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Nic Cicutti: Advisers must face fact clients still don’t trust them

An FCA report exposes a large underbelly of consumer opinion whose view of advisers is negative

One of the recurring assertions I have heard from endless numbers of financial advisers over the years is how much their clients love them and everything they do.

Sure, there are some bad advisers out there. Yes, there have been some terrible financial scandals in the past couple of decades. Undoubtedly, many people have lost out to poor advice and misselling.

But the relationship between the advisers and clients whom I speak to – and whose comments I read in the pages of Money Marketing and elsewhere – is, by contrast, entirely built on trust, mutual respect and gratitude for the superb service and high-quality advice they receive, day in and day out.

So that’s sorted then. Or is it? My own experience, distilled from many discussions over the years with friends, family and acquaintances who know I have an interest in financial issues paints a far more complex picture.

Yes, there are many consumers, possibly even a majority nowadays, who are happy with their advisers and the service they receive. On the whole, that is something to be celebrated by advisers who have worked hard to earn the right to their clients’ trust. Even so, I would still query some of those supposedly satisfied customers. In some cases, they may not be aware of the indifferent quality of the advice they are getting.

A few years ago, I recall a good friend who was highly risk-averse, being incredibly effusive about an adviser she had been with for a long while. That was, until she discovered she was investing, on his say-so, a large chunk of her self-invested personal pension into a Ucis product and she had no underdstanding of the risks and charging structure. He had recommended the Sipp on the grounds that she would then have more “control” over her money.

Hopefully these instances represent a tiny minority. Or do they? If the last week’s FCA 2017 Financial Lives Report is anything to go by, the proportion may not be as small as we think.

The FCA interviewed 12,000 people, the majority of them through online interviews, and had face-to-face discussions with around 900 more non-internet users or people over the age of 70. The picture presented in the Financial Lives Report is far more nuanced than many would believe. The interviews found that only four in 10 UK adults have confidence in the financial services industry. Two-thirds, and an even higher percentage among older consumers, prefer to stick to a financial brand they know – clear evidence of financial inertia.

The survey also found evidence of consumers not engaging with their finances, for example, not reviewing their pension investments or their worth, selecting the cheapest insurance rather than shopping around, and not reading credit agreements and pre‑contract information.

At a time of continuing financial uncertainty, when the need for good quality advice is so important, it is vital for the financial services community to resolve this issue

There was a lack of real understanding of financial topics: not knowing if a pension was a defined contribution or defined benefit scheme; not knowing that different options exist for accessing a DC pension. In general insurance, this lack of insight meant not knowing what no claims protection means for motor cover.

One of the features of this 198-page report is the vast mass of data that underpins the findings, available in a range of comprehensive Excel spreadsheets. For those with an interest in mining this data, what comes out is equally worrying.

This shows that 13 per cent of those who received advice in the past 12 months feel their financial adviser mis-sold them a pension or investment product at one point. The same percentage of consumers claimed that they received bad advice – as distinct from misselling – either recently or at some stage in the past. The picture gets worse when looking further than 12 months out. According to the FCA, one in seven of those who received advice more than 12 months ago but do not currently have an adviser believe they were missold a pension or investment product. More than 20 per cent claim they received poor advice albeit not linked to misselling.

The report goes on to say that because it did not investigate further back, the findings “will underestimate the proportion of all UK adults who perceive they have been missold a product or received bad advice from an adviser.”

At this point it is worth stressing that the report does not put these claims of bad advice and misselling to the test. We are forced to accept what the respondents are telling us. Who knows, they could be talking a load of old cobblers.

But what the survey does show is a large underbelly of consumer opinion whose view of advisers is negative. At a time of continuing financial uncertainty, when the need for good quality advice is so important for millions of families in the UK, it is vital for the financial services community to get to grips with this issue and identify ways of resolving it. And that includes those who have always fondly imagined their own clients love them dearly. Maybe they do. Or perhaps they are the ones giving an alternative view of their experiences to the FCA.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. I will not have someone as a client if they do not trust me.
    It should be as simple as that and this has been my standard all of my life.

  2. Just a few questions come to mind in no particular order:

    Did the respondents get advice, guidance or were just sold a product?

    Although touched on, there is no qualification of the results. I know perception can be reality but the results of this survey must be treated with caution at the very least. Remember the adage about statistics…!

    People are right to be suspicious about advisers, as they should be of policemen, lawyers, teachers, social workers,regulators, benefits claimants, HGV drivers, politicians, soccer players, the NHS, estate agents, bookies and journalists etc. In fact everyone!I know I am. At the end of the day who can one trust?

    Maybe this survey would have been more meaningful if it had been specific and measurable or even asked whether people didn’t believe they had been badly advised. I do highlight the difference between bad advise and mis-selling as they are not at all the same thing!

  3. Quite right Nic.

    I used to work for two Companies whose Clients though that they were great. One was great at marketing and ‘overcharging’ in the extreme. We used to say that they reminded us of a Rhinoceros, “Sharp at the front end, short-sighted and charge a lot.” The other Company expressed much concern that Clients should make sure that their adviser was really ‘Independent’, they even had a video on their website saying so, many times. Then they placed 99.9% of the SIPP & ISA business into a DFM that was 95% owned by the owner of the ‘IFA’. Most clients never knew this, there was no ‘conflict of interest’ statement and I was not liked when I tried to use a different and more relevant DFM. The DFM has now been sold and I am not sure what the ongoing arrangemnet is.
    So, the truth is that some ‘IFAs’ have complete trust from their Clients and abuse it.
    We have set up a Client Review Board with 3 clients attending regular meetings so that we can be completely transparent and making sure that we are focusing on the things that Clients want us to focus on.

  4. Nicholas Pleasure 27th October 2017 at 1:57 pm

    Interesting article. If I had to look for a reason why this is still the case in this post RDR world I would say that it is a lack of investment in financial advice.

    Financial advice is still a cottage industry and the costs of providing financial advice coupled with regulatory uncertainty and a parallel kangaroo court type legal system means that financial advice will remain a cottage industry until it dies completely in around 20 years time, when the youngest of the current crop of advisers retire and there is insufficient new blood to replace them. Few people with any sense would invest money in a business that can be taken down by the regulator with a snap of the fingers and without independent legal appeal.

    Investors will look and see how anecdotally the regulator has gone after well capitalised companies that can pay fines. They will look at the encouragement for people to claim for misselling PPI, even if they weren’t missold. They will see the regulator trample over existing legal contracts such as trail commission and those investors will wonder what might be next and look for another home for their cash.

    Sure, we will all post on here how great we are and how our clients love us, and that is probably the case for most good advisers. However, we are small, small businesses in the main and there is nothing we can do to counter the negative view in which financial advice remains held.

    The view of financial advice is improving and most people have very limited experience of the new RDR chartered world. Sadly small financial advice businesses don’t have the time, money or even the need to tell the public otherwise. Demand comfortably outstrips supply.

  5. Christopher Petrie 27th October 2017 at 2:01 pm

    I think most IFAs reading this publication would indeed be trusted by most or all their clients. The survey in the article was answered mostly by people without an IFA themselves. How many of the 20% who suspected they had been mis-advised in the past were thinking of their banks? Who knows? It doesn’t say.

    Whilst it would be nice to have all IFAs trusted by 100% of the population, that’s never going to happen. What % if people trust lawyers, doctors, MPs, accountants etc? Less than those who trust IFAs probably.

    Why was the question not asked…do you trust your own IFA? I suspect the answer would be pretty high. By definition those who don’t trusts advisers aren’t likely to be using one anyway.

  6. A thought-provoking article as usual, Nic, though I think that most of us (advisers) who own or are part of established businesses think about our very low client turnovers, our clean complaints histories and the fact that most of our new clients come to us by way of recommendations from satisfied clients who’ve been with us for many years.

    Perhaps it would be useful if we could know just what proportion of these supposed mis-sales and examples of not necessarily product sale orientated bad advice are considered (by those who took part in this survey) to be down to IFA’s, particularly those working either for themselves or for small to medium sized businesses. At just what sector of the adviser community are these consumer gripes aimed?

    You mention NCD protection on motor insurance, the concept of which I for one most certainly do understand and for which I’ve been happy to pay a bit extra for several years. So you may imagine my reaction when, at the renewal following a small no fault claim, my insurer (Aviva) ramped up my premium by about 15%. Hang on ~ I thought that NCD protection is supposed to stop that happening? All Swinton could offer is that if I’d not had NCD protection, the increase would have been greater. So it’s only PARTIAL NCD protection?

    The following year, I had to make a claim that, unfortunately, was my fault and I had to replace my vehicle with a new one (a Merc instead of a Volvo). For that, Aviva DOUBLED my premium. So I shopped around and got the same cover for about the same as what I’d been paying previously (for the old car which was nearly 10 years old). In light of that, I certainly have no faith in Aviva for car insurance.

    • Julian – I don’t work in motor insurance, but my understanding is that the NCD protects only your No Claims discount – say 70% of your premium. However, that does not mean that they cannot “rate” your actual premium at renewal should you have an accident. You therefore retain the 70% discount of a higher, “rated” premium. Subtle but little understood I fear and Swinton seem to have not understood either?

  7. ‘Tis only a fool who looks through a telescope the wrong way around”

    Like an adviser who fails to vet a client before entering on a very close and personal relationship

    Like the sailor away for months or years at sea and about to enjoy ther first day ashore…… is it wise to view your options or dive straight in an suffer the consequences

    You may get lucky but odds on ….. well no need to elaborate…

    Meanwhile (Nic)

    Back to the telescope…….. get some perspective !!!!

  8. Sure, there are some bad jounalists out there. Yes, there have been some terrible uninformed and even fake news scandals in the past couple of decades. Undoubtedly, many people have been deceived or even had their lives changed by poor journalism and misreporting.

    But the relationship between the journalists and their audience and readerss whom I speak to – and whose comments I read in the pages of Money Marketing and elsewhere – is, by contrast, entirely built on trust, mutual respect and gratitude for the superb service and high-quality reporting and opinion pieces they receive, day in and day out.

    So that’s sorted then. Or is it? My own experience, distilled from reading and discussing many articles over the years with friends, family and acquaintances who know I have an interest in journalism issues paints a far more complex picture.

    Yes, there are many readers, possibly even a majority nowadays, who are happy with the writing and opinions they read. On the whole, that is something to be celebrated by journalists who have worked hard to earn the right to their reader’s trust. Even so, I would still query some of those supposedly satisfied readers. In some cases, they may not be aware of the indifferent quality of the writing they are getting.

    A few years ago, I recall a good friend who was highly trusting, being incredibly effusive about a journalist she had been reading for a long while. That was, until she discovered she was reading, on his say-so, a large chunk of factually based information and opinion that turned out to be fatuous guff and she had no underdstanding of the nebulous nature and supposedly informative structure. He had written the pieces on the grounds that it would present readers with something that was grounded in fact and was educational.

    Hopefully these instances represent a tiny minority. Or do they? If recent surveys of who consumers trust and what appears in publications is anything to go by, the proportion may not be as small as we think.

    Glass houses. Stones.

  9. This is perhaps like the Curate’s Egg. Right in parts, but off beam in others. That’s what generally happens with generalisations (Pun intended).

    I rather agree with Paul Wooley, but that doesn’t necessarily prove that I provided good advice.

    I know that many advisers do and are trusted accordingly and some perhaps have clients who trust them but don’t realise that they could have done better elsewhere. (SJP springs to mind?)

    We can all quote our own cases and I’m sure that many of us are confident that we provide good advice at the right price and are trusted by our clients. Retention is a guide but not necessarily proof.

    I was rather chuffed in my own case that many of my clients were with me for over 10 years , some over 20 and that when I sold out several wanted my assurance that the new entity was OK.

    I also only had clients from referrals – as do a good few others. Most of my referrals came from professional connections with whom I had longstanding contact. Perhaps the fact that referrals (either way)never involved and financial consideration may also be a contributory factor.

  10. Nick I have only got around two hundred client files, mostly these clients have been using my advice for the past thirty years, my very first client rents an office within my premises, he still has the very first pension I “sold” him in 1986,having never received an complaint and I can not remember having a client Transfer to another adviser, I am very sorry to say, the above article is blatant obfuscation and completely antagonistic, The basic flaw in your conclusion is you have tar and feathered all advisers with the same brush, and I take umbridge at that.

  11. Trevor Harrington 27th October 2017 at 4:43 pm

    Monday morning meeting between Nic and his editor ….

    Pick a subject Nic, and try and generate some response ….

    ehhhh voilaaaa !

  12. I agree with everyone else, it is impossible to understand the overall data without specifics. For example was this advice, guidance or a simple sale. The context of the position is all and would help understand if this is a genuine case of misselling or a client perception.

    In my experience on trusting advisers it is down to the level of regular adviser client interaction.

    The more interaction an Adviser has with the client over the year the more likely that they are aware of client issues and the more likely, when asked, that the client will be positive. This is even more important when markets fall (as they always will). The adviser should be there to explain in both positive and negative times. Whether the adviser is tied to a single company, multi tied or independent, for clients, in the main, this is irrelevant.

    Where a complaint or accusation of “misselling” originates is generally those clients who were transactional or with limited adviser interaction after sale.

    There will be a number of exceptions to this (some clients possibly shouldn’t be taken on by any adviser but in many cases the red flags on these are there) but those clients to whom you are close will be unlikely to find fault (or it will be something you are aware of already!)

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