Refusing direct consumer contact could cost firms

Good communication should be fundamental to any successful business. It is part of what makes us human and can give a crucial advantage to any species.

But many businesses in the financial services sector – and particularly in the investment arena - have time and time again failed to communicate properly with their customers.

It has cost investors untold amounts of money and ultimately hit the businesses’ custom and profits.

It is arguable that the endowment scandal would not have become so corrosive if insurance companies had kept customers better informed from the start about what was happening to their policies.

Many financial advisers are equally culpable for failing to keep their customers informed of the progress of these investments once they had sold them.

But on to today. The retail distribution review is the catalyst for a revolution. And, as with all revolutions, there will be casualties and winners.

How hard are firms working to make sure they will be among the winners? How many are looking at their basic models to ask whether these will ensure they will come out at the top of the pile rather than falling victim to the guillotine?

Banks are certainly making changes of which you may or may not approve.

There have been suggestions that Lloyds group could clean up in the advice arena. And some banks have clearly set out their stall targeting the execution-only sector.

So what are fund managers doing? Well, in the main, not a lot. With one or two exceptions there appears to be a remarkable degree of complacency

Many fund managers have always taken the attitude that they deal with IFAs and the trade press and that is that.

The trade press is vitally important – as part of it I can vouch for that.

But surely ignoring vast swathes of the consumer press and direct contact with customers is foolish in the extreme.

There can be no argument that execution-only is becoming more popular and will continue to do so.

So why are fund managers willing to surrender this massive potential customer base to Scottish Widows and others that enjoy the comfort of being linked with a big bank?

IFAs will continue to play a big part in selling the investments of the fund managers. The trade press will continue to play an essential role in introducing, commenting on and analysing these funds.

But fund managers who refuse to communicate more with investors directly are wilfully excluding themselves from a large sector of the market.

Come the revolution they may well regret it.

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