Industry bodies are looking to create a “coalition” with consumer groups to help strengthen the voice of the advice profession and improve trust in the sector.
The Personal Finance Society has stepped up its consumer profile with the launch of a money guidance website, while ex-IFA Association director general Garry Heath plans to work closely with consumer lobbyists when he launches an adviser trade body later this month.
The PFS introduced a consumer insight panel last year, made up of representatives from organisations such as Which? and the Financial Services Consumer Panel. And last month it launched consumer education website Yourmoney as part of its drive to improve the way the public perceives advisers.
PFS chief executive Keith Richards says: “The sector carries a legacy of poor public perception which needs to be addressed, and the only way to do that is to tackle it from a consumer perspective.”
Experts say a closer relationship with consumer groups can help get the industry’s voice heard with Government and the regulator.
Apfa director general Chris Hannant says: “The FCA is there to create a safe financial services sector for the consumer. So a consumer perspective is very important to the regulator when developing its rules, and consumer groups have influence there.
“The adviser agenda is not a million miles away from the consumer agenda because advisers act on behalf of their customers.”
Lansons director Ralph Jackson says the advice sector and consumer lobby have largely resolved their differences in recent years.
He says: “It used to be the case that adviser trade bodies would argue consumer groups did not fully understand the issues, and consumer groups would argue advisers were just trying to make a profit.
“But that has broken down a lot over the past decade. The adviser community and the consumer lobby now recognise they are not coming from completely different standpoints.”
Heath says he has always found consumer groups “useful” when lobbying on advisers’ behalf.
He says: “It is important to get close to the consumer lobby and ensure they understand advisers have their clients’ best interests at heart.
“That widens your shoulders, and if you ignore consumer groups they tend to find friends elsewhere.”
But consumer representatives say how effective any alliance will be depends on the industry’s motivations.
The Financial Inclusion Centre director Mick McAteer says: “It all depends on the intent behind a trade body. If it’s just a lobbying organisation for the industry then we rarely have much in common.
“However, if a trade body wants to improve levels of professionalism and get a better deal for consumers then there is room for discussion.”
And Financial Services Consumer Panel chair Sue Lewis says consumer groups would not “fall for” the industry simply pursuing its own agenda.
She says: “We are not dumb and we know when we are being used.”
Lewis says the benefits for consumer groups are the ability to influence the sector and to improve outcomes for consumers.
She says: “We can flag issues the industry does not spot itself. For example, charges can put consumers off, so being able to find out upfront what advice is going to cost is an issue Which? has raised with the PFS.
“I would also like to see more advisers offering one-off charges for specific pieces of advice. A lot of advisers want a continuing relationship because they make more money from that, but many consumers just want a one-off piece of advice on inheritance tax, for example, which is hard to find.”
Fairer Finance managing director James Daley says: “For as long as most people can remember, the advice industry has had a reputation and suffered from a lack of trust problem and it is quite hard for the industry to turn that around on its own.
“But in a world where the pension reforms have increased demand for advice, it is in everybody’s interest to improve trust: if a consumer makes poor decisions because they didn’t use an adviser, that is a loss for everybody.”
He says advisers displaying information on charges on their websites is key to improving trust.
“I appreciate it can be challenging to have generic pricing when everybody’s circumstances are different,” says Daley. “But most advisers make no effort whatsoever and just use that as an excuse to not be transparent.”
He suggests consumer groups could also develop a form of accreditation system for advisers.
He says: “We need an excellence standard that demonstrates advisers are putting customers at the heart of their business year after year, rather than just taking an exam.
“Which? offers a ‘trusted traders’ scheme which endorses tradespeople, and it would not be a huge leap to extend that to the advice sector.”
A difficult relationship
However, Lewis says the relationship between adviser and consumer groups is “not always easy”.
She says: “Consumer groups retain the right to take an independent view. Where we see bad practice in the industry we will carry on pointing it out.
“We are not there as an advocate of advisers, but where we can feed in views that they find helpful in creating a better deal for consumers then that is a win-win outcome.”
Hannant says there are certain issues where the interests of the two groups are not aligned.
He says: “The long-stop is a classic case of that. We need to bear in mind the FCA’s consumer protection duties and try to develop a solution that addresses those demands as well as working for the industry, which is why Apfa is considering alternatives to the 15-year limit on complaints.”
But Yellowtail Financial Planning managing director Dennis Hall warns there is a risk of the industry’s views being “watered down”.
He says: “If you are working with a consumer group, you have to occasionally agree to disagree because I don’t want the industry’s message to be watered down.
“But in grown-up organisations it is possible to disagree on certain issues while working together, as we have seen with the coalition Government.”
Daley says consumer groups must also be “pragmatic” on such issues.
He says: “It is their mission to stick up for consumers, but equally if you don’t allow the industry to learn from its mistakes that is problematic for consumers.
“So practical measures like the long-stop can draw a line under a nasty issue for the industry, which can be beneficial for everybody in improving trust. We do not just want to sit on the fence and point the finger – we want to help.”
Expert view: Consumer groups are trusted and influential
The advice sector continues to evolve into a profession post-RDR but we carry a legacy of poor public perception which needs to be addressed. It is therefore essential we find effective ways to better engage the public if we aspire to influence the future direction of travel.
Consumer groups play a key role in helping to enforce safer regulations which is not unique to financial services. They are trusted by the public and carry significant influence with Government and regulators, especially in environments where there is a general consensus that the public are being exploited or taken advantage of by industry.
As part of the broader work the Personal Finance Society has been doing to improve consumer confidence and awareness, we established a consumer insight panel last year.
The panel consists of some of the most influential and trusted consumer bodies in the UK, including the Financial Services Consumer Panel, Age UK, the Money Advice Service, The Pensions Advisory Service, StepChange Debt Charity and Which?.
The group provides invaluable insight and guidance to help influence the society with its strategic objectives to improve the profile of professional advice and secure public confidence and trust in advice more broadly.
Advisers pride themselves in delivering strong client-centric propositions which earn the trust of their clients but the advice sector more broadly has a poor public profile, built up over the past two decades. The only way to change these perceptions is to tackle them from a consumer’s perspective, which is what the PFS has set out to do.
Currently, our emphasis is on implementation of the pension reforms and areas of complexity or risk affecting consumers. We are also looking at ways to make advice more accessible, making the benefits and cost of advice easier to understand for consumers seeking it for the first time as well as highlighting the risks of financial fraud and scams.
Seeking valuable but often very candid insight can be challenging, especially as some criticism is based on perception rather than fact. But for many, perception is reality and it is essential we address that from the public’s perspective.
Keith Richards is chief executive of the PFS