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Tarred with the same brush

Some time ago, a journalist I respect highly – but won’t name here – wrote a column in another publication. The gist of his comments was that, for most consumers, the financial services industry is intricately bound together, no matter what individual branch its practitioners belong to.

Ordinary punters rarely differentiate between independent financial advice, a tied salesperson or a company representative. They do not make a distinction between a bank loan, a pension, an investment or a credit card. They are all financial products.

And consumers see no difference, in terms of any “approval rating” of the industry, between the way they might be treated if they have gone overdrawn, the fact that they are forced to explain their problem to an indifferent telephone operator in Bangalore, or the cavalier way their life savings are being managed by a spotty twentysomething.

To them, it is all part of the same thing, a seemingly monolithic block of acronyms, of small print and products they do not understand.

In many ways, as a subset within the industry, IFAs get off relatively lightly. This may not be immediately apparent, certainly not to the adviser who wrote to Money Marketing last week, claiming that it is all the fault of “platitudes continually put out by the press, who have been extremely biased in their reporting and, no doubt, working on the premise that it is bad news that sells”.

But if you compare the coverage given to IFAs with, say, the comments about sales of PPI, the difference is striking.

The week before last, for example, newspapers and broadcast media reported – and rightly so – on the continuing scandal of a section of the industry that is trousering profits worth anything up to 1bn a year by selling clearly inappropriate PPI products to millions of consumers.

As if to ram the point home, the FSA announced last week that it has fined one loan provider – Loans.co.uk – a whopping 455,000 for “failing to treat its customers fairly when selling PPI”.

The FSA statement says that the company’s breaches were “particularly serious, as the failings exposed approximately 14,400 customers to the risk of the sale of PPI which was unsuitable for their needs.”

As soon as details of the fine went out over the wires, I immediately went to the Loans.co.uk website to find out more about the company. There, nestling in the “About Us” section, was an inane stream of comments that, especially in the light of this fine, were so painfully embarrassing that any sane PR adviser – are you reading this, Lansons? – would advise removing from the site immediately.

For instance, the company claims to be borrowers’ “best friend in the loans business”. It says it “takes the time to listen, quickly search for the best solution and offer a loan tailored to suit individual needs”. It adds that its long-standing membership o the Corporation of Finance Brokers is linked to it sharing the CFB’s “common long-term aims, being the promotion of openness and honesty to you, our customer.”

Loans.co.uk’s staff are highly qualified: “We know precisely what we are doing, and that we are doing it the right way. We are all honest, experienced and friendly people making the whole loan process a surprisingly easy and pleasurable experience for you.”

Meanwhile, even lenders are brought in to boost the firm’s supposed credibility. “It is obvious to see that you are a professional, highly motivated, ethical and successful company,” writes one.

Another compliments Loans.co.uk’s staff: “Nothing appears to be too much trouble for them in the pursuit of providing a first class service to the customer. It must also be said that your staff are trained to a very high standard, with their knowledge of our products being exceptional, meaning the customer is always provided with the most competitive package, which is tailored to suit their individual circumstances.”

After reading this garbage, two thoughts come to mind. The first is that, over the years, I have heard exactly the same comments made to me by endless numbers of IFAs about their own businesses.

In some cases, I know them to be broadly correct. In most cases, I don’t know enough about them to judge whether they are true. In a minority of cases, as fines and regulatory tightening-up have forced many individuals and entire firms to leave the industry, we now know these comments to be manifestly false.

My second thought is that too many IFAs – even the better ones – imagine that they live in a cosy little microcosm. As long as they treat their own customers fairly, their good reputations and those of independent advice in general should not be disputed.

Yet the brutal reality is that many consumers do not see it like that. Sure, they may have a soft spot for their own individual IFA. But he or she then becomes an exception to the rule, creating the potential for a relationship that is exceedingly brittle. Should anything go wrong, and sometimes it does, the IFA will be tarred with exactly the same brush as the less savoury parts of the industry, perhaps unreasonably – occasionally with justification.

If IFAs want to be seen as being advocates of their clients, rather than remaining within their chosen areas of competence, then they should be prepared to step up to the plate and condemn practices that harm the good name of everyone within the industry.

nic@inspiredmoney.co.uk

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