Pension providers need to do more to satisfy customers along their complicated retirement journeys — otherwise the industry is at huge risk of being blamed for not doing enough, according to Cheryl Black, independent trustee on the Scottish Widows Master Trust.
Speaking at the Pensions Management Institute’s DC and Master Trust Symposium on May 11, Black said it is crucial to treat customers like human beings and help them on their retirement journeys.
Referring to her previous experience of working in the mobile phone sector, she said customer service is not just about dealing with calls or complaints, but rather thinking about customer service as an ethos or culture: a way of behaving and thinking about the customer.
Black explained: “That means taking decisions based on insight that says, 'This is something that our customer would value', and not just assuming that because we are industry experts, we know what's needed.
We need to comply with regulation, but for me, regulation is a floor and not a ceiling. We can go beyond it
Cheryl Black, Scottish Widows Master Trust
“Or in the mobile world, not just assuming that we could make products that customers would want to buy. But also, to take the time to understand customers' views and use that to shape our decisions and make strategic and tactical decisions throughout the organisation.”
Lessons from the mobile phone industry
There are clear parallels between the mobile phone industry and the pensions industry, Black added, pointing out that the mobile phone industry had to completely change its approach years ago.
She said: “The mobile phone industry had to completely re-engineer its own processes because they recognised that they'd never make any money.
"They kept signing up new customers and grabbing market share, of course, but if 75 per cent of those customers were dropping at the end when the contract finished before they hit payback, nobody was going to make any money.
"Instead of just thinking about acquiring a customer and the processes that lead to the point of retirement [in pensions], or the end of the contract [in the mobile phone industry], we need to think about what processes and products are required to retain a satisfied customer along a longer and more complicated journey.”
Black pointed out that in the face of severe competition, the successful players in the mobile market realised that products and technology would all eventually become hygiene factors. The way to differentiate from the competition was through “how we treated our customers, and how we created trust in them, which led to loyalty”, she added.
She stressed that pension customers want to be treated like human beings and need providers to recognise that they are dealing with something that is important to them but that they are nervous about.
“We've all seen the stats about the levels of confidence that people have or don't have in discussing finance and pensions, and I think this will be vital as we move into the complexities of decumulation, and people may need to move around to access new products. The question 'Who owns the customer?' always needs to have a clear answer,” she said.
In the pensions world there are many structural, legal, and regulatory issues, which can create challenges for customers.
However, Black said: “Yes of course we need to comply with regulation, but for me, regulation is a floor and not a ceiling. We can go beyond it.
“We can differentiate through service. We can create a reputation, generate a conversation, get customers talking about their experience, and really engage them.”
Innovation and competition go hand in hand
Competition drives innovation, and it is innovation that will make decumulation a positive thing for customers, according to Black.
“We are at risk of snatching defeat from the jaws of victory here; there are more people paying into their pensions than ever, and yet there's a risk of them not achieving the best retirement outcomes, and I think we need to be creative to prevent that.”
In the mobile phone world, some providers thought they could hang on to their customers simply because there was a huge amount of inertia, according to Black.
She explained: "When customers moved from network to network in the early days, they couldn't take their mobile number with them — and some providers thought, 'Well, that's fine. Everybody wants to keep their mobile number, so they'll never move to another network.'
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“And then some clever people did some thinking, and suddenly it was possible to take your mobile number with you when you went to another network. It was a complete game-changer.”
She went on to caution that the industry can spend as much time as it likes creating interesting investment strategies that make customers feel good, but if the customers do not understand what their options are and if they do not make the right decisions then it would not be a success.
“It wouldn't be the individual who's blamed eventually — I think for making the wrong decisions and getting the wrong outcomes it will be the industry. I think this is a huge risk for us [as an industry],” she concluded.
