Report 4: Products of the future
Emerging trends and innovation
I was reviewing a new product recently that promised to ‘allow your family to live life in
comfort and flourish’. You might think that a product which carries this tag line would be a
financial savings vehicle of some kind, rather than in reality a fabric softener. The average
household shopper is perhaps more interested in a new detergent, than they are in the
delivery of a new retirement planning solution. The fact is that financial products are not easy
to market and still often need a ‘sell’ in the process to at least help the consumer understand
the benefits, if not perhaps to also clarify the need.
New product development in financial services is rarely radical, and we tend not to be brave
enough to use such strong tag lines, for fear perhaps of future action; should the suggested
promise not transpire. The supply of a new product is rarely created from pent up demand
either. Although in the Retirement Solutions market we could say that in some ways this is
now the case. Demand is more often created following the supply.
In financial services we do of course need to find real money that is linked to the demand,
whether it is to pay a risk premium or to invest. It is possible to get it wrong though. Not long
after the new millennium a great new and innovative product came to market and duly failed,
because those that needed it could not afford it, and those that could afford it frankly did not
need it.
In our industry we are both hindered and helped by legislation and regulation. Without the
shackles of regulation we could offer far greater choice, at the cost perhaps of less security,
and the loss of consumer confidence. However if it were not for the Chancellor’s budget
speech this Spring the retirement industry would not be busy building new options to a very
stable range of options that have existed up to today. This one speech is surely now one of
the greatest catalysts for the most radical change in decades to the retirement side of the
industry.
The changes announced hit the masses, as well as the wealthy elite. Now the money in your
pension really is your money - and not just held in reserve for the annuity company to eat up.
The challenge we now face as a result, is ‘bringing drawdown to the masses’. How do we
serve a mass market when we are offering solutions that simply can go wrong? Are the
warning signs enough? Will the client say to their adviser in ten years’ time, ‘I know you said
I could run out of money, but I didn’t realise you meant it.’
The wealthy are now increasingly served by a profession that has learned how to
deconstruct the packaged solution, and with the development of technology has been able
to reconstruct a bespoke solution for their client. The cost of such solutions though can be
inhibitive in the mass market, and we must in turn be careful to ensure that the consumer
really does understand the solution into which they invest.
The mass market demands simple solutions that are easy to understand. A Director of an
advice firm that focuses on the mass market recently commented: ‘We don’t all eat gourmet.
Trying to distribute some of these products is like selling Michelin star priced food in a Happy
Eater’.
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Report 4: Products of the future
Simple product does not mean a bad product, and it does not need to be vanilla, (although I
really like vanilla ice cream!). A simple product does not need to be a boring product either.
The reality is that people want to plan a retirement they understand. They don’t want hassle.
It is possible to build solutions with the options that make the product or solution more
adaptable and complex - in the places where complexity is required. There is no doubt the
product manager of today needs to decide where on the spectrum their product sits between simple and complex.
Innovation has also hit an industry that has been largely happy with what it has got. The
challenge of being first to market is great. A brand new product is not met by the euphoria of
new technology; rather the conservative scepticism of an experienced profession, that
‘knows what it knows and likes what it likes’. Breaking through with brand new products and
practices, into a market that demands evidence of success before you have started, is a
tough task indeed.
The greatest innovations will come not from our shores, but overseas. In the protection,
investment and retirement markets we have seen innovation arrive in the form of new
concepts that are already tried and trusted solutions in their home market.
In reality though, despite the advancement in technology and ability for a product to travel,
the evolution of a product from the existing base is trusted style. Building on what has
already been accepted, by adding a new feature or fund is the established practice. The
greatest product managers I have worked with, have a vision of a future entirely different
from today, and have worked out the pathway to get there through a hundred steps of
development to ensure that emerging trends can be accommodated; the adviser kept
interested, and the client needs still met - even if the promise is not to ‘live a life in comfort
and flourish’.
You can speak with the LV= specialist retirement consultants at the LV= Retirement Desk on
08000 850 250.
Steve Lewis,
Head of Distribution, LV= Retirement Solutions
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