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Crisis of confidence

How must consumers be feeling about the financial services sector right now? At a time when our industry has been devoting so much energy and resources to increasing consumer understanding and confidence in financial services, we can only speculate about how much of that work has been eroded by recent events.

As financial advisers, you are a good barometer of consumer sentiment because you will have undoubtedly been taking lots of calls from concerned clients as events have unfolded.

For me, one of the few positives that can be taken from this period of financial turmoil is that when consumer confidence wanes, the value and significance of professional independent financial advice become even more important.

We cannot disguise the fact, however, that we are trading in truly exceptional times. Businesses that contribute to the health of both the domestic and global economy are experiencing unprecedented upheaval and we do not know whether there are further shocks to come.

Exceptional times require exceptional measures, which is why we applaud the radical rescue plan being proposed by US Treasury secretary Henry Paulson whose $700bn financial scheme will seek to sweep up US banks’ bad mortgage debt to help restore confidence in the market.

Of course, people who have questioned the amount of excessive lending that has taken place in recent times may feel that some financial institutions are getting off lightly. This is entirely understandable but the reality is that market stability is of paramount importance in these difficult economic times and Paulson has made a very tough decision for which he should be congratulated rather than castigated. Not to act may have had more dire consequences.

As well as the economic environment, the regulatory framework is also under scrutiny, with governments around the world trying to determine whether a regulatory refocusing exercise needs to take place to stave off a repeat. Let us just hope that future regulatory activity is more proportionate and that we learn from these painful lessons.

One thing that I have been stunned by is the sight of huge and long established global institutions being undone by the sheer complexity of the financial instruments they were operating. Issues that are so complex rarely offer simple solutions.

Responsibility is likely to be one of the defining themes that is taken forward by governments and industry, whether that is responsible lending by financial institutions or individuals being responsible for their financial decisions.

The final fallout of this intense period of failures and consolidation remains to be seen and it may yet have some time to run.

What is clear is that consumer confidence in financial institutions will undoubtedly have been dented.

How bewildering and intimidating must it be for consumers who have faced a barrage of media reports and speculation about vast sums of money and household names under threat? That is precisely why many consumers turn to financial advisers to help them pick up the pieces by making sense of what this means for them.

For advisers, this means continuing to focus on the basics by providing the expert insight, guidance and reassurance that consumers are looking for, particularly at a time like this.

Faced with such an apparently hostile climate, it is understandable that many consumers will now be anxious about protecting their homes, their families and their livelihoods.

As a result of this crisis, protecting people’s financial well-being will be even higher on the nation’s agenda.

The independence of the financial advice profession means that we are ideally placed to help consumers address their concerns, safeguard their homes and families and thereby begin to regain consumers’ trust and confidence.

Sesame is constantly monitoring market conditions as well as using our influence with providers and lenders to understand the longer-term implications of recent events on advisers and their clients.

There is undoubtedly some disarray within the banking community at the moment but the sector will emerge from this tough period and we hope it seizes the opportunity to work with the advice profession to help close the savings and protection gap.

The advice profession has already demonstrated its willingness and appetite to reach for higher professional standards and while there is still much work to be done, the need for consumers to seek professional financial advice is paramount and we will be there to offer that support.

Consumers need professional guidance now more than ever, which is why as financial advisers you should never underestimate your strengths – the trust and value that clients place in your knowledge and experience.

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