When I think about most new services, not just financial services, there seems to be an unspoken trade off which nobody wants to acknowledge or talk about. And because we don’t discuss it, we implicitly accept it, and future business models are then based on on this implied consent.
I’m talking about the provision of ‘free’ services in return for a loss of all privacy. For obvious reasons, it is rarely described as a loss of privacy. At worst we understand this as consensual use of personal information for marketing purposes, but in reality there has to be an exchange of value within every business model for it to be viable. I’m not dogmatically against it, but I don’t think most of us recognise what’s happening and the direction we are taking society as a result.
I currently use a hotmail account which Microsoft has provided me with free of charge for around 15 years. It’s a personal account, I use it occasionally, and I know that every email sent or received is read by a robot to decide the best types of adverts to serve me each day. I have no desire to upgrade to a chargeable version as it suits me for the purposes I use it and I don’t find the banner adverts too intrusive. Should I start to receive too much targetted spam as a result, I might change that view. Conversely, I don’t use a points card when I shop at a supermarket. Despite being viewed as insane by my own family for not taking advantage of ‘free’ offers by using one, the thought of a marketing department selling my contact details and shopping habits to various third parties at £1 per data line gives me the creeps. I know it’s inconsistent with using hotmail, but I don’t like it. At least I do understand it, and make a decision consciously.
IFAs have similar decisions to make. The majority of services they use are subsidised in some way by product manufacturers. Whether that be an event, conference, or technical support, you are expected to trade something in return. Usually this is a meeting, a dialogue, ultimately some business. I don’t think this is unreasonable, nothing is really for ‘free’. But as we put increasing pressure on manufactures to reduce their prices and demand higher levels of service, it is less and less likely that we will continue to get our free extras. That’s because ultimately it’s our own clients who are paying for the extras, through increased charges. When we whittle the charges down on behalf of our clients, we must also accept that we should pay our own way in the world, it’s part of being professional. It’s part of being grown up. And that means our own costs go up.
Unfortunately there are already too many business models around based on ‘free’ for advisers, and plenty of advisers who are willing to sign up to such an offer, turning a blind eye to what they are trading away in exchange. With my hotmail account I am trading the privacy of my personal emails. For some IFAs they are trading their client’s money.