Big banks and fund managers have the budgets to spend millions protecting their reputations. But what can your average IFA do to build trust in a hostile environment? Laura Miller finds out...
Trust is a tricky thing, hard to gain, easy to lose, difficult to quantify. It's also the most vital facet of the financial services industry.
Banks need customers to trust that they will safeguard their assets in an account until needed; insurers, that they will pay out in the event of a crisis; advisers, that they will guide decisions about what to do with hard-earned money that can make or break a future.
However, some participants in each of these markets of the financial sector have broken the circle of trust they have with consumers; Northern Rock, payment protection insurance, Keydata, Harlequin, Arch Cru, AIG - the list goes on.
Can we rescue financial services' reputation?
The resulting reputational damage scars everyone in the industry. But, while the financial system is set up in such a way that most people tend to use at least one bank and life company throughout their lives, advisers are left to box their way out of a tight corner by themselves.
And this in a world in which financial professionals are "all banks" in the minds of investors, according to former Morningstar OBSR managing director Richard Romer-Lee. Given banks' post-crisis standing, this is bad, very bad.
As an antidote, Romer-Lee called for industry trade bodies to do more to "talk up" the good that the profession does.
Worldwide Financial Planning IFA Nick McBreen agrees.
"A very important contribution could be made if the professional bodies worked much more closely to present a cohesive and professional image of the advisory profession and market clearly the value of advice and the tangible benefits of seeking out and engaging with an IFA, " he said.
McBreen admits there is no "one-stop solution" to rebuild trust with consumers, which is a point echoed by Premier Practice director and principal Richard Bishop.
"You can't just wave a magic wand and everyone now loves and trusts IFAs," he said.
So how are advisers fighting back? 'One day, one client at a time' seems to be the answer.
"Trust is a personal thing, you have a meeting and there is a mutual trust across the table, trust is built by holding meetings and digging deep into what drives the client," Bishop said.
So what is it that drives clients' opinion of advisers?
According to David Shirley Associates managing director David Shirley it is clarity, peace of mind and honesty.
"Qualifications get a mention but not as number one," he said.
For Shirley, a trusted adviser is one who has an ongoing commitment to be the best they can be.
"Commit yourself to the highest standards of professional and ethical behaviour. Earn the reputation of always being willing to go the extra mile on behalf of clients. Always put the clients' interests first," he recommends.
First thing's first
The client is just one part of the equation, however.
Stirling House Financial Services chief executive Neil Francis believes the process of building trust starts with the IFA "practising what they preach".
"Over the years I have met the tradesman's wife still waiting for her plumber husband to fix that dripping tap, the chippie to put up the long-awaited shelf, the brickie to finish off her kitchen extension.
"Likewise I have met countless IFAs devoid of a personal pension plan, mortgage repayment vehicle, ISA, and all the rest. How often the craftsman deals with others' issues while ignoring their own."
One of advisers' own issues is compliance. SLM Associates compliance and conduct risk consultant Frank Capron believes good compliance practises are another way of building trust with clients.
"If I narrow it down to one thing, I would capture it all in one word - deliver," he said.
By this he means deliver products the clients understand and that are relevant, with an explanation in plain English. Also, offer an after-sales service and ongoing reviews.
Most financial advisers do an outstanding job for their clients, which brings with it reputational rewards.
But the upcoming New Year is a good time to address some of the issues raised here; lobby your professional bodies to raise the positive profile of the industry; be the one who cuts through the jargon for clients; apply the best of what you do to yourself as well; use compliance procedures to your advantage.
And prove to your clients just why you are so much better than banks.
The trust checklist
Zen Wealth Chartered financial planner Patrick Murphy reveals his secrets to securing client trust
1. Always keep promises, even when it is costly or inconvenient
2. Be conscientious and dependable in all that you do
3. Take yourself off the throne, be prepared to 'serve' your client
4. Demonstrate consistency in tasks and approach
5. Act on principles, not emotions or impulses
6. Be open and honest with no ulterior motives
7. Don't criticise, condemn or complain
8. Carry out work in a friendly manner
9. Offer sincere praise and appreciation
10. Let the client save face
11. Help the client to have a good reputation to live up to
12. If you are wrong, admit it
13. Work on your character, reverse the flaws
14. Be aware of your strengths and weaknesses
15. Don't settle for the easy options
16. Take your responsibility seriously
The hard truth
"Act as their adviser, which sometimes means telling their clients they are wrong." - Hargreaves Lansdown head of financial planning Danny Cox
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