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Silver lining

One of my favourite Christmas songs sings the praises of silver bells and how they peal out at Christmas. This is not to be confused with jingle bells, which lacks gravitasIn business, we talk of “silver bullet” solutions – magic management ideas to solve a problem at a stroke.

Responding to the RDR, Aifa wanted to find its own equiv-alent of silver bells, which is why we went direct to those people who are the only ones who can speak with total clarity about the consumer view of financial services and the IFA profession – consumers.

We asked 2,500 consumers about their attitudes to financial services, about profession-alism, trust, remun-eration and qualif-ications. We also asked 500 existing IFA clients a similar range of questions and the results from the two groups were compared.

The key findings have been revealing. We asked IFA clients how they preferred to pay for advice – 46 per cent say they prefer a choice of payment, 6.6 per cent prefer fees, 32.5 per cent prefer commission and 14.9 per cent prefer customeragreed remuner-ation. In compar-ison, 30 per cent of UK consumers (surveyed by YouGov) prefer to pay by upfront fee, 30 per cent prefer commission and 22 per cent prefer product charges when a fee has been agreed with the consumer.

So, apart from “choice” being the main finding, it seems that people prefer a “mixed economy” of options, leaving it up to them to decide what type of adviser to deal with and then decide how that adviser should be paid.

We also found that qualifications were important to clients. The group that felt most strongly about the level that advisers should be qualified to were new clients. Those with a track record of dealing with their IFA saw qualifications as less important – recog-nising the value of experience and of the trust built up over a period of years.

It is true to say that younger people want more highly qualified advisers. With around 50 per cent of younger people at, or heading for, university it is no surprise they expect to deal with people at least as well qualified as they are. Once a client relationship had been in place for a number of years, 49.1 per cent of IFA clients said they did not believe the qualifications held by their IFA were relevant as they could judge the value of their adviser from their own experience. Around one in four believed that advisers should be qualified to degree or equivalent.

One of the key statistics was that 97.7 per cent of clients trust their IFA more then their bank, insurance company, the Government and even journalists.

We are always told that people want to blame others for their own mistakes and they need protection from themselves. The results do not bear this out. Almost nine out of 10 clients believe they are ultimately responsible for their financial affairs.

If the RDR is to be successful, it has got to re-engage consumers with financial services.This means understanding what consumers are looking for and delivering a profession we can all be proud of.

Two other issues hang over the RDR – debt and meanstesting. Students now have thousands of pounds of debt. Must they pay that off, try to get a mortgage and only then save? We must distinguish between manageable and unmanageable debt. The benefits system also needs reform if it is not to penalise those with little who want to save something.

We need the silver bells of clarity, not the shrill sound of silver bullet ricochets.

Chris Cummings is director general of Aifa

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