OctopusMar 11 2022

Trust in financial services ‘broken’ due to ‘arrogance’: Octopus

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Trust in financial services ‘broken’ due to ‘arrogance’: Octopus
Ruth Handcock, chief executive of Octopus Investments

Trust in financial firms is still half “broken” because of an assumption made by companies that clients simply would not understand things even if they explain them, Ruth Handcock has said.

When asked what she thought trust meant in financial services, the chief executive of Octopus said she tends to break it down into two halves.

The first, she said, is the “table stakes” expectation that a firm isn’t going to lose all of an investor’s money, whilst the second is whether a firm is going to act in an investor’s best interest.

It’s the second part, Handcock said, which “is the bit that's broken”. 

There's sometimes a little bit of arrogance in saying ‘don't worry, I've got it, I know what I'm doing, I'll just deliver the results for you’.Ruth Handcock

Speaking on a panel hosted by white-label platform provider Seccl, Handcock commented: “Regulation has largely succeeded in the former, it's not perfect, it’s not like there aren't scandals occasionally. But it's largely succeeded.

“The latter is a really big deal, because if you ask most people ‘do I think financial services organisations are on my side?’ you get anything from someone just laughing to, occasionally, someone saying ‘I can give one example of someone that might be’.”

For Handcock, this part of the ‘trust puzzle’ can simply be solved by transparency. She said during the pandemic, Octopus Investments - an asset manager - made a concerted effort to issue updates from fund managers to clients “almost daily” in the first instance.

“We knew everyone was going to be really worrying about what was going to happen to the money they had invested with us, rightly,” she said.

“We decided to immediately spin up a bit of our website and put updates from the fund managers, almost daily in the first instance to say, ‘look, this is what we know, this is what we're doing, this is what we think the outlook view is’.

It's not just fees. It’s about ‘am I acting in the right way?’ It’s not assuming that people aren’t going to understand.Ruth Handcock

“We were absolutely as transparent as possible. And I think it was exactly the right thing to do, because there's sometimes a little bit of arrogance in saying ‘don't worry, I've got it, I know what I'm doing, I'll just deliver the results for you’.”

In Handcock’s opinion, investors are now expecting more. “They’re expecting you to say, ‘this is what I'm doing’, ‘this is why you can understand this just as well as I can, so I'm going to be open with you’,” she said.

“It's not just fees. It’s about asking yourself: ‘am I acting in the right way?’ It’s not assuming that people aren’t going to understand. They will understand if you explain it clearly. We all have an obligation to be transparent. That's how I think you build it [trust] over time.”

‘Clients ask us to turn contract notes off’

While Handcock believes all financial services firms should communicate more with investors, some firms are quick to highlight the issue of bombarding end clients with information.

Jonathan Gunby, Transact’s chief executive, made the point at the Association of Investment Companies’ UK conference on March 9 that advised clients actually want less communication around investments, rather than more.

He said “mum and dad are not very engaged at all” according to log in data, while younger family members with small holdings are “much more engaged”. The average family on Transact holds around £450,000.

“Our contractual client is Mrs Miggins, the end customer,” said Gunby, with Transact’s main communications being with the adviser.

The platform has now switched off paper for almost all customers, and instead sends things online to clients’ ‘pick up pages’ which are behind a secure log in.

“I have to tell you, we get lots of requests to say, ‘please don't send any more things to my pickup page’. This is from Mrs Miggins. ‘I've got an adviser, that's why I pay the adviser, I'm not interested in this stuff.’ 

“So even with things like contract notes - customers are saying to us, ‘can we turn them off?’ We say ‘no, you have to get those, there’s certain things we have to send to you’.

"It's clear the end customer would like less rather than more. That's one of the things everyone is battling against.”

The difference in appetite for communication, as Gunby highlighted, seems to depend partially on age. While older investors want less, younger, often more engaged investors, want more.

ruby.hinchliffe@ft.com