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Faith, hope and clarity

Individual investors have had their confidence in investment markets and, by association, trust in product providers and advisers, severely tested over the last few years. As if it was not bad enough that markets have declined through three calendar years and touched five-year lows, there have also been accounting scandals and discredited product types to contend with.

Sentiment is at very low levels. It is because of this that this year&#39s Fidelity Investment Forum, which takes place in October, has been titled Keeping the Faith.

Our expert speakers at the forum will be asking and hopefully answering the question of how much confidence investors should be placing in the various asset classes, individual economies and investment markets. The forum will look at whether indicators suggest we have passed a turning point and the implications for investment strategy and portfolio composition in light of this.

We also want to examine concerns the relationship between clients and advisers. We believe it is topical to look at this now, not just because faith in advisers has been tested by poor investment returns but because our whole industry is beset by reviews sharing (certainly CP121 and Sandler) the same flaw – a failure to understand properly the true nature and value of advice given by IFAs.

Our own model of advice looks beyond its economic and financial value, which are quantifiable – we will present research that measures this and proves that advised investors achieve better long-term results – but it also looks at the psychological value of advice. We believe the role of an IFA is akin to that of a “financial therapist” and that advisers achieve most by stopping clients carrying out value-destroying actions.

Non-advised investors are typically their own worst enemies. The ability of IFAs to build a relationship of faith between themselves and their clients is what leads to most investor satisfaction and reinforces behaviour patterns not seen in non-advised investors.

We will take a light-hearted but serious look at the worlds of counselling and therapy to analyse how people&#39s expectations are set and maintained – and apply some of this thinking closer to home.

We will also be looking at why we may be about to enter an unprecedented “sweet spot” for the advice industry based on population dynamics, where we are in the current cycle, long-term changes in consumer behaviour, a shortage of advisers in certain age groups and a belief that current anti-adviser Government policy must change in the face of the growing savings gap. Put simply, the penny must eventually drop.

We believe topical evidence that investor confidence in investment markets may now be running ahead of professional advisers&#39 confidence. On a practical level, we see this in current business levels, where Fidelity IFA sales are more depressed month on month and year on year than consumer sales.

Although absolute IFA volumes remain some 80 per cent of our total, it is the “momentum change” we use as a confidence indicator. Does this mean that advisers have become more bearish than their clients? This last happened in the last quarter of 2001 and the final half of 1997.

Or is this just the later stages of summer industry doldrums which are more pronounced than usual this year? Will we see the traditional upturn in adviser business in the final quarter of this year or do we have an early sign of a significant divergence between adviser and consumer confidence?

By mid-October and the forum presentations, we will have completed some research and, more important, have another six weeks of business data to analyse for signs of a reversal.

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