The issue of consumer trust in financial services is well-worn ground. After the financial meltdown and the fire and brimstone declarations from some quarters and navel-gazing of others, a sense of perspective has returned to the debate. Gordon Brown’s comments earlier this week showed that, at least in dialogue, the Government is moving in the right direction. It is important we acknowledge the genuine failings of the financial services sector but it is equally vital that we recognise best practice and areas where consumer trust is strong.
The IFA profession has built extremely high levels of consumer trust through a combination of professionalism and transparency throughout the downturn. When Brown said “some financial institutions have managed their risks and maintained trust” he could have been talking directly about IFAs. A YouGov poll last year found 86 per cent of those who had dealings with IFAs in the past three years rated their services fairly good or extremely good. Independent research from the University of Nottingham confirms we are the most trusted of financial services sectors, ahead of building societies and banks. It also confirms consumers show a higher level of trust towards independent advisers than for tied advisers. The IFA profession can count itself part of a very small minority of financial services institutions enjoying such trust.
The regulator must recognise the contribution of IFAs and build on the high levels of consumer trust they enjoy. The original objective of the RDR was to improve consumer trust and increase access to professional financial advice. Instead, in its current manifestation, I worry that the RDR is much more likely to restrict access, increase costs and drive some highly competent IFAs out of the profession. It seems perverse regulation in the extreme that robs people of the one area they trust.
The financial services industry as a whole has taken a huge hit through the failings of the banking system. For IFAs to take another from regulatory changes could be devastating and would punish adviser and consumer.
This is our clarion call to the FSA – it is time for encouragement and reward, not heavy-handedness. The story of the last 10 years has been one of increasing levels of IFA professionalism. We have always stated that “change costs money but improvement is affordable” and we want to see FSA reinstitute the regulatory dividends that were a core component of original RDR thinking to help firms afford to make the change necessary and recoup the cost of exams and study. Lower regulatory fees, lower capital requirements and less intrusive supervision for such firms should be looked at to help in a smooth transition.
FSA has an opportunity to use the IFA profession as a template to evaluate the profession’s success in maintaining high levels of consumer trust throughout the downturn and use this as a blueprint for improving consumer trust in other areas of financial services. It should not waste this opportunity by introducing regulatory changes which could erode this trust.
Members should be aware that we will continue to lobby for common sense and for a fair deal for the IFA profession. The FSA should take heed that building and maintaining trust is much more than a paper exercise.
Chris Cummings is director general of the Association of Independent Financial Advisers