1. Cello Group
Money Talks
Leapfrog Research and Planning
Repairing the damage
Rupert Blackwell
Sarah Buckle
Good evening, ladies and gentlemen.
We work for Leapfrog Research and Planning, an international qualitative and
quantitative market research agency based in Windsor.
Over the last 2 years or so, we’ve carried out a large number of projects – for
clients in a range of categories, not just financial service providers – looking at
consumers’ responses to the economic climate and what’s been going on in the
financial sector.
We thought you’d find the broad findings from these pieces of work interesting,
possibly even instructive.
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2. What we’re going to talk about comes chiefly from lots of different group
discussions with a wide range of mainstream consumers including our own
research which we conducted a week ago.
• Online quantitative research; c1800 adults; 1st October 2010
But we also carried out some quantitative research – featuring an online sample
of 2,000 people – especially for tonight’s session, and the numbers that will
appear behind us while we speak come from that survey. Our sample is all adults
and isn’t based on product ownership, so some of the figures might be lower
than your own data suggests.
Given that you all work in financial services, our focus this evening is on
consumers and their views on banks and other financial institutions, rather than
the broader economy.
Having said that, most consumers we’ve spoken to think the two are inextricably
linked or at least that there’s quite a lot of chicken and egg involved with them –
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3. recently what happens in one seems to affect the other significantly, and vice
versa.
The interesting thing about consumer attitudes to the financial services industry
is how things have ebbed and flowed since 2008.
When the crisis began, banks and other financial institutions were in the full
glare of public consciousness.
Then – after the initial scares – the media’s and people’s attention was distracted
by the declining fortunes of Gordon Brown and the General Election.
Now, with Gordon gone and the jury still out on the Coalition, consumers’
attention has to some extent gone back on the banks in particular, especially as
they seem to be behaving as though nothing has happened, at least if the
media’s to be believed.
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4. We obviously don’t need to tell you that – at an overall level – most ordinary
people consider what’s been going on at the banks over the past couple of years
pretty astonishing: akin to discovering that the quiet, even boring, neighbour
that you don’t really know anything about at number 42 has been revealed by
police as a kingpin in an underworld of vice and fast-living.
And, not only that, without your knowing, he seems to have involved you and
the rest of the street in the consequences of his misdemeanours, too.
Of course, we weren’t all wiped out by the banking crisis in the way we at first
thought we could be.
The actions of the previous government to prop up the institutions in crisis with
taxpayers’ money did prevent further crashes; people’s savings were protected;
the forcing down of interest rates has made many mortgage-payers better off,
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5. possibly better off than they’ve ever been, though savers will tell you a very
different story.
But now that the stormy waters have calmed, what are we left with as far as
consumer attitudes and responses to banks are concerned, assuming that further
crises don’t occur in the sector?
A consumer collage of anger
National and personal debt Arrogant – the only winners
Blame
Cold
Unapologetic
Cuts
What next? Country in disarray
What lies behind these attitudes and what are their implications?
The prevalent attitude is one of anger.
Of course, people have always been pretty grumpy with the banks from time to
time, because of charges, errors and lousy service and, more recently, the fact
that new customers get a better deal than loyal ones, and these grumbles still
exist.
But there are other layers of anger, too, and these have shifted.
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6. It’s worth pointing out here that one of the consequences of the banking crisis is
that it’s given people a much clearer appreciation of the organisation of banks
and, in particular, that your friendly local branch is backed by a much larger
institution with different values and goals.
Clearly consumers were conscious in the past of ‘Head Office’ but it’s not until
recent events that most people have had a proper sense of how what goes on at
a bank’s HQ, and at the bank’s bank – affects the man on the street.
“I blame financial institutions for rising levels of personal debt”
% agreeing with statement
23 26 28
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Total 16 - 34 35 - 54 55+
Source: Toluna online poll of 1794 UK adults on Friday 1st October
One of the things we’ve heard a lot from consumers – particularly older ones –
even before the banking crisis was how much they disapproved of banks
encouraging people to take on debt, especially credit cards and loans for more
frivolous purposes like shopping.
At that time, this was a kind of generational disapproval, people who’d been
brought up with a save before you spend mentality tut-tutting the buy now-pay
later values of their children.
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7. But now, these same people are angry that they were right all along, that the
days of easy credit have caused us problems, though to a much greater extent
than anticipated.
These people are particularly aggrieved that their prudent behaviour – in other
words, not borrowing – has counted for nothing, and they’ve gone down with the
ship along with everyone else.
What makes more people angry now, though, could be summarised as the
‘parallel universe issue’, the idea that bankers – and the bankers at ‘Head Office’
and above, not Tina in your local branch – appear to live on another planet to
the rest of us, possibly with Premiership footballers as their neighbours.
We of course refer to bankers’ salaries and bonuses, especially the bonuses.
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8. Some of this boils down to good old-fashioned envy, of course.
But what really drives consumers demented is the sheer unfairness of it all:
bonuses being paid out by institutions that the taxpayer has bailed out, which
won’t lend small businesses money and who are making getting a mortgage
harder than ever, if possible at all.
And this all at a time when ordinary people are suffering redundancy – or the
threat of it – pay freezes and the spectre of cuts hangs over them.
According to consumers we speak to day in day out, no banker has been made
redundant as a result of the banking crisis, none has had a pay cut.
If anything there’s a sense they’ve enjoyed the reverse – unprecedented pay-
outs, higher even the days before the credit crunch, if the latest reports are to be
believed.
It’s the lack of contrition that gets to people and the feeling that banking’s the
only industry where failure comes with such a good pay packet.
Everyone has to be financially cautious, but the people who caused the problems
don’t need to.
Neither of these examples is particularly revelatory – everybody from Vince Cable
to The Daily Mail, probably even you, agrees with ordinary people on this matter.
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9. But, research we’ve carried out in the past couple of months appears to reveal a
new kind of anger among consumers – resentment at having to pay proper
attention to their money.
Until now, unless they were genuinely active investors, and we meet few of
these, many ordinary consumers appeared to feel at one remove from their
money and in particular their longer term savings and plans for the future.
They’re angry that what they had hoped for as a matter of course in terms of
pensions and savings may not be delivered in reality.
They’re also angry that they’ve been caught out, living in the dark about their
money and just trusted to luck, or the people they were told to trust.
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10. In other words, they’re angry with the institutions for their failure to deliver as
well as promised, but they’re also angry at themselves for being naïve and
ignorant about such an important topic.
This ‘self-anger’ is even more keenly felt at the moment given that we’re all
going to be more liable for our children’s future costs than we may have
anticipated, because of the rise in tuition fees and how expensive it will be for
them to get on to the property ladder. And we can’t rely on the nest eggs we’ve
put aside either…
Which of the following do you trust to act in your interest?
% agreeing
Family & friends and the NHS are most
The Bank of England 8
trusted…..
Trade unions 8
Supermarkets 7
Friends and family 51
Employers 7
Local councils 5 The NHS 22
The Labour party 5
The Coalition Government 5 ….but more than 1 in 5 do not trust anyone to
Newspapers 5 act in their interest
High Street banks 4
Pension providers 4 None of
23
Energy providers 3 these
Insurance companies 2
Credit card companies 2
Estate Agents 2
Industry leaders 1
Source: Toluna online poll of 1794 UK adults on Friday 1st October
No surprises, then, that levels of trust in banks (and every other financial
institution for that matter, shown here in red) are very low, and the only people
consumers feel they can rely upon are their own friends and family and, at a
push, the NHS.
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11. But, ultimately, does this consumer anger matter? Does their lack of trust have
any really serious implications?
In both cases, not really.
Britain is a nation of moaners and the banks are to some extent just another
thing to be cross about.
It’s also hard to imagine widespread rioting in the street, at least among
mainstream consumers.
And, when you talk to consumers, what does their anger actually lead them to
do?
Switching behaviour in the last few years
I have changed car insurance provider 20
I have changed house insurance provider 16
I have moved my savings account 14
I have moved my current account 10
I have transferred my credit card balance 9
I have moved other investments 8
I have moved my mortgage 4
I have moved my loan 3
I have transferred my pension 3
None of the above 51
Source: Toluna online poll of 1794 UK adults on Friday 1st October
It’s clear that lots of people shop around for insurance nowadays (indeed they’ve
done so for a long time) but this largely boils down to price and the fact that
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12. comparison sites have made the process so easy, not because of any anger with
the institutions themselves.
Our research has established that most consumers don’t in fact bracket
insurance companies in with banks, even those they know are owned by banks.
More significant, though, is the low level of bank account switching or switching
of any kind given the frustrations people have.
People say they’re angry with their bank – both because of the poor service and
because it nearly collapsed – but do they move out of protest?
No, hardly ever – it’s too much hassle; they’re worried about their direct debits;
they feel they’ve got a relationship with their bank manager which might come in
useful if things ever get really tricky with their finances.
Better the devil you know, especially in a world of devils.
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13. In fact, when it comes to trust, our data doesn’t tell the full story.
Yes, people don’t trust banks, but surprise, surprise, as we saw from the earlier
data, most aren’t that keen on politicians and estate agents, either.
Actually, in groups, we’ve found that the only people who can really be trusted to
sort out the banks, stabilise their operations and continue their important
contribution to the economy are the banks themselves, with assistance from
government and regulators.
So what now for the banks?
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14. Clearly a priority for any bank in the short-term future is to make up the distance
that appears to exist between bank and customer, to bridge the parallel
universes we talked about earlier.
NatWest – and in Scotland, RBS – seem to be attempting this with their current
customer charter campaign, while LloydsTSB’s For The Journey positioning also
seems to acknowledge how out of touch banks appear to customers and how
they need to demonstrate real empathy.
When we talked to consumers about these campaigns recently, there was, it has
to be said, a degree of scepticism, influenced by their reaction to the industry
overall.
And, in our recent quantitative survey, only 12% of respondents felt that the
banking crisis was caused by just a few individual institutions, that – in other
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15. words – the banking crisis was symptomatic of malaise and irresponsibility across
the industry.
So, an industry-wide campaign, from all banks, not just individual brands, is
probably required to acknowledge what’s happened and draw a line in the sand.
Sharing responsibility and showing contrition may well be vital.
Without it, we wonder whether any individual existing banking brand – and we
should stress existing and banking – will be able to convince fully that they’ve
made a break with the past, or even be able to make their voice heard.
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16. The good news for banks and other financial institutions is that the crisis has
made consumers engage properly with their financial situations, and the fact
they need to take control.
There is a generation of people in their 30s to 50s who desperately need help
and leadership from experts to help them develop appropriate and realistic plans
for the future.
They’re going to need more money than they thought they did; the system they
assumed, because of their parents, was failsafe probably no longer exists; they
are nothing like prepared enough.
In fact, they often seem paralysed by not knowing what to do.
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17. If nothing else, the recent banking crisis has awoken these consumers from their
stupor, so reach out to them with practical help while their appetite lasts. And
deliver on the basics of banking without ceasing.
Thanks for listening. Good night and good luck.
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