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 firstname.lastname@example.org