CUSTOMER AGREED REMUNERATION - CRA International

REPORT BY CRA INTERNATIONAL
2.2
2.2.1
pronounced for non-purchasers who felt that advisers would “Sell you products you do not
need for their own gain”. 10
However, despite this link between trust and remuneration, this does not necessarily
mean that non-purchasers would become purchasers if they trusted the industry more.
Even after targeting consumers who are considering purchasing a financial product, we
found that by far the most important reason for not purchasing previously was not having
enough money to invest (60% of respondents). Indeed, a lack of trust was only
mentioned by 10% of non-purchasers as the reason for not purchasing. For this reason,
it is important to be cautious regarding the impact that improving the perception of
advice would have on non-purchasers.
Impact of CAR on understanding and trust
CAR could bring benefits to consumers if it removes a concern regarding the financial
services industry or if it provides them with information to make better decisions. In this
section we examine whether consumers understand CAR at a high level and then whether
this improves their perception of the industry. Finally, we examine whether this might
change the way that they behave.
Understanding CAR
During our focus group research, we found that the way CAR was explained had an
important influence on consumer understanding of the concept. In our first focus group
we included a reference to fees in the description of CAR. 11 We found that customers were
confused about the concept of CAR believing that it implied a movement towards up-front
payment of unconditional fees. This provoked a very adverse reaction to CAR reflecting
the traditional reluctance of the majority of customers to pay a fee for advice.
In subsequent focus groups, we modified the description of CAR (to that found in section
1.1) by removing reference to fees. This resulted in a very different reaction to the
concept which customers viewed favourably and saw as easy to understand. This ease of
understanding was also supported by evidence from the quantitative survey where, using
the same description of CAR, we found that:
• 84% agreed that “the concept was easy for me to understand”; and
• 56% disagreed with the statement that “the complexity of this approach would put
me off seeking advice”.
Intermediaries were also asked about what they thought the likely impact would be from
their clients. Intermediaries were concerned that this would confuse customers, with over
10 This is consistent with the evidence from “Consumer confidence in the financial services industry, Consumer
Panel Research Paper 2/2005”, Financial Services Consumer Panel, 2005, which finds that more than half of
consumers think that financial services firms sell the products that pay the most commission.
11 The material used stated that customers will have the option to pay for advice through an upfront fee or by
paying through charges on a product bought.
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