“That’s an interesting choice” is a statement that interests me a lot. It is an entirely satisfactory response to a test we have just started with the FCA in which we allow people to compare pension pots by way of a single score assigned to each pot
The phrase should also be welcomed by policy makers when those not taking advice are offered investment pathways at the point they have to consider their retirement income options.
We could add to this the choice an employer needs to make when choosing or reviewing the choice of their workplace pension.
All of these choices come with varying levels of information , presented in ways that are designed to make the choice meaningful and interesting.
Today’s exam question is – when does interesting choice become advice?
Interesting and meaningful?
When you scan the price tags of instant coffee on a supermarket shelf you are presented not just with a price, but with a price per 100g. This information is interesting and meaningful but it is only becomes vital if I think that all the coffee tins contain the same powder.
If I have a preference for one coffee of another, I will mark that as my main decision maker and only refer to the price point as a decider where the choice elsewhere is not clear. I am creating a balanced scorecard in my head and though the decision will take me only a couple of second, the coffee hits the trolley with a more satisfying clunk if I am happy with my choice. If I cannot decide, I may not buy and I may have to shop elsewhere.
Looking at the presentation of the choices above, I think I would find some of the choices clearer than others. A lot of this comes down to the clarity of information presented and the logic behind that information. If I am feeling I am being led down one pathway, I will be wary, worrying that I may be being led down the garden path.
Or led down the garden path?
If the point of every comparison is to lead me to the same overwhelming conclusion then we may feel coerced and reject the basis of choice. We may ask are there other pathways of coffees we are not being shown.
This is the risk of comparison and why for decades the concept of “whole of market” was the basis of “independent advice”.
But necessarily we have turned to restricted advice because not all choices may be available. The Pension PlayPen table (dated around 2013) shows that several providers weren’t prepared to offer terms yet, would the purchaser hang on or take a restricted choice?
This is always a dashboard dilemma. The problem for the pension dashboard is whether a dashboard is offering meaningful information if the information is incomplete, or whether there is enough information to be getting on with.
In the AgeWage dashboard, information is incomplete and boxes hang like hanging chads.
Should we be so needy of our customers?
In yesterday’s blog, I was asking what mattered in the game. For the purists, the game will be remembered for the purity of certain moments, or the cut and thrust of the first half or for the empty stadium or the refereeing. But for most people the FA cup final will be remembered for the result – Arsenal winning 2-1. That is the meaningful and interesting information on which we judge the merits of the teams.
We test and innovate around what matters to people and if we can’t provide meaningful information in an interesting way – we fail. I fear that we are failing a great number of the 650,000 people who reach 55 each year for whom the promoted current options are Pension Wise and Financial Advice.
Which is why it is so important that organisations step up and provide default continuation options to people who simply do not engage with their pensions. I wrote last week about how good it is to see Nest’s guided retirement fund.
This is why we test and innovate.
For nearly a decade now, I have been focusing on non-advised choice. I have looked at choice in car showrooms, estate agency, supermarkets and on price comparison sites. I have compared tangibles with intangibles and I now see that people spend time on choice if it is interesting, not because it is important.
We may think it is important for a retiree to choose the best annuity rate or an employer to choose the best workplace pension , but that choice will only be made if we can get choice onto the agenda in the first place.
I was talking to some people the other day about the FCA/tPR anti-scamming campaign that compares an unfortunate victim to the jet-ski-ing scammer. Unfortunately, the interest was with the scammer (Milton gave Satan all the best lines). One of the people watching the advert thought that pension scamming looked an interesting career choice.
My point is that presenting choice can solicit the wrong reaction and sometimes we must accept that no choice will be made (witness the 99% default rates into some workplace pensions). This is why it seems so important that we test whether choice works at retirement or whether a default decumulator is necessary.
All the evidence going back to the days when we tried to promote open market options on annuities, suggests that we cannot be needy of our customers and that our ambitions for getting engagement with investment pathways may be doomed from the start.
The power of collectives
Despite providing individual’s financial advice to individuals for much of my career, I am a believer in collectively delivered decisions. That is why I accept consolidation as natural and (within limits) desirable.
The power of collectives to deliver consistent value for our money is much greater than our power to deliver this individually. I totally agree with Nest’s strap line
When does interesting choice become advice?
To my mind, to have got people’s interest in their choices is an achievement and much more than can generally be hope for (we should not be too needy).
That said, the amounts that people are and will build up in workplace pensions are meaningful and interesting, when people realize they can have the money back.
The responsibilities of those presenting choice are therefore very onerous. For we know the consequences of taking bad choices
The choice presented by the man on the jet ski is likely to be a lot more interesting than the investment pathways presented by pension firms. Which is why we need regulation and why we are spending time in the FCA sandbox testing what engagement we can get from ordinary people.
If you have been interested either by this article or the one I published yesterday, you may want to join our growing group of testers. You can do this very simply by going to agewage.com. All you need to test is to have a UK DC pension pot.
We want to see if you find your pension choices can be made interesting and will be listening to your feedback very carefully