Clued up clients make better buyers

The findings of Mortgages Direct’s recent customer survey were depressing to many in the industry but in a way, inevitable. Some findings beggar belief. For example, one in four people thought a tracker mortgage tracked their salary increases and a staggering 31% thought it tracked inflation.

It is easy to be dismissive of the findings of such surveys but we do this at our peril. The message is clear – the vast majority of customers do not understand the basics about the mortgage they have bought. It’s also a fact that as the UK has one of the most competitive mortgage markets in Europe, customers have never had so much choice of products and lenders. The bewildering choice is one of the reasons so many use the services of intermediaries.

The Key Facts Illustration should supply information to consumers so they can compare and understand the finer details of products. But on the evidence of this survey there is precious little of this new understanding about.

Cynics say the sheer volume of information provided in KFIs results in only the most committed customers reading documents the thickness of telephone directories.

Never before has the customer had access to so much information. And you’d think the money columns in the newspapers would be improving the understanding of financial products. Someone must be reading them. But it does not seem to be your average mortgage customer.

Perhaps another problem is that our products are too complex. Simplicity can benefit some customers but too simplified a product can lead to dumbing down. Besides, different customers have differing levels of understanding.

So can brokers play a part in the education process? Yes, but only to a limited extent. Many argue they could end up spending vast amounts of time explaining products and features. But the reality is those clients who want to learn will be the ones who listen.

Customers with a better understanding of the products purchased will be a benefit not only to themselves but to the industry as a whole. This should be a long-term objective of the industry, working with the Financial Services Authority. Why? Because consumers with more understanding will deliver easier sales and fewer complaints.

Are all these aspirations for better understanding just pipedreams? I hope not, as 20% of those surveyed by Mortgages Direct thought FSA stood for Funds Savings Account. A telling example of how much work there is to do.