Independent Market Research


With regulatory pressures becoming more intense for the financial services sector, the importance of accurate, reliable and effective independent customer-facing research has never been greater for product providers. So it’s hardly surprising that a whole host of independent research providers are working hard to help investment houses, life and pensions providers and many others to meet the challenges ahead. The question is, are they doing a good job? And are they now running out of new people to survey? And does that really matter anyway?

ORC International

Perhaps the most experienced player in the field, ORC International, has spent more than 70 years looking at general opinion and market research activities, including two decades with the financial services sector. Pete Johnson, divisional manager of ORC’s financial services team, says the lion’s share of research conducted by his unit is on behalf of key players like investment houses and life and pensions providers, with the commissioned work being carried out among both Independent Financial Advisers and consumers.

“In our experience,” he says, “independent market research plays a consistently important role among financial services providers in understanding the needs of their customers and measuring how well these are being met.”

ORC’s current activities extend from new product development testing and the segmentation of customer databases to, most recently, the actual customer experience and the issues revolving around the FSA’s Treating Customers Fairly (TCF) principle. Of which more anon.

Regulatory Change as a Driver

The clearest motivation for the entire market research sector in recent years has, of course, been the galloping progress of regulatory change – running from depolarisation through pensions reform/A-Day, and, ultimately to RDR.

In considering the process by which market research is commissioned, Johnson says, ORC typically sees it originating from a multitude of different sponsor areas within financial services firms, including their product, compliance and marketing arms. In some cases, he says, several companies with similar research needs and common goals may all decide to pool their resources and share the research cost. In others, they want to go it strictly alone.

The Hot, the Cold and the Transitory

ORC’s Investrack survey is an example of the former in action, says Johnson. The survey, which provides members with “a robust view of the high end investment intermediary market covering usage; views around investment performance; marketing; and sales support provided by investment houses as well as other ‘hot topics” (phew), began life in 2000 when a number of investment houses approached ORC to fill gaps in terms of information needs relating to the IFA/Discretionary Asset Manager channel.

Yet some kinds of research can’t easily be shared in this way because they remain central to a single client’s business objectives –by far the most important being that of monitoring customer experience. “Clients increasingly recognise the need to measure the interactions that customers – both consumers and intermediaries – have with them,” says Johnson. “With poor service experience likely to impact on re-use, potential cross-selling and word of mouth, this is an area that is increasingly being measured on a much more regular basis.”

Johnson says that in the future he expects to see a growing demand for research to integrate completely with the internal data that’s already held by providers: “This is a perfectly logical development,” he says, “and one which we fully subscribe to. It does, however, require research providers to be fully involved with key stakeholders from the outset of the process to ensure the full benefits of the research are secured.”

Integration is the Key

Consensus Research International, based in London, also shares a long history of providing independent research to the financial services sector – most notably, perhaps, through its bi-annual Consensus Investment Funds Survey (IFS), which has been running since 1985 and which looks into trends and current thinking in the UK’s Discretionary Asset Management, IFA and private investor sectors. In this case, says Consensus, it also provides valuable insights into potential market opportunities.

Consensus manages the IFS enterprise on behalf of a syndicate of leading UK fund managers. The survey modules include a quantitative reading of IFAs who regularly advise their clients on the purchase of collective investments and private investors who are holders of unit trusts, PEPs, OEICs or equity-based ISAs, as well as a qualitative snap-shot based on face-to-face, in depth interviews with IFAs, top-end IFAs, and discretionaries.

IFAs ‘Over-Researched’

Andy Glazier, head of Consensus, says that in general his company’s work entails an “awful lot of research among IFAs themselves”. This, he says, can be anything from strategic programmes on how advice given to clients is changing, and how it is expected to change in the future, through to tactical pieces around reactions to marketing and communications, product literature, campaign messages and so forth.

Like Johnson at ORC, Glazier observes that research topics tend to come in and out of fashion, with RDR issues very much in vogue at present. Indeed, he says, RDR may well be without precedent in terms of the level of attention that is being devoted to it: “It wouldn’t surprise me if more research had been done on the effect of this particular piece of regulation than all other topics put together,” he says. And the key challenges for research providers will be to stay abreast of a rapidly changing IFA universe, to continue to understand IFAs’ needs post-RDR, and to continue to represent their needs meaningfully and accurately.

Research Quality on the Up

For Glazier, assessing the true return on investment (ROI) of research on any audience is the “holy grail for which we all strive.” Among techniques employed to try and assess the ROI accurately as possible is the correlation of typical research measures – such as brand recall/usage – against media spend. This, he says, can be useful for assessing the effectiveness of the research behind the marketing and communications used.

Like Johnson, Glazier says he is in no doubt that the quality of the market research for providers has improved “dramatically” over recent years: “Qualitative and quantitative research is now an awful lot more than answers to questions which are aggregated and reported back. Agencies are required to act as an out-sourced function of the product provider far more than used to be the case, which is not a bad thing. The ability to add insight and value is something Consensus is particularly proud of and has worked hard on in order to remain successful.”

IFA Shakeout a Concern

Over at brand strategist and research group Bdifferent, director Kim Bell believes that reduced budgets are likely to become a major issue for the future. “Most of our clients have reduced their research spend but still have the same research needs,” he says. “In some ways this has had a positive effect by forcing us to look at new cost effective methodologies. But it has also reduced the volume of research being carried out. At the same time there has also been a huge consolidation amongst financial services companies – resulting, unsurprisingly, in a reduction in the number of companies needing commission research.”

Bell says another major challenge facing research providers is the reducing size of the IFA community and the fact that IFAs are ‘overresearched’ – a point on which he agrees with Glazier at Consensus. “It is really becoming very difficult to carry out research in central London, for example, with IFAs who have not been exposed to previous research. We constantly have to travel to different parts of the UK to find ‘fresh’ IFAs.”

Bdifferent’s client list includes asset managers such as Schroders, Inveseco Perpetual and Ignis; life and pensions groups Kames Capital (formerly Aegon UK) and Prudential; and the Santander banking group. Of these, Bell says that it’s the life companies have been especially keen to use externally commissioned research as a way of winning insights into what makes their target market tick, assessing reactions to new products and promotions, and helping define brand strategy.

The TCF Trigger

All three agencies agree that the advent of the FSA’s TCF principle has been a major driver for new market research commissioning – although they also add that there is some tendency for companies to use research as a “tick box exercise” to prove to the FSA that TCF principles have been adhered to.

Bdifferent’s Bell says that the company’s TCF-related work has been a big issue for the company’s product provider clients over the last few years: “The work [we] carried out has proved valuable for clients – not only in understanding how far consumers understand financial services products but also in enabling them to review documents to ensure consumers understand what they are buying, the implications of charges, longevity, expectations of performance and so on.”

What’s changing? Well, he says, product providers are increasingly using research these days to determine IFAs’ own views and progress. He also senses a more recent, growing trend for providers to review and track brands and advertising/ promotional activity as they slug it out for market share in a difficult environment – while also preparing, of course, for the upturn when it comes.

Overall, the most noticeable trend that all three agencies agree on is that the actual quality of independent research has improved markedly in recent years. “The rise of specialist agencies,” says Bell, “that are specifically dedicated to the financial services market and that understand the market’s complex structure and needs, have led to a colossal improvement from, say 12 years ago, when we were working on the client side.” And long may it remain so.

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