Experian research shows fund managers are still not getting D2C distribution

04 Mar, 2015

More than two in five people are frustrated by requests for further information or documents during the application process, according to new research from Experian, which reveals key factors driving people to pull out of an application for a financial product or service.

A third of mutual funds are now sold direct (either from fund managers platforms or intermediary platforms such as Hargreaves Landsdown), and getting it wrong cuts out a swathe of investors. Experian’s latest research, which looks at the top frustrations causing customers to pull out of an application, found that two fifths (40 per cent) of adults were deterred by a long application form, putting them off completing the application altogether.

Fund managers, reliant for so long on third party distributors, are struggling to adapt to D2C in the wake of RDR. Many have still not grasped the chief lesson of successful IT and network companies such as Amazon, Google and Facebook and Apple: start with the customer, not the product.

Waiting too long for the application form or payment to be processed was found to be enough to cause more than a third (34 per cent) to abandon the process, but the primary reason for actually abandoning an application, however, was poor customer service and poorly designed customer technology (46 per cent).

A lengthy application process is the number one frustration felt by over half (51 per cent) of UK adults applying for financial products and services, while being asked to provide further information or documents in addition to those already provided during the initial application process (42 per cent) was also a key frustration. Over a fifth (22 per cent) stated they would abandon an application if asked to do this.

“The increase in the use of online and mobile channels rather than face to face interaction has made identity checks a vital part of the process,” explained Nick Mothershaw, Director of Fraud and Identity Solutions at Experian. “With increasing competition in the financial services industry, a faster more streamlined identity verification process, where the identity can be electronically verified and supporting documents are validated immediately online, is the only way forward for providers, otherwise they risk losing their customers.”

“The latest research highlights the challenges faced by financial services providers when it comes to online transactions. Many organisations have processes in place to protect their customers, for example from the threat of fraud when making online transactions. However, these processes can have a big impact on the customer journey, leaving many unhappy with the service they are getting. When applications take longer, this is usually due to identity verification measures that are there to protect both the business as well as customer from fraud.”

Jerry Toher of Royal London. The largest mutual life, pensions and investment company in the UK, commented that Experian’s findings “confirm a fundamental challenge for financial services firms today: how to evolve in a modern ‘omni-channel’ world which operates 24/7. They also highlight a persisting issue which insurance providers especially need to conquer: the over-complicated application process (no life insurance provider should ask any customer to answer 90 questions in front of a computer for hours!)”

The CEO of Royal London Group’s consumer division added that “every business, b2b or d2c, should regularly step into its customers’ shoes to appreciate the journey from their perspective. When selling direct it’s even more important, given consumers are detached from the complexities of industry parlance and process. Before we launched our direct life insurance products, we researched how customers in the real world actually navigate the life insurance market. We found that 49% of all online searches for life insurance came from mobile devices; and few customers buy life insurance after they’ve started the application process (1-2% conversion from one of the main online channels: comparison sites.)”

“In light of our findings we made a number of conscious decisions: we made the purchase accessible on mobile phones and tablet devices; we stripped the application process right back - so the whole process takes only a few minutes versus c. 45 minutes with a conventional product; we replaced the usual complex (dozens of questions-long) medical underwriting stage with a few smart questions that are relevant to the applicant; then finally we lead customers to a price that we honour - no false quotes. This no-nonsense approach is central to our ethos at Royal London – we want to help people get protected with the right products that flex to meet their needs, not ours,” concluded Toher.