Global Attitudes to Financial Services by Illuminas...(Average scores for all brands) Source: Illuminas, Base: 2008 = 600, 2009 = 600, 2010 Feb = 607, 2010 Oct = 600 . 8 Last year

Global attitudes to financial services

John Connaughton, CEO, Illuminas

MRS, Financial Services Research, London, 14 October 2010

2

20 minutes to…

� Examine attitudes to financial services

� Identify recent shifts: short focus on UK

� Play the blame game

� Give global context – short term and

long term

3

…and this includes

� Presentation draws on multiple

Illuminas projects. Main source is:

� Joint project between Illuminas

offices in US, UK and Asia

� c 1,800 interviews across

US/UK/Asia

� Asia markets: China, Hong Kong,

Taiwan, Singapore, Malaysia

� Data collection conducted online

last week

UK Focus

5

Why worry ?

80

78

77

65

64

58

49

37

8

-14

More or less likely in next 12 mths vs last 12 ?

(Net scores: % more likely – % less likely)

Financial institution fail

A decrease in house prices

Interest rates rise

Less job security

Increase in inflation

Unemployment rate rise

Government public spending cuts

Increase in taxation

Cost of living increase

Mortgage availability

Source: Illuminas Oct 2010, Base: UK - 600

6

Double dip you say ?

7

…double dip in trust for financial services brands

Established

Safe

Trustworthy

Friendly

2008 2009 2010 Feb 2010 Oct

Key attribute levels back down to 2008 levels. Up from here to

complete the “w” ?

Which of the following do you associate with the financial services brands listed ?

(Average scores for all brands)

Source: Illuminas, Base: 2008 = 600, 2009 = 600, 2010 Feb = 607, 2010 Oct = 600

8

Last year action was taken – this year, signs of inertia

Use credit cards

less

Reduce

borrowing

Switch savings

provider

Switch mortgage

provider 2009 2010 Feb 2010 Oct

Less will or less capacity to tighten the belt ?

Which of these have you done in the last 12 months ?

12%

27%25%

52%

3% 2%

20%15%

40%27%

25%

52%

Source: Illuminas, Base: 2009 = 600, 2010 Feb = 607, 2010 Oct = 600

9

Web comparisons are still being made

% using price comparison website to find deals on financial products in past 12 months

2010 Oct2009 2010 Feb

52% 45%64%

Source: Illuminas, Base: 2009 = 600, 2010 Feb = 607, 2010 Oct = 600

10

How trustworthy would you say price comparison websites are when looking for advice and information

32

6

20

28

64

51

13 13

2009 2010

Very trustworthy

Trustworthy

Neither / Nor

Not very trustworthy

Not at all trustworthy

…but views of aggregators may be changing?

These comparison websites, I

find them a little bit

misleading sometimes. The

prices they sometimes quote in

the first instance, but you then

get through to the sites and it

is a totally different price.

Source: Illuminas, Base: 2009 = 600, 2010 Feb = 607

11

Corporate inertia ?

Base: 300 Finance Directors of mid and

major UK corporates

NoYes

Why not ?

28 72

65

10

10

5

4

Cash rich

Parent company finance

No need

Cost

Timing

Base: All not planning to borrow in next 12 mths: (217)

Plans for bank borrowing

in next 12 mths ?

Who’d be a bank ?

Conflicting pressures: Pretty up balance sheet (market/regulator pressure)

but extend lending (government pressure)Source: RBS / Illuminas March 2010

12

Corporate inertia

Base: All (300)

Plans for business next 18

months – 2 years (%)

27

20

18

11

25

Avoiding risk

New

markets/sectors

M&A

Financing

working capital

None

Planned 6-8

months ago

Actually

happened

Plans for business (%)

37

35

28

37

24

39

Avoiding risk

Other

None

� Which are you planning to undertake in the

next 18 months – two years?

� So, thinking back, 6-8 months ago – can you tell

me what your plans for the business were ?

� And which of those have in fact happened (to

date)?

- signs of hopeBase: All (300)

…but he who dares Rodney…Discretion the better part of valourSource: RBS / Illuminas March 2010

13

Feeling is: more action will be required in next 12 mths

Targeting of offers / sensitive cross-selling will again be important. In

this environment tendency is to focus on retention vs acquisition

Compared to last year, how likely are you to do the following in the next 12 months

(Net scores: % more likely – % less likely)

42

39

34

29

20

7

-10

Switch mortgage providers

Save more

Keep money in easy access account until

have a clearer idea

Switch savings provider

Use credit card less

Reduce borrowing

Take out mortgage

payment insurance


Blame Game

15

Economy now vs 12 mths ago

41%

45%

49%

Consumer sentiment

Economy over next 12 months

Personal finances in next 12 months

% saying worse

Consumer driven recovery ? So who can we blame ?


16

Q: Who do we blame ?

Him Him

17

A: Them (a bit)

18

A: …but more them (for now)

19

A: …and them

“I think financial service providers are just out to make as much profit as

possible without thinking about the consequences”

61% Agree71% Agree

Source: Illuminas Oct 2010, Base: UK = 600, USA = 591

20

A: …and ourselves

“Over spend” got us here

� 56% say their priority is

to use their credit cards

less (up from 35% in 09)

The hybrid consumer

� 63% seek lowest price

for some items but no

compromise on things

that are important to

them

� 33% seek lowest price

for everything

Consumerism Value of money

Reactive push

back against

consumerism

Consideration

given to the value

of money

Source: Illuminas, Base: 2009 = 600, 2010 Oct = 600. Hybrid Consumer study 2009, UK = 234

21

Critic

ismEmpathy

Increased my engagement with

politics

Failed to deliver what was promised

Net agree/disagreeStatement

Exceeded my expectations

Increased my confidence in UK

economy

Would have been far more successful

if hadn’t formed coalition

No evidence of tackling the deficit

Made the best of a bad job 17%

-10%

-11%

10%

-9%

-11%

-16%

Nick + Dave: 100 days later: empathy and criticism

Below are a few statements about how the coalition government has fared during its first 100

days. Please indicate the extent to which you agree or disagree with each one

Source: Illuminas Oct 2010, Base: UK = 600

22

Standard rate of VAT increase to 20%

Preference (%)Tax change

Capital gains tax increase from 18 to

28% for those liable to income tax at

the higher rate

Reduced tax credit eligibility for

households with income above £40,000

(previously £50,000)

Increase of personal allowance before

taxation by £1,0007

13

13

50

11

14

15

19

19

19

23

14

20

29

28

11

44

25

22

7

5th 4th 3rd 2nd 1st

Preferred tax solution (no brainer)

To relieve the budget deficit, a number of tax changes have been proposed.

Please indicate from the list below which you favour from most to least.

Preference

Source: Illuminas Oct 2010, Base: UK = 600

Global perspective

24

Today’s racial stereotyping quiz

A. B. C.

Who are they ?

25

Today’s racial stereotyping quiz – tie-breaker

26

Worse

Economy now better or worse than expected 12 months ago ?

57%

Same 20%

22%

19%

25%

54%49%

13%

34%

Consumer sentiment

Better

Source: Illuminas Oct 2010, Base: UK = 600, USA = 591, Asia = 542

27

Slow down

Own expectations for economy over next12 months ?

46%

Same 15%

36%

32%

24%

41%45%

22%

27%

Consumer sentiment

Improve


28

Worse

Expect to be better or worse off in next12 months ?

79%

Same 12%

5%

31%

34%

26%41%

20%

34%

Consumer sentiment

Better


29

Attitudes to financial service providers

Net agree/disagree (%)Statement

All financial products are basically the

same, it's just the price that differs

I trust financial service providers less

than I did 12 months ago

One financial service provider is much

like another

Financial service providers are too eager

to lend money to customers who might

not be capable of paying it back

I think financial service providers are just

out to make as much profit as possible

without thinking about the consequences

The cheapest financial products are not

always the best56

53

37

27

25

20

Little variation


30

Net agree/disagree (%)

19

56

68

30

33

47

AllStatement

I would value having a closer

relationship with a financial

service provider

Financial service providers are

responsible for the current

state of the economy

Financial service providers

should be more heavily

regulated in the current

financial environment

55

59

73

49

35

63

US: less noisy support for regulation. More blame for Obama. All would

like a closer relationship with their provider – much more so in Asia + US

Attitudes to financial service providers SOME variation


31

-1391I would prefer to keep all my

financial products with one

provider

46140Financial service providers in

my country are safe and secure


N/A

-40

-17

-65

-9

12

AllStatement

I prefer foreign financial

service providers to local ones


generally have their customers’

best interests at heart


provide a good deal for their

customers

5

1

31

13

9

-16

-30

20

Confidence in providers shaken in UK, a little less in US, barely at all in Asia

– though some signs of scepticism. US - a tough market for foreign entrants,

where local/regional players are still key and brand relationship central.

Attitudes to financial service providers MAJOR variation


32

576954I will reduce spending on non essential goods


515138I will reduce spending on credit card

735250I will review financial products to make sure I’m

getting the best deals/rates

34

41

37

31

50

50

I will try to pay off loans/mortgage

I will have less money to save

I will make greater efforts to pay off credit card

debts

45

26

52

Continued contrition in US/UK. Asia = more cash available for saving but

stronger resistance to credit (although this is changing across the region, albeit

unevenly)

Likely behaviour over next 12 months


33

54209I will seek longer term savings opportunities


5411-1I will increase my level of savings

-32

-22

4

-33

7

-2

I will be moving my money into equities [stocks and

shares]

I will be using new share opportunities as a way to

save money

I will be thinking about ways to take advantage of

low mortgage rates

14

31

17

Asian middle class planning ahead (sometimes driven by the absence of social

infrastructure). Asian investors showing stronger current appetite for equities.

Likely behaviour over next 12 months


Broader context

35

UK – why so glum ?

FIFA6FIFA ranking

Yale University14Environmental Performance Index

WHO18Health system ranking

UN16Human Development Index

UN20Life expectancy

Transparency international17Corruption Index (lowest)

UN22Infant mortality (lowest)

World Bank14GDP per capita

SourceGlobal

RankingCategory

Remarkably consistent….except for the FIFA ranking

36

USA – why so optimistic ?

Source: “Building a Better America – One Wealth Quintile at a Time”, Michael Norton, Dan Ariely, USA December 2005. Base = 5,522

37

Population Structures by Age and Sex

1950

(563m)

2000

(1.3 Bn)

Male

Female

Sources: World Population Prospects: The 2004 Revision (2005), National Bureau of statistics of China, The Economist.

China – why not defuse this ?

2050

(1.4 Bn)

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80+

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80+

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80+

Age

Age

By 2030 population start shrinking. By 2020 average age will be 37 (same as

US). Dependency ratio starts increasing next year (2011).

38

North Korea – why oh why ?

0% 20% 40% 60% 80% 100%

Kim Lil' Kim Kim's mates The other 24m

Wealth distribution in the world’s only

Communist monarchy – North Korea

Source: Pure fiction

Summary

40

Summary

� Consumer took significant action in 2010

� Inertia/uncertainty has returned

� Anticipate taking action again – but may need more

help this time – accurate targeting of offers is key

� Racial stereotypes alive and well

� No-one has forgiven bankers yet

� Short-medium term Asian picture is rosy

� Asia - longer term: unprecedented challenges

41

THANK YOU

www.illuminas-global.com

42

Today’s racial stereotyping quiz

Yao Ming

Who are they ?

Albert Tatlock

(Jack Howarth)Ronald McDonald

43

Today’s racial stereotyping quiz – tie-breaker

Kim Jong-un

Documents

Global Attitudes to Financial Services by Illuminas...(Average scores for all brands) Source: Illuminas, Base: 2008 = 600, 2009 = 600, 2010 Feb = 607, 2010 Oct = 600 . 8 Last year