Most of us know a ‘Mr Smith’ He is in his late thirties, just got married and owns his own home. He is a little worried about what the future holds, finds his next-door neighbour’s music mildly annoying and takes his dog for a walk most evenings. Indeed, he is ‘Mr Average’, with the same concerns and fears as thousands of other people.
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Now for the £1 million question – are we actually listening to what he wants from his financial products? No, really think about it. Yes, I know that as an industry, before we launch our new ISA or tracker mortgage, we ask people what they think about it. But are we asking him if he even wants a tracker mortgage? Rather an interesting thought isn’t it?
Financial concerns
With all the product development departments beavering away in light of the recent rate change, this is definitely something we need to do. We recently took a step back and asked consumers what their top five financial concerns were. After all, financial products are ultimately intended to help them with their lives so this seemed a logical place to start.
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Unsurprisingly, the top concern was ‘the rising cost of living’, followed by ‘having insufficient funds for a reasonable standard of living’ and ‘lack of preparation for retirement’. The final two most common financial worries were ‘level of debt’ and ‘keeping on top of financial repayments’.
So what can we learn from this research? Well, there are certain problems that we can’t solve, like increasing interest rates, soaring house prices and growing inflation. However, if Gordon Brown does want our input, I’m sure that we would be happy to oblige. What we can do though, is listen to what our customers are saying and develop products that help them to deal with these challenges.
Listening to customers
Innovative solutions such as our own buy-to-share product, Newcastle Building Society’s guarantor mortgage and Yorkshire Building Society’s divorce mortgage need to be the order of the day. Yes, some of you might say these are purely marketing gimmicks, but each product fills a niche and encourages consumers – and their intermediaries – to find innovative solutions to a particular financial ‘problem’.
Indeed, we believe that it will be building societies listening to their customers who will be leading the charge on the production of innovative products. Why you may ask? After all, as a sector we do not necessarily have the size or the reach of some of the financial institutions we are competing against.
Well, traditionally building societies have had the upper hand on recognising consumer needs and demands as we are actually owned, and to a certain extent controlled, by our customers. Yes, we, and most other building societies, might not have an international branch network, but we do know the concerns and fears of our customers in the areas we do cover. Indeed, we are often the first port of call for some consumers when they have financial questions.
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In addition, companies within this sector tend to have the size, which allows them to bring innovative products to the market in a timely fashion. I’m not necessarily a betting man, but I would put money on the fact that it probably takes 10 times as long for a multi-national to launch a product than it does a building society. Sometimes, size isn’t everything.
Potential developments
What of the future? Well, there are indications that financial services organisations are listening to customers’ desires and creating bespoke timely solutions. We now live in a world where you can get an agreement-in-principle in minutes, find a property online in your lunch hour and sort out the ‘legals’ without even meeting your conveyancer. Life is speeding up and companies are starting to focus on addressing consumers’ needs.
There are also potential developments on the horizon that could see mortgages becoming even more bespoke. Risk-based pricing is one of these and it will be interesting to see over the next few years how this theory becomes more of a reality and potentially an answer to a huge need in the market.
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There are, of course, challenges to overcome in this bright new future, as essentially it is easier to innovate existing ranges or launch ‘cookie cutter’ mortgages, but we need to evolve to survive. So perhaps now is the time to sit down with Mr Jones, Ms Smith or Mrs Phillips and ask them what they want from their financial products. You might be pleasantly surprised to see that finding a solution to their financial dilemma isn’t actually as hard as you might think.
