As we all know, the RDR is intended to enhance the quality of financial advice and so strengthen consumer confidence in the industry. Its implementation, long awaited and much debated, represents one of the most seismic shake-ups the sector has ever committed to in terms of how advice is delivered and paid for.
“Professionalism” is among the key words in the RDR lexicon. But, according to new research, the average consumer already believes advisers embody the pinnacle of professionalism in the financial services sector.
This finding emerges in the first round of data collection for the Financial Services Research Forum’s Professionalism Index, which will now run alongside the extant Trust and Fairness Indices to monitor consumer perceptions of the industry.
The data were collected in mid-2012, drawn from 150 observations for each of seven types of financial services institution – banks, building societies, life insurers, general insurers, investment firms, credit card providers and financial advisers. Study respondents’ answers to questions designed to gauge perceptions of professionalism were classed as “positive”, “neutral” or “negative” and then converted into index scores, which will serve as baseline figures for future rounds of data gathering.
Financial advisers, with a score of 47.14 per cent, finished comfortably ahead of second-placed building societies (34.46 per cent). Banks came third (20 per cent), followed by general insurers (16.63 per cent) and life insurers (3.39 per cent). Two categories finished with overall negative perceptions: investment firms (-3.75 per cent) and, bottom of the pile, credit card providers (-11.45 per cent).
The results raise several interesting points. Given the extreme turbulence faced by the sector over the past five years, the score for the industry overall, 16.50 per cent, is surprisingly favourable. That banks are positively perceived at all, bearing in mind their central role in the financial crisis and the storm of negative commentary and publicity they have attracted ever since, is in some ways remarkable.
But it is the pre-eminence of financial advisers that perhaps most obviously invites attention.
The unrivalled level of esteem they enjoy – which, it should be noted, is also consistently reflected in the findings of the Trust and Fairness Indices – clearly begs a number of crucial questions in the current climate. Why are perceptions of advisers so positive? Are consumers right to think so highly of them? Maybe most pertinently, how will their professionalism – or otherwise – be perceived in a post-RDR landscape?
The answer to the first question lies largely in a truth that each of the Forum’s Indices has repeatedly served to highlight: the personal touch is greatly valued.
The financial services industry is routinely accused of being faceless and unavailing. In an era in which so many interactions have been stripped of even a vaguely human quality the close contact advisers have with their clients is vital to engendering extremely positive perceptions.
Will this admiration persist, though, now that advisers have no option but to charge a fee? We cannot ignore the very real possibility that consumers may re-evaluate the level of professionalism they receive relative to what they are paying when charging becomes far more explicit.
This gives rise to the prospect of an intriguing paradox. The RDR aims to increase professional standards, but it is possible that consumers, at least in the short term, will discern a decreasein professionalism as they, too, come to terms with this brave new world.
James Devlin is professor of financial decision-making at Nottingham University Business School and director of the Financial Services Research Forum