Mike Fotis

Using fear to sell financial products is simply desperation. Selling hope is the future

Using fear to sell financial products is simply desperation. Selling hope is the future
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Using fear to sell products is a powerful strategy. Unsurprisingly, many financial firms have come to rely on fear to fatten their bottom lines. But in 2017, there’s only one word to describe fear-based marketing: desperate.

Firms selling pensions, investments, and financial products aimed at the over-50s, such as funeral plans, have traditionally been the worst offenders. The insurance industry also knows a thing or two about using fear to sell. After all, with the exception of a mandated product like car insurance, the raw motivation for buying insurance products is largely fear. None of us plan to drop our iPhones, and yet we buy gadget insurance, just in case. But even the masters of fear-based selling are dialling it down a notch.

What many of the old guard have started to realise is that there’s a pretty seismic shift in the way many new financial firms are engaging with their customers. Fear-based marketing is being replaced with a new model of aspiration, accessibility and transparency.

Few financial firms have moved as far away from fear-based marketing than those providing credit reports. Checking your credit report used to require a £15 a month subscription that would help us spot and stop fraudsters. Then along came firms like ClearScore and Noddle. Both are free for life and aspirational. The primary objective of these firms is to help us improve our credit scores and access better credit options.

This shift towards aspiration can’t happen quickly enough for the pensions and investments industry. For far too long, consumers have come to view this all-important part of the financial industry as a dark gray haze. Contrast this with the consumer credit industry, which is viewed as fuelling consumer dreams, by funding weddings or new cars. It’s not hard to see why we’ve become a nation of borrowers.

And this is precisely why how we market financial products matters. Whether consumers are borrowing or investing money, both acts share the same basic goals and have aspiration as a common component. But as long as the pensions and investments industry remains grey and boring, consumers will continue to switch off.

Contrast the approach of a new investment firm like Nutmeg with that of the Skipton Building Society. Nutmeg sells its service based on its quality, simplicity, cost, and accessibility. The Skipton Building Society’s in-store marketing offers the mantra ‘Hope is not a strategy…planning is.' It’s a catchy tag line, but it’s also wrong.

As I write this, there are people burying their heads in the sand about unpaid bills, or ignoring the fact that they have no savings to fall back on. For these consumers in particular, hope must be part of the equation.

Those firms involved in the pensions and investments industry have to get better at selling the type of aspiration that requires consumers to critically engage with their goals and hope is a natural part of this. Be it hope for a 2% pay rise, or the Del Boy and Rodney hope to become millionaires by this time next week.

It’s a simple choice. Firms can adopt aspiration and hope or fall back on fear. And while the brightest financial firms are selling a better future, others continue to sell more grey messages about planning. This is no longer good enough.

For millions of UK consumers, hope is an essential part of achieving a strategy based on what is possible. Hope is a flickering flame that keeps people believing that their goals and aspirations are possible.

Hope is also vital to the belief that better financial organisations exist. Without this belief, half a million customers wouldn’t have flocked to a new bank like Monzo, and they’d be no point in trying to raise standards in the industry. Financial firms that try to extinguish hope should themselves be avoided.

Mike Fotis is the founder of Smart Money People and a former financial services consultant.