The phrase ‘familiarity breeds contempt’ could certainly be applied to many consumers’ views of the financial services companies they deal regularly with. However, it’s not always the case that the contempt a company is held in naturally leads on to that consumer changing providers. Indeed, most consumers (and I include myself amongst them) would rather deal with ‘the devil we know’ rather than the devil we don’t. Many companies have built highly successful businesses based entirely on customer inertia and certainly if we look at certain sectors of financial services, for example, bank current accounts, then we can see this playing out.
Even with the introduction of a seven-day turnaround for bank current account switching – which was introduced last year and designed to make the switch process much easier – I suspect the vast majority of account holders have continued to stick with the bank they’ve been with most of their lives. Indeed, the latest figures for switching released by the Payments Council for the first three months of this new scheme show the numbers to be in the hundreds of thousands rather than a mass stampede to change.
The point is that in general we tend to be a rather conservative (with a small ‘c’) bunch and it is only when we feel completely aggrieved or ‘ripped off’ that we will make the effort to change something – especially when our perception is it’s going to be a major hassle. In the past of course bank account switching could take weeks and seemed particularly difficult to achieve – one wonders whether the numbers of switchers will continue to rise in the months and years ahead as we get our heads around the fact it’s not going to take many weeks to achieve the switch, or if we will still stick with what we have.
We see the same dilemma being played out in the network sector with AR firms often unhappy with their current Principal but, firstly, wondering if the grass will really be greener on the other side and, secondly, worried about the process and the effort that has to go in to changing network. Again, many networks have been fortunate to have an AR membership satisfied with a stick rather than twist approach however we are (thankfully) seeing many more firms lay their cards on the table and are willing to get up and leave.
Certainly, the smaller AR firms we talk to are now much more interested in looking at the range of alternatives available to them particularly when it comes to the fee structure a network operates. We’re proud to say we have never changed our approach to charging since we were established and therefore our AR firms can be totally confident in what they will have to pay and how. Other ARs have not been so fortunate, particularly in recent times, when financial pressures – especially on the bigger operators – saw many adopt wholesale changes to their pricing structures which left many firms having to pay considerably more for exactly the same service.
Even when this has been the case and dissatisfaction levels have risen, AR firms often continue to stay put because of the perceived hassle involved in changing, the nature of the contracts they have signed – exit clauses, etc – and a lack of understanding about the nature of compliance and risk for the firm having left the network. The point we try to get across is that no perceived obstacle is insurmountable and even if the firm has been with the network for many years, this does not mean the time isn’t now right to move.
One of our most recent new AR firms, Rod Conway Financial Services, spent 25 years as an AR of another network so you can imagine how big a deal it was for this business to move. However, as Rod explains, the time was right for them to change: “The market has been continually changing especially with the recent implementation of MMR and our customers are now much more financially aware because of the wealth of information available. Against this backdrop we felt that the business had become a little stale due to the sole provider relationship we had. What a difference a change of network has made – everyone within the business has been rejuvenated by the move to Stonebridge, in particular, the wider range of products they offer which means we have more choice and flexibility and we feel we are much better able to meet our client’s needs. Everyone within Stonebridge had been friendly and welcoming and demonstrated a real willingness to help in the development of the business – we would have no hesitation in recommending them to other firms and are delighted with our decision to move.”
So, as can be seen, inertia in today’s market does not need to be the go-to option. Competition is still strong in the network sector and each Principal has a different proposition which may be suitable. Firms certainly need to do their homework and due diligence before making the switch however in the long run, the right decision could ensure a much healthier balance sheet and a stronger business altogether. If familiarity has bred contempt now is the time to harness that emotion and make the change rather than sticking with a business you are dissatisfied with – you would not advise your clients to sit put, so why should you?
Richard Adams is managing director of Stonebridge Group