In the annual Edelman Trust Barometer 2014 survey conducted across 27 countries and more than 33,000 respondents, Financial Services ranked the lowest of the 15 global industries tested. And within these results, it was the insurance and financial advisory segments that scored less than bank and credit cards/payments.
The fact is that consumers trust banks and insurance companies less than any other industry.
This erosion of trust in financial services is not a new phenomenon. The origins of this widespread and quite fundamental decline in consumer confidence in our financial institutions goes back a long way.
There are many factors that underpin this erosion, from the persistent media frenzy on fat cat bankers and corporate greed, to the institutional ‘conduct unbecoming’ of those entrusted to look after our money. Of course, events such as the financial crisis and the resultant failure of banks and national economies alike don’t do anything to build confidence in the financial services industry that we all rely on.
But this lack of trust is deep seated after consumers have had decades of bad advice, being mis-sold products that are not right for them, and the “you can trust me, I’m independent” message of advisors with no transparency over the commission and reward mechanisms that drive their behavior.
At the heart of this lack of trust is the consumer’s engagement with financial institutions as the provider of good advice. Consumers expect this good advice to be backed up by expertise to bridge the gap in their own competence to understand the complexity, jargon and technicalities of whatever it is they are looking for. They also expect this advice to be provided in their best interest and not in the interest of the provider or the advisor themselves (see the previous article on addressing the issue of mis-selling and bad advice with the artificial intelligence solution from Recordsure.)
Shopping around does not always offer a solution to consumers because of the difficulty in comparing competing, complex products in the market. I covered one example of this in a recent post about Abaris, who have a solution in the US market to compare income annuity products. Abaris are an intermediary that provides an apples for apples and transparent comparison across multiple providers and in so doing, they provide the consumer with a level playing field to make their own judgments.
And when consumers do go shopping, they are faced with cash back, money off and other discounts or other enticing offers from providers and intermediaries. From free cinema tickets for buying health insurance to free money for signing up to a new credit card or current account. None of these offers help match the consumer with the right product for them but what we do know is that there are few free lunches in this world and and if anyone offers one…caveat emptor – buyer beware!
So, where does that leave us in the disruptive world of Fintech today?
We have undeniable evidence of a problem in the market that needs to be addressed. We have a complex and broad world of often difficult to understand, technical products that consumers have to buy (although many are not and there is growing evidence of the true scale of under insured in our society). And we have the emerging power of social, the crowd and of networks.
When you bring these together, you create the market opportunity for the money managers, this new breed of financial services intermediaries that bridge the gap between the buyers (consumers) and the sellers (insurers and banks), and in so doing, they create a trusted platform for consumers that offer a lot more than the last wave of intermediaries, the aggregators.
To gain insight into the world of the money managers, I spoke this week with Dieter Fromm and Johannes Cremer, the co-founders of German based moneymeets.
Dieter and Johannes have been friends for a long time, both working for over decade in the world of financial services. It was this whole subject of the lack of trust and consumer confidence that led them to talk about creating an Amazon-like business in financial services.
Having both had long careers in the industry, they understood that the heart of the issue was in this area of advice. Quite simply, consumers did not trust the advice and the quality of that advice that they were being provided by the industry. They also understood that the underlying IT or financial product itself was not being questioned by consumers.
Essentially, this was a distribution problem, not a manufacturing one.
So they set about creating moneymeets as a one-stop shop, financial portal that would do five things;
- provide a complete overview of a consumers financial position including insurance and investments as well as their current account
- define a set of financial goals and objectives specific to the needs of the consumer
- manage their portfolio of products against those objectives, taking feedback to improve the consumer’s financial position from the moneymeets community through social rating and review, or C2C (community to community)
- transparent pricing of all products showing all commissions and fees with a cash-back offer to split commissions 50:50 with the consumer
- ongoing monitoring of financial activity
The core value of their consumer proposition is a simple one – trust! Established by providing consumers with a complete view of their financial position, by being transparent with prices and sharing commissions, and by building a social network of collective support and wisdom in the community.
Formed towards the end of 2012, moneymeets now has over 4,500 users and €20m of assets under administration on the portal, which is growing fast with 5% growth in new assets being added each week. And as the platform grows, so does the size of the community and the buying power of moneymeets. Which in turn creates a greater pool of experience to share amongst the community and stronger purchasing power to further drive down prices.
There are money management platforms all over the world, but I was drawn to moneymeets because of the way they are one of the few who have included insurance in their platform. When their users move their insurance business to the portal, moneymeets declare all the commissions and charges against the policy. In the German market, it is typical in the Life market for only the distribution cost (fee to the intermediary) to be shown, but moneymeets goes further and shows the full cost breakdown for the insurance product.
moneymeets are the first in the German market to show this level of transparency and return 50% of the fees in a cash-back offer to the user (typical fees in the non-Life sector are 20% of the premium, which effectively gives the consumer a 10% discount).
One of the reasons for this being an attractive market proposition is that many non-Life insurance products can be low margin for brokers and the consumer does not get a great deal of service. Instead, the users have access to the moneymeets community to pool shared experiences and provide support for insurance products.
The success of the portal is reliant on its connectivity to financial institutions and it already has over 160 interfaces to banks and insurance companies. The aim is to have 98% coverage of the German market by the end of this year. To make the portal easy to use, it has an intuitive, uncluttered and simple user interface that hides the intelligent algorithms and investment strategies that sit within the platform.
Whilst other platforms provide some of the features of this portal, moneymeets is the first money manager in the German marketplace that provides a holistic and transparent offer to the consumer. And in doing so, they hope to build a business based on Trust as its core value.Like This Post