Aegon is an international provider of life insurance, pensions and asset management that can trace its roots back to Edinburgh in 1831. Today, the organization has businesses in over 25 countries around the world and around 2 million customers in the UK.
The firm caught the headlines late last week when it confirmed that it will be cutting nearly a third of its 100-strong sales team in the UK. It's a decision in part shaped by Aegon’s ongoing shift, in common with others in its sector, from a product-based provider to a platform-based one.
A spokesman for Aegon was quoted in the media stating:
We’ve always been very clear that digital is the way forward and that our focus is on growing the business through our platform. The platform remains our long term strategic priority and we have implemented a new operating structure to support this. We are focusing our sales team behind the platform and unfortunately a number of roles will go in this process.
By coincidence - and prior to and unconnected to this announcement - I had the chance to sit down with Duncan Jarrett, Managing Director for Retail and Retirement at Aegon, to talk about the firm’s digital transformation, including the importance of that shift from product to platform.
By the end of the third financial quarter of 2015, Aegon had around 200,000 customers on its platform, adding 47,000 in the previous three months. The direction of travel for the organization is clearly laid out. As Jarrett puts it:
Aegon is a platform business. Everything we do in the retail sector is all driven from platform technology. Everything that we sell now is platform-based. We don’t sell product.
We had an old world product-based system. It runs efficiently, but it was a product and the industry is moving to platforms.
We do have a huge legacy base, but our business now is digital. Our legacy book continues to exist, but the business going forward is digital.
That said, Aegon - and others in its field with similar ambitions - faces an interesting challenge, akin to the enterprise software establishment vendors as they try to transition their customers to a cloud-model ie: how to get to your destination without losing or damaging your installed base?
Jarrett openly agrees that getting that ‘old world’ into the ‘new world’ is something that needs to handled with care:
The legacy book obviously still exists. We have hundreds of thousands of customers who have bought old-style product that we have to keep up-to-date from a regulatory point-of-view. We do work with the regulators to get customers who are on an old-style product to move over to a new service. We will say to customers, ‘You are on an old-style product, we want to give you a shiny new service and if you don’t like that, we will put you back on the old one’. But it has to be done with care and we still have to invest in our legacy customers.
Making pensions interesting
It's essential though that the investments in digital tech are also made, at least in part to keep up with the changes in the UK pensions market, such as the Chancellor of the Exchequer taking the sector by surprise two years ago by announcing that anyone could now get at their pensions pot without paying an annuity. That put customers far more in control of what they can get to in terms of their pensions and the decisions that they need to make.
It also sparked a wave of interest from customers, Jarrett recalls:
We had 8000 direct calls in week one after the Pensions Review, saying, ‘We want our money!’.
In some respects, this sudden ‘sitting-up-and-paying-attention’ is encouraging. One of the challenges facing the UK pensions market is that, despite an ageing population, Aegon’s own research indicates that the percentage of people actually financially on-track for retirement is as low as 7%. That’s behind the US and a number of European countries, such as Holland.
So pushing out new platform-based digital offerings that encourage people to engage with the journey to their pensions is a key goal for Aegon. It’s, at least in part, all about making pensions interesting and engaging. As Jarrett observes:
It can be very difficult to get customers interested. People would rather be booking their holidays or going on Amazon to do shopping.
Part of [the digital shift] is to motivate people to get interested in pensions. We use our sponsorship of tennis to do that in part, but pensions flexibility has ramped up interest in pensions from being ‘this thing we don’t really understand’ to being 'pots of money and what we can do with it’.
One good example of the type of offering that Aegon sees as critical moving ahead is Retiready, a mobile/tablet retirement planning service to plug the knowledge gap. This is designed to be simple and straightforward to use, presenting rankings of where an individual is on his/her pensions journey in a way that can be easily understood by those without financial expertise.
Retiready was built to be mobile and to be easy to use. We spent a lot of time with end customers to find out what they wanted. What they wanted was a simple scoring system, like an Amazon score. They wanted to be able to put data in and see where they were on their journey to retirement.
Customers are able to put in information that they would readily have available, such as their salaries, what kind of pensions they would like, how much they spent on coffee each week and so on. That then gives them an overall score. We wanted to give them simple language of what a pension is, not the usual annual statement coming out full of complicated words, so that they could see where their money is at any time.
A journey so far
One element that does need to be factored in to any such digital strategy is the idea that there will come a point when customers need - or just want - to talk to a human being. In other words, the online/mobile/digital service can take a customer a certain way along their journey, but not necessarily to the final destination.
It's the challenge faced by all the 'establishment' banks chasing a digital reinvention - customers do still want to be able to go into a branch and talk to a manager, no matter how much they can now do from their iPhones.
Retiready was designed with this in mind, says Jarrett, making it straightforward to move from online to what he calls the ‘advice market’:
People are very happy to go on to mobiles to do very simple things. Where it becomes trickier is when they want to speak to someone. What we’ve done is to build-in mechanisms to get back to the advice market. What do I do about inheritance tax? Or I’ve got a situation with my family that I need to talk about. Those are questions that we need to hand back to the advice market. Retiready is a tool that can help to plan the money that goes into an ISA, but it can’t do inheritance tax for you!
People get to certain level and they stop and need to talk to somebody. There is a web chat capability, but that can’t give you advice. It can change addresses and so on, but if you need tax advice, that needs to be handed off to the advice market. We do have Aegon Assist, which is a small phone environment with people who can help those who want to call before handing them on to the wider advice market.
Underpinning much of Aegon’s digital transformation is Salesforce cloud technology. Starting with Sales Cloud back in 2008, Aegon has expanded its use of Salesforce over the years, adding analytics capabilities as well as using Chatter for collaboration. Jarrett says:
If you go back six years, we had 800 people in 34 offices across the UK; today we have no offices. We have main office points, but they’re very fluid. Our field force is in the field and heavy users of Chatter. We don’t use email any more.
The firm is now exploring Marketing Cloud - particularly Radian 6 - to assist in understanding what the end customers want to see in new offerings.That’s important to understand in a market sector that is changing, not just in the UK, but around the world.
What is interesting here is that, for all the talk of digital transformation, the conversation with Jarrett is commendably free of Uber-ization threats. In Holland, Aegon recently opened a digital bank, but there appear to be no plans to emulate that in the UK, for example.
Aegon is clearly aware of the changing nature of the challenges that confront it over the coming years, but the idea of an ‘Uber-Aegon’ coming out of left field seems unlikely, explains Jarrett:
To play in this market, you need very deep pockets. Having worldwide scale like Aegon and the ability to use technology across the word has been essential for us. Thirty years ago all sorts of companies were doing our kind of business; now there are fewer and all with deep pockets. It makes it harder for new entrants to come in. And in the UK, there is the complexity, one of the most complex tax positions you have anywhere in the world.
All of which results in a satisfyingly simple mission statement:
People need to understand what they can and will do with their pensions pot.