Successful innovation in financial services doesn’t just happen. It’s the culmination of many things: foresight, capability, feasibility, timing and focus and other factors.

Most groups and people can innovate in some way, shape or form. It’s called having an idea.

But whether an idea should ever see the light of day and manifest into reality is another matter completely. The path to successful innovation is invariably a case of trial and error.

And in financial services, firms too often bypass the road to successful innovation and instead take shortcuts that ultimately lead nowhere.

Take product proliferation, where fund managers churn out never-ending variations of the same funds or themes under the guise of catchy names and buzzwords. While these gimmicks or fads may be innovative from a marketing point of view, they often lack innovation at a product DNA level.

Terms like “smart beta,” “strategic beta,” “active ETFs,” and “factor investing” are some latest buzzwords to emerge from these relentless marketing machines – terms all loosely encompassing index strategies that adopt a factor/strategic approach in a bid to deliver outperformance.

While some of these new approaches may prove over time to possess innovative characteristics — such as offering investors access to inaccessible areas of the market or providing superior risk-adjusted returns — others merely cannibalize other product lines.

What is guaranteed with product (and strategy naming) proliferation is the delivery of alpha-packed top-quartile outperformance in the category of investor confusion!

The task of cutting through the noise to separate the fads from the innovations becomes that much harder. And the real tragedy is true innovators may struggle to get their voices heard as their potentially game-changing solutions get lost in the crowd. This is especially so for smaller companies lacking the marketing muscle of larger peers.

The different variants of the Isa (in this case served up by the UK Treasury’s ministry of innovation) serve as another warning of the pitfalls of product proliferation. The expansion of the Isa — previously a simple, well-understood and effective savings vehicle — into the housing, peer-to-peer lending and pensions sectors (and that’s just the beginning!) throws up a host of complexities that may ultimately erode investor confidence.

Recent calls for the Lisa, for example, to be included in auto-enrolment underscore some of the confusion caused by its constant rebranding and diffusion into different investment categories.

But while these ‘me too’ or new outfits of existing product lines tend to be gimmicky, they can still meet an objective. In the case below example, the new outfit is a dog jacket!

One UK charity is looking to adopt current technology to raise awareness and overcome a weary public saturated with requests from 100’s of charitable causes.

Blue Cross, is unleashing (pun intended) a handful of ‘contactless dogs’ to reflect Britain becoming an increasingly cashless society.

The dogs wear jackets with card readers that allow donations of £2 when people use their contactless debit or credit cards.

Gimmicky as the shock-rendering wristband but probably quite effective, at least in the short-term.

Perhaps someone will come up with the idea of ‘shock dogs’ next? Dogs working for a charity that shock people who don’t donate £2 via contactless payment?

But away from dogs that shock, the ultimate question is whether the race to innovate has improved the life of the end client or veered off course with negative consumer outcomes.

The jury is out.

Unfortunately, in financial services and other industries, some things do make it through the testing phase with perhaps insufficient market research being conducted to paint a true picture of an opportunity (or lack thereof) or perhaps key sponsors of so-called ‘innovation’ are dogged in their quest to turn an idea into reality.

Take for instance the release of new wearable technology that is linked to your bank account and which apparently is designed to give people a 255-volt shock (described as ‘slightly uncomfortable’) in the event they go overdrawn by a pre-set amount.

Yes it’s innovative. But people don’t like nasty things. We like comfort and ease. Therefore this piece of tech’s adaptation for banking is likely to be a flop.

The device is also adapted to try and modify other behaviour, such as smoking, nail-biting, and exercise (the lack thereof)… perhaps slightly more potential there?!

Just because the boss says something is a good idea, doesn’t make it so. If companies do not have the in-house research capability to design new and potentially game-changing products, then should they outsource innovation in much the same way firms do for compliance?

The hiring of an outside innovation team not influenced by the whims of the boss or the constraints of corporate culture could hold the key to developing next generation products.

The financial services industry needs to professionalise the way it innovates.

But it’s not all doom and gloom. In fact, London’s thriving fintech sector is leading the way.

According to the latest EY Attractiveness Survey, London is considered the second most likely city in the world to create the next technology giant, with only San Francisco ranked higher.

Continued collaboration with fintech outfits? The fund management industry could certainly do with learning a few new tricks… there’s life in the old dog yet!