27th September 2013

Consumer Confidence Campaign Gathers Momentum

CEO of the Personal Finance Society, Keith Richards clears up some misconceptions about the PFS’s Trust Campaign and asks: Have you signed up yet?

It has been heartening to see that a large number of advisory firms, and many others associated with the advisory profession – including the regulator – have overwhelmingly backed the call to unite as part of a longer-term objective of improving consumer perceptions of professional financial advice.

Uniting the profession is just the start of a wider awareness campaign to reinforce the importance, and value, of professional financial advice.

We have now seen 25 years of regulation in the advisory sector and the way advice is delivered has changed significantly during this time. Financial advisers now have a different mindset and operate to entirely different professional processes and standards. Many, quite rightly, now stand side by side with other professions to deliver a joined-up legal, accountancy and financial planning service to discerning clients. Chartered financial planning and paraplanning are also now becoming more attractive career choices for new talent.

It is now high time that we started to jettison the baggage of the past, and the Personal Finance Society sees a key part of its role as raising awareness of the value of advice and helping to neutralise negative perceptions. But we need the support of the entire advisory community to bring about positive change. It is time the voice of the professional majority was heard to nullify the unnecessary self-criticism, derision and pessimism of the vocal minority, that has for too long been the only basis for the outside world to judge and form perceptions of our sector.

Following my first article, there have been two areas of confusion that I would like to clarify. Firstly, many advisers have questioned whether there is a lack of consumer trust in the first place, or assume that any trust issues are caused by ‘other sectors’ such as bancassurance, over which they have no control. And secondly, some advisers do not seem to appreciate that their comments on trade website blogs are also accessed by consumers and regulators. Their unprofessional comments, while perhaps intended as ‘internal’ banter, are serving to reinforce the negative perceptions of our sector.

Let’s get real with regard to the trust. Yes, your clients trust you because you have had the opportunity to dispel the negative perceptions by doing a good job for them. They have been lucky to have found one of the ‘good guys’. The problem is that many have been put off seeking advice, and this is largely down to negative perceptions rather than a bad experience. You only have to look at the comments on national newspapers’ websites attached to any article about financial advice. The overwhelming perception of advisers has been, and remains, that they are commission-hungry product pushers. The way not to react, as one ‘IFA’ did, was to add the following comment: “I am an IFA, and have a very successful and lucrative business thanks to the fact that most people are too stupid – an observation supported by the majority of comments here – and lazy, to manage their own financial lives.” This is just the kind of unprofessional behaviour that serves to confirm negative perceptions in the minds of consumers. Rest assured that the perpetrator is currently being investigated by his professional body.

Secondly, consumers can, and do, read articles (and comments) on trade websites. So do personal finance journalists and regulators. Type ‘financial adviser’ into Google and you will find the usual array of results (66 million actually). I just did it and the first result was FT Adviser, followed by everything from local advisory firms to the Money Advice Service. We must therefore demonstrate our professionalism on such forums, which could be as simple as having a professional adviser make a sensible comment as balance to the minority of participants who hide behind pointless anonymity.

I was also quoted recently as saying that consumer groups often did a ‘disservice’ to consumers. By this, I meant that much consumer advice on the subject of professional financial advice seems to lack balance. A recent article by one such group, in relation to the Financial Ombudsman Service’s annual review, chose to sensationalise the fact that complaints against ‘IFAs’ had doubled. However, it chose not to add the balancing context, which was that more than half of those complaints were rejected. Nor did it reassure consumers that complaints involving ‘IFAs’ stood at just 1% of all complaints received. The reality of course is that, in the minds of the majority of personal finance journalists, commentators and consumers, financial planning is just a small part of the wider financial services market, tarred with the same brush as payment protection insurance misselling. This particular problem has also been exacerbated by the emergence of aggressive claims handling companies that offer to take the fight off your hands (even though you had never bought such protection). I plan to meet with consumer groups, champions and trade journalists over the coming months to extol the positives about our sector and encourage them to give balance. Often, as much can be at stake, in terms of consumer outcomes, by them being put off taking professional advice altogether, compared with the small risk of receiving poor financial advice.

Now is the time for us to build on the positive changes in our sector. Many advisory firms began the professional journey long ago and have established shining examples of profitable businesses with highly ethical cultures. More recently, the retail distribution review has imposed new minimum standards of professionalism that have introduced greater transparency and reduced product bias. All of this will give greater comfort to consumers and can be used to begin changing the perceptions of millions of consumers that could, and often should, benefit from professional financial planning.

Keith Richards, chief executive officer, Personal Finance Society

Visit www.thepfs.org/confidence now and sign-up in support of the campaign 

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