This book's first pages touched briefly on one of the trickier issues we've had to grapple with: that arguably there isn't really a single, homogeneous thing that can be called ‘retail financial services’, and therefore there aren't really any generally applicable ground rules to tell us how they should and shouldn't be marketed.

Obviously if we accepted that argument it would be difficult to proceed further, so we don't. We think that despite its enormous size and diversity, there is a thing that can meaningfully be described as ‘retail financial services’, and there is a lot than can sensibly be said about marketing in it.

However, precisely because it is so very large and diverse, we feel an obligation to provide some kind of guide to the territory – a list, in other words, to make clear what's included and what isn't.

For two or three reasons, this isn't a completely straightforward exercise. For one thing, it feels uncomfortable to include a chapter that is so blatantly industry- and product-centric in a book that is supposed to emphasise the paramount importance of putting consumers first. Beyond that, a chapter that is basically a list could be extremely boring to write and indeed to read. And beyond that, we have had to ponder a number of decisions about what should and what should not be included. For example, is gambling a financial service? Or the huge personal car finance market, which is causing so much concern to the regulator at the moment? What about financially oriented media? How about estate agents? Or online utilities switching services?

Arbitrarily, we've decided that for the purposes of this book, none of these is included under the heading of ‘retail financial services’. You may disagree, and to be honest on a different day and in a different mood so might we, but there it is. Far be it from your authors to make any comparison between their humble efforts and the great English dictionary of Dr Samuel Johnson, or indeed the strange and disturbing occult dictionary of the sinister Ambrose Bierce. But both those famous books share a principle we intend to copy: their authors didn't hesitate to include words, and exclude others, for no better reason than that they felt like it – or, perhaps, more accurately, because they had something they wanted to say about them.

And then there's one other complication that we feel obliged to explore: in today's retail financial world, what exactly is the distinction between a ‘product’ and a ‘service’? In this book, we tend to refer to the industry as the financial services industry, but also to the products this industry provides. What's going on here?

Historically, both on a commonsense basis and in the academic literature, the difference between a product and a service was fairly obvious. A product was a manufactured and tangible thing, made to a consistent specification and available for repeated purchase and consumption. A service was an intangible thing, delivered by a person or people and so not completely consistent in delivery, and available only at the moment of consumption. A bottle of shampoo was a product: a haircut was a service.

In truth it was never quite that simple. Many service providers ultimately provided a product: the process of being fitted for a Savile Row suit may be a service, but the suit itself is clearly a product. And many product providers also provided (and often made most of their money) from services. A new car is clearly a product, but what's the word you use to describe what it needs at the garage every 10,000 miles? Exactly.

Today, though, it seems to us that in the financial world the meanings, and defining characteristics, of the two words have become so blurred that it's hard to find any sensible distinction. Some might have a vague sense that a bank account, say, or a mortgage, or an insurance policy has some of the characteristics of a ‘product’, while financial advice or tax planning would be considered ‘services’. But it's very difficult to explain this distinction. All of these things are intangible, unrepeatable as a whole and prone to inconsistency, which would make them services: on the other hand, increasingly none of them is necessarily delivered by a person or people, and are made up of elements increasingly delivered digitally and therefore entirely consistent and replicable, which would make them products.

All in all, we can't see any clear or meaningful distinction between financial products and financial services. In this book we may have a slight tendency to use the word ‘product’ to describe a packaged, defined and named entity, and ‘service’ to describe entities that are more open-ended and variable in the consumer experiencer they offer. But actually, we use the two terms pretty much interchangeably.¹

Having clarified these ground rules, the rest of this chapter is made up of the list of what we have decided to include, in alphabetical order. And in an attempt to make it more interesting to write and to read, we've added some notes about some of the more interesting marketing issues and challenges currently arising in each category.

There's no getting round the fact that all this does result in some extremely product-centric pages: one proof of that is to be found in the generic names used to describe them, many of which are both opaque and unappealing. (It's difficult to believe there were many marketers in the room when terms like permanent health insurance and deferred annuities were invented.)

But after this blast of product-centricity, don't worry – the rest of this book is customers first, all the way to the end.

ANNUITIES

How are the mighty fallen. Since the Pensions Freedom changes, introduced in 2014 and fully implemented in 2015, sales in this once-gigantic category, providing lifetime income for some 300,000 people retiring every year with defined contribution pension pots, are down according to the Association of British Insurers by some 80%. The at-retirement market has turned its back on annuities, and it's not just advisers – it's consumers, too. Somehow, the word ‘annuity’ has broken through consumers' customary barriers of ignorance and apathy and established itself as a bad thing, roughly on a par with other bad financial terms like ‘PPI’, ‘mis-selling’ and ‘pensions black hole’.

The funny thing, of course, is that if you offer the very same people at the point of retirement an income that's guaranteed for the rest of their lives, perhaps with an option to index-link it and provide a continuing income for their spouse on their death, they'll bite your arm off. This is exactly what they want. Of all the words in the financial lexicon, the word ‘guaranteed’ is the single most popular. And ‘guaranteed for life’ is the gold standard of guarantees.

You have to say that this dichotomy sounds very like a marketing challenge. On the face of it, the issue is all about managing perceptions, use of language, telling stories, all the things we're supposed to be good at.

But before we start getting excited, we do need to recognise a couple of complications. One is a consumer issue: although people like the ‘guaranteed for life’ part, they genuinely don't like the way that annuities operate on the cusp, so to speak, between investing and gambling: die young, and you lose. (There's a convincing Behavioural Science explanation for why people feel like this, mainly to do with loss aversion.)

The other is that regardless of what consumers think, a great many people in the industry have fallen massively, and we strongly suspect permanently, out of love with annuities too. From an adviser's point of view, a cynic might suspect this is at least partly because they don't provide much of an opportunity to deliver an ongoing service, and so to raise an ongoing adviser charge: arranging an annuity tends to be a one-and-done transaction, while a drawdown plan, needing annual reviews and rebalancing, offers a much clearer route to locking in that 0.5% (or in some cases even up to 1%) per annum. But it would be too cynical to suggest this is the whole story. The industry's distaste for annuities is also symptomatic of a broader problem, which is its not-infrequent tendency to undervalue, or even disregard, benefits that are genuinely important to consumers.

In investment, this applies particularly to benefits that are to do with consistency or reliability. These qualities really matter to consumers, partly for rational reasons but also for highly emotional reasons to do with loss aversion (see Chapter 12 on behavioural economics for more on this).²

People in the industry, on the other hand, don't like guarantees, primarily because they know that there's always a price to be paid. Most take the view that when it comes to long-term investing, you're better off (literally) taking your chances, and giving time in the market the chance to do its work. This takes us to the heart of one of those wants-versus-needs ethical dilemmas raised in Chapter 4. If a consumer is taking financial advice, then the adviser should give an honest opinion, and it's for the customer ultimately to decide whether to take it or not. But outside the context of advice, is it helpful for the industry to show reluctance to provide, or promote, propositions which appeal to consumers and powerfully meet their needs? At the moment, the industry and its customers have formed a tacit agreement to play down the case for annuities. It's debatable whether that agreement really works in customers' interests.

CARDS

Credit cards are the only financial services category with significant ‘badge value’, because it's the only category that is highly visible. People across the restaurant table or at the checkout counter can see which product you own.

They are also one of the biggest, most crowded, most complex and fastest-changing financial services categories (and, in turn, part of the even bigger, more crowded, more complex and faster-changing payments market): and, frankly, a category that is now so steeped in some strange and not-very-customer-friendly habits that it's hard to see how it can mend its ways.

The most important of these habits is a business model in which clients who are revolvers (who maintain balances from month to month) are highly profitable, while transactors (who clear their balances every month) are loss-making. This simple if strange reality means that marketing activity is hugely tilted toward recruiting and retaining revolvers (all those endless balance transfer offers), and also of course means that the rates they pay are enormously much higher than rates available elsewhere in the lending market. And God help you if you are a day late with a payment on a balance transfer card …

Meanwhile, the market as a whole feels like the middle fish in that well-known picture of a little fish that's pursued by a bigger fish that's pursued by yet a bigger fish, and so on. Cards, with the help of technology advances such as contactless, have recently overtaken cash as consumers' preferred form of payment, but in turn are coming under increasing threat from a shoal of emerging new competitors – mobile may be the biggest, but then there's PayPal and Alipay, and behind them the emerging world of virtual and crypto currencies.

Amid all this turbulence you'd imagine that this would be an exciting sector from a marketing perspective, but at this moment there's a continuing sense of phony war or perhaps more accurately a calm before the storm. Marketing communications activity is in fact sharply down from its peak, and a good deal of what still goes on consists of dreary balance transfer promotions. In terms of value propositions, too, card providers seem currently more concerned to trim benefits and improve margins than to develop new stories for their target markets.

Finally, cards also present us with one of the category definition problems that are endemic in this stupid idea of producing a gazetteer of retail financial services: should we include those would-be challenger banks, like Monzo and Starling, which at the time of writing are able to offer only prepaid cards? Let's just say for now that some of these, most notably Monzo, are undoubtedly achieving impressive traction among their young millennial target market, and are achieving a kind of emotional engagement completely different from anything the big legacy banks can hope for. But then again, some would argue that achieving emotional engagement isn't much of a trick when you're running a fundamentally unprofitable business model and giving away a suite of outstanding digital money management services. Inevitably, sooner or later, it will become necessary either to cut back on the added value or to start charging for it.

CRITICAL ILLNESS INSURANCE

The same set of problems and indeed opportunities as Life Assurance (see below), really, only with three additional challenges to overcome:

1. Very few people have ever heard of it (and it's another opaque and unappealing name, if a little better than the term used when the first products were introduced, the mind-blowingly terrible Dread Disease Insurance)
2. Unlike life assurance, prices don't generally turn out to be much lower than people think they'll be
3. Most people think it won't happen to them (although of course many of them are wrong).

All of these challenges add up to explain why there's virtually no direct-to customer (D2C) market for this product, which is still dominated by intermediaries. If the new financial services marketing is all about delivering propositions that meet customers' perceived wants and/or needs, it's going to be very hard work persuading more than a small number that this is one of them.

CURRENT ACCOUNTS

Another big, complex, difficult and fast-changing part of the market is current accounts. These are important for many reasons, but especially these two:

1. Current accounts are perceived by both providers and consumers as the ‘cornerstone’ product in people's financial lives, and the basis for their biggest, broadest and longest-lasting financial relationship
2. At the same time, they're usually the richest available source of customer data and therefore the most powerful opportunity for providers to develop their customer relationships further.

In much the same way as cards, the reality today is that current accounts have driven a long way down a business-model cul-de-sac, and reversing all the way back to the main road is far from easy. The trouble began many years ago, when the then-Midland Bank (now part of HSBC) first offered free in-credit banking and stole the market. All the other leading banks were obliged to respond, and although all was more or less well during the period of relatively high interest rates – banks could make a return on customers' credit balance or ‘free float’ – it's a different story with rates not far from zero.

Banks have adopted various strategies, not all of them hugely consumer-friendly, to combat this margin pressure: examples include packaged accounts, where customers pay fees for add-on services, which many don't really want or need, extremely high charges for additional services such as foreign payments, and sky-high rates of interest on unauthorised borrowings.

None of this has endeared big banks to their huge current account customer bases, and in recent years the list of challengers excited about the potential for growth has lengthened rapidly. Hitherto, despite attempts by the regulator to remove some of the obstacles to switching, consumer inertia has largely prevailed: everyone knows the cliché that individuals are more likely to change their spouse than their bank. At the time of writing, we're rapidly approaching another market intervention that may finally change the dynamic – the so-called Open Banking Project, or more properly PSD2 Payment Service Directive is an EU initiative that will make it much more difficult for banks to maintain exclusive control of their customer data, and therefore will open the market to a new level of competition. On the one hand we've heard stories like this before and nothing much has happened: on the other hand, as in the fable of the boy who cried wolf, it's important to remember than in the end there was a wolf.

EQUITY RELEASE

With such a high proportion of so many people's assets invested in property, everything about equity release makes perfect sense except the numbers, which tend to be quite painful to contemplate. Still, for many older people the instinctive desire to remain in their homes is strong, and for many of them equity release is the only game in town.

That being so, it remains a curiously undeveloped concept, chosen by only 37,000 people in 2017. One small reason for this may be its remarkably unattractive and uncommunicative name. For many, the word ‘equity’ means little, except perhaps as the name of the actors' trade union.

FINANCIAL ADVICE

We write at length elsewhere about the extent of change affecting the world of financial advice, most of it driven by regulation while technology also plays its part. In short, the advice industry is getting smaller (in the number of advisers at least), better and less dependent on one-to-one personal contact between adviser and client.

These are all important developments. But there is another potential development, also important and also welcome, that's proving very slow to gather momentum in this fragmented industry – the emergence of a small number of large, strong advice brands. In terms of any widespread level of consumer awareness, financial advice is still an almost entirely unbranded market.

Many of us have been anticipating that this must change for decades, and can cite a long list of compelling reasons why it should have started to change long ago. But we're still waiting. The main obstacle is, quite simply, the personalities of the country's financial advisers: independent-minded, stroppy, unwilling to take orders, determined to do things in their own way. This poses a management challenge on a par with organising the similar number of London black-cab drivers into a single coherent organisation.

There are several other formerly fragmented retail, or intermediary, sectors in the consumer economy where large national brands have emerged. For example, hundreds of opticians are organised into the Specsavers brand; bookshops with Waterstones; and coffee shops with Starbucks. What's interesting, though, is that in all these cases, very few of the branches of the national brands are staffed, or managed, by former owners of small independents. Starbucks managers didn't formerly run Italian espresso bars, managers of Waterstones typically didn't own local bookshops, and Specsavers managers are mostly young opticians either newly qualified and/or qualified in other countries. There's reason for this: those in charge know that if a national brand is to stand for anything then it must stand for a consistent customer experience, and achieving any kind of consistency among a group of people who've spent years doing things in their own way is much harder than starting at the beginning, with people who've never run a branch before.

At some point, the same kind of trend must emerge in financial advice. There are, obviously, tough training and compliance issues to tackle, but they can't be harder than they are for opticians. But until then, in the absence of any firms combining consistency of proposition with scale, there is little opportunity for marketers. As we said in the introduction to this book, some level of consistency in the delivery of a product or a service is the sine qua non for marketing: without it, there's simply nothing to be done.

FUNDS

Where do you start with retail funds? This huge, sprawling, massively overcrowded industry could only have developed the way it did in an era of high-charge, commission-driven intermediation: and now that commission has gone, and intermediation is changing in nature, it's an industry that's almost completely unfit for purpose. We simply don't need several hundred firms managing retail funds, or a total universe of over 9,000. We don't need the level of charges still taken by active fund managers who regularly underperform their benchmarks. We don't need the millions of words of market commentary that they pump out on a daily basis. We don't need their almost entirely generic and undifferentiated investment propositions. And we don't need their distant and patronising attitude toward the individuals who entrust them with their life's savings. The industry now feels about as vulnerable to change as the industry that had grown up to serve American travel by horse and stagecoach – stables, feed suppliers, livery yards – must have been at the time when railways first crossed the continent.

Still, it's unlikely that it's going to uninvent and reconfigure itself overnight, becoming dramatically much smaller, better value for money, more differentiated and more focused on what individual investors really want and need, so we're going to have to get to where we need to be gradually, over time. The familiar rebuilding-the-aeroplane-in-mid-flight metaphor seems to apply.

This puts a huge and very challenging responsibility on marketers, both to map out the course and to manage the journey. It won't be at all easy, because fund managers, and fund management firms, hold marketing in particularly low esteem. Even more than other financial services sectors, it's here that marketing is known, almost invariably, as the ‘colouring-in department’.

Frankly, this is at least in part because marketers have too often been intimidated by the people running the money. One of your authors remembers working on a brand development project for a very well-known retail fund manager some years ago. On the basis of a thorough strategy development process, with plenty of research among investors and intermediaries, the marketing team agreed that the brand should stand for the idea of ‘accessible expertise’. In real life, this brand promise was compromised perhaps just a little by the fact that at that time, the investment team were so arrogant, aloof and thoroughly inaccessible that people from other parts of the firm had to prove they'd booked an appointment before they were allowed to get out of the lifts on the investment managers' floor.

It isn't easy for marketers working in intimidating environments like this to venture far beyond colouring-in, especially when most members of most firms' senior management teams come from fund management backgrounds (and virtually none comes from marketing), but it is a crucial challenge.

To be fair, there is some evidence that the funds industry is starting to change for the better, rather than just becoming ever bigger and more shapeless. Welcome trends include:

• The growth in the number and market share of passive funds, taking much less in charges than their actively managed counterparts, while outperforming well over half of them;
• The increasing readiness of fund managers to assemble and maintain the entire investment solution in the form of multi-asset and other ‘non-single-strategy’ funds, rather than leaving the crucial role of asset allocation to someone else (adviser or investor) much less well qualified to fulfill it;
• The use of investment platforms to make buying, selling and managing portfolios of funds cheap and easy.

But there's still a great deal more to do to reform and restructure what is probably still today the least customer-oriented and most self-indulgent sector of the retail financial services market, and it looks likely that the next big push in this direction will come from the regulator. The FCA's Asset Management Market Study, published in 2017, can only be described as a damning indictment of much of the industry as it now stands. It's impossible to believe that its publication hasn't started the clock ticking on a process of massive reform.

GAMBLING

Your authors have thought long and hard about whether gambling is within the scope of a book about retail financial services. The truth is, it's very difficult to find a good reason why it isn't, but we don't much want it to be. If you want some detail on the subject, we recommend the comprehensive review that you'll find in Professor Adrian Furnham's excellent book The New Psychology of Money. Also, in Chapter 12, we note that behaviours to do with betting have always been a primary focus of behavioural science: we'd expect to see well-thumbed copies of the works of Kahneman and Tversky on the bookshelves of all marketers involved in these sectors.

It's hard to justify our decision in the light of what we've said about consumer wants being just as valid as consumer needs, and the industry having a duty not just to offer consumers only what it thinks they ought to have, but there it is. If you're reading this book because you're looking for some interesting apercus of the marketing of gambling propositions, we apologise. If you haven't folded any page-corners over, perhaps you can still get your money back (or double down on your bet …).

Inevitably our choice then raises related questions about Premium Bonds, and about the spectrum of niche financial products which operate on the borderline between investment and gambling – CFDs, spread betting, derivatives trading. We don't have a lot to say specifically about these, but they are undoubtedly a part of the world we're describing.

LIFE ASSURANCE

Life assurance is widely perceived (even by many working in the area) as a flat and depressing corner of the industry, where a dwindling number of insurers seek business from an intermediary market dominated by a small number of specialist firms, largely on the basis of endless rounds of price-cutting.

One big current success story, though, makes you wonder whether the fault lies in the category, or in the people working in it. Vitality is the protection brand (providing both life and health insurance) that rewards people for leading healthy lifestyles, an idea that's appealing at two levels. From an insurance perspective, it makes obvious underwriting sense. But from a marketing perspective, it surfs what looks certain to be a big and long-lasting wave in the zeitgeist. For a large and growing segment, staying in good health is not just an objective, it's a complete lifestyle – with profound effects on what people do, where they go, how they eat and drink and even what they read. If Vitality can become the default insurance choice for this segment, it will become a classic example of a strong niche brand – and as such, we'd suggest, an important role model for firms across financial services that haven't yet grasped the idea of targeting.

At the opposite end of the protection market, there is another niche – this one specifically to do with life assurance – that is reasonably well occupied. This consists of the segment of much older consumers who are targeted with so-called Over 50s Plans (the large majority, it has to be said, being a very long way over 50). If the hallmarks of the new financial services marketing include a target segment with a clear want or need, a focused proposition, a simple process and highly visible and engaging communications, then this belongs on the list. However, the fifth hallmark is that the proposition should offer consumers acceptable value for money and, if you'll forgive the mixed metaphor, that means these plans fall at the last fence.

Whether you look at protection as a whole or life assurance in particular, it seems very odd that there is such a large expanse of empty ground between Vitality, at the young and healthy end of the market, and Sun Life, promoted by the likes of veteran journalist and TV personality Michael Parkinson at the other end. There are literally dozens of other equally attractive niches available and still unoccupied.

Part of the problem is that most people don't understand the difference between insurance and assurance. You insure against a possibility, you assure against a certainty – and eventually, we are all going to die. …

For some time now, we've been eagerly awaiting the arrival into the market of a horde of innovative, consumer-focused new players, the so-called insurtechs. There have been rumours of sightings in other markets, particularly the US. A much copied conference slide shows the names and logos of many dozens of them. But here in the UK protection market, the impact of these players has so far been minimal, and the status quo remains largely un-disrupted: the handful of new players to have emerged so far have made modest impacts, and the established major players have suffered few sleepless nights. We're all certain this is going to change, but we're not quite so certain about when.

LENDING

Lending is a great big core sector in the financial services market, worth over £200 billion in the year to June 2017. There are various ways to segment it – secured versus unsecured, prime versus sub-prime, short-term versus long-term. It represents good news and bad news as far as the national economy is concerned – good in the sense that the flow of new credit keeps consumer spending up and the economy going, bad in that if for any reason the wheels start wobbling, let alone falling off, the consequences can be devastating for individuals and for societies as a whole.

And apart from this, we can't think of anything very interesting to say about lending.

MORTGAGES

It's a cliché to say that for most homeowners, mortgages are their biggest-ever financial commitments. They're also commitments that, while usually benign and manageable, can turn nasty and become very difficult to manage remarkably quickly, when rates rise rapidly and/or when property prices fall. You'd imagine, therefore, that borrowers would choose mortgages extremely carefully, and that questions about their long-term affordability would loom large. On the whole, though, they don't. Experience tells us that consumers are driven by the answers to two questions: ‘Can I afford the monthly payment?’ and ‘How quickly can I get an offer?’ Particularly if they use the services of an intermediary– and some 70% do in the UK – mortgages have become an increasingly transactional product, with borrowers expecting to switch at two-year intervals as their special offers run out, a bit like a person crossing a pond using stepping-stones. Switching mortgages from one lender to another is lucrative work for intermediaries, too, with so-called ‘procuration fees’ playing a very similar role to initial commissions.

This doesn't make for very interesting marketing, but there are more opportunities for innovation when you examine consumers' needs in more detail. For example, only a few lenders seem to have taken on board the fact that the first-time buyer market is now almost entirely intergenerational, for example, with parental or grandparental support now more or less obligatory in many parts of the country. And the buy-to-let sector is ripe for further innovation: with so many retirees expecting to use property to generate some or even all of their retirement income, there must be opportunities to package buy-to-let borrowing with pension decumulation investment.

Elsewhere, too, we comment on one of the more disappointing (but also instructive) recent examples of financial product innovation, the curious case of the offset mortgage. For millions of people looking to manage both savings and borrowings, these are simply brilliant products, delivering huge financial benefits: yet sales have always been modest, and even when people have taken the plunge, they've largely failed to make the most of the benefits available. Some cite this as an example of consumer apathy and lack of engagement, but – as we hope we've made clear – we don't subscribe to the concept of blame-the-customer marketing. If people don't get it, either we have to tell the story better or – as is probably the case here – tell a simpler story.

MOTOR INSURANCE

As we've said, motor insurance was the first category in retail financial services to adopt a marketing-led approach. It's well over 30 years now since Direct Line first came into view, with a proposition that brought together all the key elements: clear targeting, simple process, competitive pricing, good service, and high-profile and engaging promotion. Since then, of course, Direct Line has faced huge competition not just from other insurers, but also from a whole new category of competitors in the form of the price comparison, or aggregator sites (discussed below).

With some ups and downs along the way, considering both the number and the intensity of these challenges, Direct Line has maintained its market position well. But the market continues to change, and yesterday's dynamic young challenger can very easily become today's (or tomorrow's) sleepy old dinosaur.

Three issues come to mind:

1. The biggest and most serious: do some of the practices of this category mean it's a mis-selling scandal waiting to happen? The fact is, in much the same way that product providers and intermediaries used to collude to take money from customers in the regulated sector, today a larger collusion involving some insurers, repairers, car rental firms, personal injury firms and others are doing the same in motor insurance. Policyholders would be astounded if they knew the proportion of their premiums diverted into heavily padded repair costs, grossly inflated car rental charges and completely bogus personal injury claims: the bottom line is that it's no-one's job even to try to look after policyholders' money. Can this continue? Could a new kind of challenger tackle this kind of institutionalised bad practice?
2. Not far behind in terms of bad practice toward customers (and also, it has to be said, very bad marketing practice), can insurers continue treating their most loyal customers so badly? The current position on renewal pricing is an absolute disgrace, and insurers deserve a great deal more criticism than they get for it. From consumers' point of view, the only sensible strategy is to switch every year. This is absolutely ridiculous, and again must create opportunities for a new breed of challenger.
3. Finally, it's clear that the relentless advance of technology presents major new opportunities (or challenges, depending on your point of view) now and into the future. So far at least, telematics is reminding us of the curious behaviour of the dog in the night-time. (‘But Holmes, the dog did nothing in the night-time!’ ‘That, Watson, was the curious behaviour’.) Then there's the initiation of peer-to-peer car rentals, arguably doing to cars what Airbnb is doing to accommodations. How far away are we from the really big innovation, driverless vehicles? No doubt all today's insurers have plans for these developments. Change creates opportunity, and there's a lot of change on the way.

PAYDAY LENDING

Enter the industry's pantomime villain, with green strobe lighting, dry ice and claps of thunder. Financial services people, especially prosperous ones, love to heap abuse on the payday lenders, and it's certainly true that many deserve all they get. But for all the right and proper anxiety about frequently appalling business practices – stratospheric rates of interest, strong-arm tactics and a business model that thrives on trapping people with little money into endless cycles of debt – payday lenders do absolutely meet a real and often desperate need in society that no-one else will touch with a bargepole. When people run out of money, have no way of getting more until tomorrow or the day after and have children who need a meal, they face the choice of dealing with a payday lender or going hungry.

If payday lenders exploiting this need were making unreasonably large amounts of money, it would be right to condemn them for their heartlessness and greed. But generally, they aren't. Several have gone out of business, and others report continuing losses – running costs, including of course bad debts, are horribly high.

It's difficult to believe that payday lenders offer much potential to expert proponents of the new financial services marketing, unless they have plans to broaden either their product mix or their target market. But we do think the less disreputable ones could use some help with their public relations – as a starting point, they could point out that over 30 days, an unauthorised overdraft from a High Street bank can cost significantly more.

Meanwhile, increasing pressure is brought to bear on them, not least by the regulator who unsurprisingly isn't keen.³

PEER-TO-PEER LENDING

Are we seeing the early stirrings of a whole new parallel financial services industry – we're almost allowing ourselves to use the word ‘paradigm’ – that could in time do what the Model T Ford did to the big banks' horses and carts? Or are we seeing the brief flowering of a seriously overhyped fashion, a frighteningly unregulated and dangerous environment that will end in tears as soon as we reach the inevitable crisis in which a lot of people lose a lot of money?

We don't know, and we're not sure if anyone else does. The category remains hazy and poorly understood (so much so that it's arguably wrong to describe much of what's on offer as ‘lending’ at all): what's more, it's extremely diverse, with firms adopting all sorts of lending models and hugely varying levels of risk. Frankly, many individuals who are involved haven't chosen to ask too many questions. At a time when mainstream savings rates are so extremely low, alternatives purporting to offer returns several times higher are hard to resist. What's missed by many consumers is that this is not ‘banking.’ Peer-to-peer lenders do not have banking licences, and consumers are not protected by compensation schemes.

The fact that more people haven't shown more interest may reflect sensible risk-aversion and a recognition of the famous aphorism that if something looks too good to be true then it probably is – but we think there's another reason. Like so many new digital categories, most peer-to-peer lending firms seem to have launched on the basis of business plans that allow for little, if any, consumer marketing communication. There isn't a single firm that has any significant level of awareness, and indeed even the category itself remains virtually unknown. For as long as firms are happy to target a very small segment of highly engaged, sophisticated consumers (which, in any case, is what the regulator wants them to do), this probably doesn't matter. However, if we're talking ‘early stirrings’ rather than ‘brief flowering’, that's going to have to change. As discussed at some length in Chapter 19 the idea that in the digital age you can achieve all necessary marketing communications tasks free of charge, using various readily available online tools and formats, is wrong. Sooner or later, someone's going to have to start spending some money.

PENSIONS (ACCUMULATION)

Pensions are a part of the market in slow-motion transformation as a result of huge changes affecting pensions in the workplace. The gradual fading away of defined benefit, or ‘final salary’ schemes, where employers bear the risk of providing a pension defined as a proportion of the employee's earnings, represents a huge change not just for retail financial services but for the people of the UK. That short golden age in which millions of people could expect their standard of living to remain more or less unchanged throughout their retirement is gradually coming to an end.

For the time being, the view of the industry and the government is that auto-enrolled defined contributions, or ‘money purchase’ pensions, where the individual employee is ultimately responsible for building a pot of money large enough to provide the desired level of income in retirement, represent the best available alternative. This very much depends on what you mean by ‘best available’ – if you mean ‘incredibly much worse’, then it's probably correct.

The whole question of funding retirement is so big and difficult, and extends into such deep and turbulent socio-political waters, that it feels out of range for a book about marketing. For the time being, while the £1 million DC pot cap remains, there's clearly a need for further retirement savings options for high earners: as for those whose savings can be comfortably accommodated within the cap, it seems that workplace schemes will provide most, if not all, of the solution.

Since the introduction of Pensions Freedoms in 2015, enormous changes have already taken place. We've seen massive increases in the amounts invested within pension wrappers (and, by the way, decreases in the amounts invested in everything else), a growing level of excitement about the potential of transfers from Defined Benefits (DB) schemes to Defined Contributions (DC), viewed with great caution and concern by the regulator, and, of course, the highly successful early stages of workplace auto-enrolment. But despite all this activity, it still feels as if the new pensions era has hardly begun.

PENSIONS (DECUMULATION)

It was in April 2014 that the then-Chancellor, George Osborne, astonished pretty much everyone (including, it's said, most of his colleagues in the Treasury and the Government) by announcing his Pensions Freedom measures. These, to be fully introduced just a year later, in April 2015, effectively brought to an end a situation in which the very large majority of people retiring with defined contribution (DC) pension savings were effectively obliged to use the money in their pots to buy an annuity, which would provide them with an income for the rest of their lives. The reforms also gave people unrestricted access to their pots from the age of 55 (57 from 2028).

The more you think about these changes, the more you realise how absolutely transformational they were. From the age of 55, the whole business of managing your long-term savings becomes a wide-open question, in which any number of options are now available at any moment for the rest of your life (and, actually, beyond, because more changes transform the role of pensions in inheritance planning). For millions of people, the new rules create the clearest and most important requirement ever for financial advice. And they create similar requirements for new solutions, both in retirement and actually for many years before (the right accumulation strategy looks very different when you're not working toward a moment in time when you aim to annuitise).

On the whole, though, the industry's response to all of this has been disappointing. To meet the need for income of retirees remaining invested (‘going into drawdown’) rather than annuitising, there has been a new wave of new income-producing investments of one sort or another (including a small handful bearing that magic word so loved by consumers, ‘guaranteed’), and firms that didn't have a credible drawdown proposition have hurried to introduce one. But that's about all. We haven't seen any dedicated advice propositions, very little that's new to enable DIY customers to explore or manage their own retirement finances, and very little creativity or imagination in product design.

To be fair, the timetable set by the Chancellor was so tight that firms were struggling to get any kind of response in place by the initial deadline. But amid all the overwhelming flexibility and complexity of the retirement saving and retirement income choices now available to everyone with a DC pension, there remains an enormous need for clear-sighted marketers to come forward with propositions that demonstrably meet individuals' needs and give them a sense of direction in a frighteningly featureless landscape.

There are fairly good excuses available to explain why this hasn't happened in the immediate aftermath of the changes – but the excuses will get thinner and thinner as time passes.

PRICE COMPARISON SITES

The big retail financial services marketing success story of the digital age: in some categories, first and foremost motor insurance, their market share has gone from 0% to around 75% in the space of less than 30 years. And also, pleasingly from our point of view, a textbook example of a marketing-led development. Price comparison sites tick almost all the boxes in our list of the Seven Ps (‘almost’ because they have nothing special to offer when it comes to Physical Evidence), and it's reassuring to see a substantial market sector where the stuff we prefer actually seems to be working.

That said, it's not all good news. We suspect that consumers would be surprised and indeed angered if they ever came to understand the workings of the algorithms that promote and prioritise sponsored content. And in another sense and at a broader level, you can argue that the sites' success highlights the marketing failure on the part of the product providers featured in their listings. The fact that so many consumers are ready to make their purchase decisions primarily, or even entirely, on the basis of price reflects the high level of commoditisation in several sectors, or to put it another way the failure of most firms to achieve any meaningful differentiation.

As marketers, we find it easy to admire the few brands that, so far at least, have chosen to stand aside from the price comparison frenzy (notably Direct Line and Aviva in insurance, still the most active sector). For those that have succumbed, it's difficult to imagine there's a way back out again. For new brands still to emerge, price comparison seems like a fate to be avoided if at all possible, except of course for those few which emerge on a lowest-cost producer, price-based proposition.

It'll be interesting to see how much further price comparison sites are able to extend their scope. In terms of market share, so far insurance represents by some distance their most successful category, with a long list of others – energy, savings, cards, loans and so on – following on behind. There's clearly huge growth potential in these categories, but it's worth considering what others might be seen to be commoditised enough to be added to the list.

PRIVATE MEDICAL INSURANCE

As insurance product categories go, PMI is something of an enigma. It's a sector that has seen a good deal of innovation over the years, especially with a view to making the cost of cover more affordable. It provides a range of solutions to a big problem which everyone recognises, namely the increasing inability of the National Health Service to meet all our healthcare needs. And it also occupies a patch of highly emotionally charged territory at the intersection of the three things which, according to research, we care most about in our lives: our money, our health and our families.

Yet despite all this, market shares remain low, sales remain flat and the sector would scarcely exist if it weren't for Group schemes. (Not only are most policyholders covered within Group schemes, but a significant proportion of individual policyholders are Group scheme leavers.) It's also curious that one big brand – BUPA – is a household name, but while a number of well-known insurance companies include PMI products in their portfolio, there is no other well-known provider specifically associated with the category.

What's going on here? It's certainly true that health is a sensitive and emotional area, where strong and dangerous undercurrents and riptides lie in wait for the unwary: for example, many of us Brits are so passionate about the poor old NHS that for many, buying private insurance feels like a kind of betrayal. But still, it's impossible to believe that there isn't good potential for better – and indeed more – marketing. In recent years, most providers have relied on Group schemes (and Group scheme leavers) for most of their new business, taking it for granted that the individual market isn't going to work for them. Given some more product innovation, some new ideas about partnership between private and public sectors and some powerful and well-targeted promotion, we think that negative view can be proved wrong.

ROBO ADVICE

Does ‘robo advice’ deserve a heading of its own, separate from advice? And what to do about the fact that this term describes a lot of do-it-yourself (DIY) investment services that don't actually offer advice at all?

Let's not overthink it. Let's use this heading as a term that, regrettably, seems to have established itself as the descriptor for predominantly online DIY investment services, where consumers can buy, sell and manage investments that they can choose in ways that meet their needs – in other words, services that offer a degree of bespoking over and above just buying and selling a fund manager's funds. From a regulatory standpoint, some of what's on offer does constitute ‘advice’, some is ‘guidance’ and some is ‘execution only’. But hardly anyone—and virtually no consumers—understands the boundaries between these three subcategories, so let's think of it as one.

Many think of it as the shiny new exciting future of retail investment, and particularly as the best way to fill the ‘advice gap’ caused by the unaffordability of one-to-one advice for the millions of consumers with relatively modest sums to invest.

We must admit we don't really share this view. What is clear is that insofar as this market currently exists, in the UK it's already dominated by one massively successful and capable organisation, Hargreaves Lansdown. Their target market is the segment of something like 1.5 million people, give or take, who are active DIY investors – mostly, although not entirely, upmarket middle-aged and elderly men, living in the south of England, who spend a lot of time and take a lot of pleasure from looking after their investment portfolios. (These same people, by the way, also tend to maintain close and active relationships with advisers, in much the same way that people who enjoy working on their own cars also tend to have close contact with one or more mechanics, and people who like cooking also often eat out in restaurants, but that's another and slightly confusing story.)

These ‘hobbyist’ private investors have always been there, and no doubt always will be there (not literally the same people, of course, although sometimes it seems like it), and they do whatever there is to be done at the time. Thirty years ago they clipped the coupons in M&G press advertisements. Then they bought from Fidelity on the telephone, and then they used the Interactive Investor or Hargreaves Lansdown websites: next it'll be a risk-managed ETF portfolio accessed via an app on their phones. These people are easy to engage and quite easy to recruit, although their price sensitivity can be an issue: the problem, of course, is that unless they're very happy and comfortable (as indeed most are at Hargreaves) they're also very easy to lose to the next interesting new proposition. (As the Eagles put it in a very different context, ‘They'll never forget you till somebody new comes along’.)

For as long as both of us can remember, and we have to admit that means over 30 years each, retail investment firms of one sort or another have been trying to broaden the DIY market beyond this inner core. One of the first attempts we can remember was sparked by the big 1980s privatisation campaigns, where the idea was that ordinary non-hobbyist investors would be so pleased with the performance of their British Telecom and British Gas shares that they'd be inspired to go out and buy shares in Marks & Spencer and ICI. Instead, however, the large majority of them just sold their British Telecom and British Gas shares. Thirty-odd years later, nothing has ever happened.

Maybe things are finally changing, and robo-advice will crack open a broader direct investment market segment. A lot of organisations strongly believe this, and are vigorously launching new services on an ‘if we build it, they will come’ basis. One big bank, Barclays, believes so strongly on the potential of the ‘new investor’ segment that they've refocused their DIY investment service toward them and away from those established active DIYers, much to the annoyance of many of the active DIYers. It'll be interesting to see if they're right.

SAVINGS

What is there to say about savings accounts? It's fortunate that one of the most powerful biases identified by the behavioural economists, loss aversion, doesn't seem to take account of inflation. With the differential between inflation as measured by the RPI, and the rates available on all mainstream savings accounts, almost all savers are currently losing money in real terms. It's fortunate, too, that there is a segment of consumers with such a deep and unshakeable urge to save, because there isn't much of a proposition for anyone else.

With margins so tight and returns so miserable, there's terribly little room for any kind of creativity or originality – even the usual levers affecting rate, such as duration, access and amount, can only offer marginal differences. In this situation, it's surprising that we haven't seen more gimmicks, or bells and whistles: one that stands out, taking its cue from NS&I's Premium Bonds, is the Family Building Society's Windfall Bond, where all savers are entered into a monthly draw and can win prizes of up to £50,000.

Some of the category's other marketing practices have attracted negative attention from the media and the regulator. It's one of the industry's favourite rip-offs, unsustained lead-in interest rates, that have caused the most trouble: after a lead-in period of a year or sometimes even less, some institutions have been cutting the rate back to an unbelievably measly 0.01% per annum, which equates to a return of 10p a year on a £1,000 balance. It's tempting to laugh at the sheer mean-spiritedness of this, but we're determined to resist the temptation and say that financial services marketing won't emerge from the Dark Ages until this kind of thing comes to an end.

In this gloomy landscape, there is still at least one much-praised and indeed awarded ray of hope, shining all the way from the other side of the world – a vivid demonstration of the fact that there is always opportunity for marketers smart enough to observe, and then to act upon, big, original customer insights. We refer, of course, to Aussie bank Westpac's Impulse Saver account, an app-based product that takes the form of a big red button on the screen of your phone: one press on the button, and a pre-set amount (anything from one Australian dollar to as much as you like) is transferred to your savings account.

This is not just a highly successful product, but also at another level probably the most effective pushback ever made against the irresistible force of our credit-driven consumer society. Impulse Saver doesn't fundamentally change the balance – what could? But in the age-old conflict between spending and saving, it does make sure the spenders don't get it 100% their own way.

TRAVEL INSURANCE

Well over a decade ago, in the early days of both digital and mobile, one of your authors did some work on a travel insurance startup where the big idea was that you switched the policy on when you set off on your travels, and switched it off on your return. This seemed like an obviously brilliant idea, providing a combination of simplicity and value for money that couldn't be matched by either single-trip or annual policies. But the startup didn't get funded, and as far as we know the product is still not available in the market. Is there a good reason? Or is this just another rather slow-moving backwater of the insurance industry, where providers are reluctant to explore the opportunities available for innovation?

TRAVEL MONEY (FX)

Hitherto something of a happy hunting ground for bad marketing – a sector in which attractive messages like ‘commission free!’ and ‘buy-back guarantee’ have distracted consumers' attention from the shockingly large spreads they're being charged.

Over the years, and across the channels, consumers have never been treated well when it comes to foreign currency. Travellers cheques, credit cards, bureaux de change and indeed banks making foreign currency payments have all taken advantage of the fact that travellers – especially holidaymakers – suffer from that dangerous combination of ignorance and apathy when it comes to what they're paying.

But digital may be changing things in this sector a little more quickly than in many others. A new wave of providers, including Transferwise, Revolut and Airmoney, offer much better deals and often better service than the leading players. It would be nice to think that, with some more visible and intrusive communication drawing people's attention to the far better deals available, this will be a rare example of a market where it's the good (travel) money that drives out the bad.

WEALTH MANAGEMENT

As the headline said in one of those great 1980s Albany Life advertisements, still one of the very best campaigns in the history of UK financial services advertising, ‘I never had money problems until I had money’. As a proportion, there aren't many people in the UK who have money, but those who do need a lot of help managing it. In recent years, organisations of all shapes and sizes have flocked to offer their services under the ‘wealth management’ banner, a term virtually unknown until around the turn of the millennium. Now, the category is made up of all sorts of firms, including those that might equally be described as stockbrokers, private bankers, financial advisers, not-so-private banks, family offices, investment managers, discretionary asset managers, accountants, tax advisers and no doubt many others.

Intense rivalry and a good deal of snobbery separate these different subspecies, but in the end what unites them is much greater than what divides them: they help affluent people to look after their money, almost always with styles of services that are commensurate with high fees. This makes them quite fun from a marketing point of view, at least if your idea of marketing fun is taking affluent people to Glyndebourne.

And with that, we complete our stroll around a selection of the stalls in the retail financial services market. If there were some areas where we didn't linger, it was only because we didn't find much of interest to comment on.

No doubt you'll have been struck by the diversity of what's on offer. As we said at the outset, the range of product types, target groups and propositions is so wide that some say it makes no sense to talk about a ‘retail financial services market’ as a homogeneous entity at all.

But from a marketing point of view, we remain convinced that they do have much in common. For all sorts of reasons, and in all sorts of ways, the need for a new, stronger, more effective and much more customer-driven kind of marketing is something that's shared by all.