Recent experience selling a five-year old Volkswagen Passat highlighted to me the sharp contrast between the professionalism within financial services and other industries. I may be criticised for setting a low bar but I sincerely believe we can learn from others.
Like most choices we help individuals with, selling a car is both an infrequent and (relatively) high value transaction. Advisers endeavor to help guide people through the complexity. However, used car salespeople, in my experience, use their knowledge to obfuscate, confuse and pressurise.
Initial indications of value are unrealistic, with an assumption my five-year-old car would be perfect. In the absence of any other information I am drawn to higher values as a layperson. This is analogous to financial services firms promoting investments with high promised returns, or implying the same through historic data.
I used the online tools offered by many of these used car firms to detail my car’s condition. Perhaps I should have been more suspicious but the value generally only reduced marginally. At my appointment the assessor told me I had not done a good job and should know the difference between a “cut and polish” and “needing paint”. Needless to say the difference in valuation at this point was significant.
We have become more sophisticated in our use of tools and therefore expect less from our clients. My firm uses five different methods to assess risk, accepting different people will understand and explain data in different ways. I am a visual person and would more accurately assess the state of my car with a “looks like…” box, so we ask for an indication of hypothetical returns (and potential losses) in a similar way.
Unsurprisingly, the offer made by the first used car firm was unacceptable. It was also predictable that, as I expressed my dissatisfaction, the offer was gently tickled upwards. In contrast, it is a full decade since our firm moved to fixed, non-negotiable fees. We believe it is fairer not to penalise those who cannot, or will not, negotiate.
Of all the tactics employed by the used car sales people, the most appalling was one threatening to bill me for a “wasted journey”. Having learnt from prior experience I sent full photographs ahead but referring to a clause in the contract they threatened to invoice for “unrecoverable losses” unless I agreed to a lower price.
Apparently, staff negotiating the contracts are not qualified to assess the damage (but remember we, the vendors, are). This clause is clearly designed with the sole purpose of being a final negotiating tactic and to worry the vulnerable into selling their vehicles under value.
Penalty clauses are all but gone in financial services. There are some notable high profile “wealth managers” that apply exit costs for up to five years (which should clearly not continue) but most advisory firms are ethical and do not have explicit tie-ins. It is a perverse behavioral trait that most individuals are more loyal and make more recommendations when they are not restricted, which makes restrictive terms bad business sense.
Naturally we should strive to improve and learn from other professions. However, we should also take the time to remember how far we have come and to recognise there is a lot that is good in financial services.
Alistair Cunningham is financial planning director at Wingate Financial Planning