As a profession, we are good at debating the best way to operate our firms. There are restricted advisers, independent advisers, integrated firms, specialised firms, those who agree with contingent charging and those who do not. However, this strategy is starting to become prohibitive.
While those variations are what make our industry dynamic, there is a danger in emphasising them and saying one model is better than another. Advice firms arguing over such issues could lead the man in the street to conclude we do not know what is in the client’s best interest. That leads to distrust, which is deadly to our industry.
For the past two years, we have run nationwide research on the value of advice and what consumers find really important. Trust has come out as the most important factor in each of those two years. Indeed, a lack of trust in advisers accounts for one in eight not receiving advice, according to a recent report from consultants Ignition House and Critical Research.
From 1 January, maintaining trust will become even more challenging, as clients will have it laid out for them in pounds and pence just how much they are paying for advice.
Research we commissioned looked at how people would react to seeing these costs by showing advised clients a mock-up of a Mifid II disclosure document. The documents displayed a moderate fall (sub-5 per cent) in portfolio value and the clients were asked how they would expect to respond. Over 70 per cent said they would want a more meaningful conversation, asking their adviser to explain and calling for a justification of the cost.
When those calls come, it will not be the nuanced way a firm runs its business that is important. It will be the things advice firms have in common. For example:
- The power of face-to-face advice
- Use of controlled advice processes
- A drive to ensure clients are informed
These tenets are vital in instilling trust. The basics of what advice offers – taxation, investment choice and helping clients navigate their own biases and uncertainty around finances – combine to provide a measurable, quantifiable difference, no matter the business model.
The danger of overemphasising difference and the subsequent impact on trust is well documented in recent times. The past number of years have seen a vast polarisation in political parties across the globe, which is leading to troubling consequences and a general fatigue for politics in the main.
In fact, a recent report highlighted how Americans are becoming frustrated with the divisions. Given this backdrop, it is of little surprise just a third of Americans trust their government, making them the least trusting nation.
Advice is built on relationships and arguably requires trust more than any other area of the sector.
This is best achieved by flying a common flag and building public awareness of the strengths of face-to-face advice, which we all agree on. In the end, we all have the same goal: that more people engage with advice.
Andy Thompson is chief executive of Intrinsic