Changing the narrative
Evidently, the financial services industry must clean up its reputation and rebuild its relationship with the public.
A potential solution in this regard would be to begin with providing a more extensive financial education to consumers, so that they know exactly when and who to turn to when seeking advice, and when they are capable of going it alone.
Further to this, the FCA would do well to make the benefits of receiving independent financial advice, as well as the realities of doing so more widely known.
There are also many protections for consumers who use regulated financial services in the UK. Under UK regulation, advised clients may have recourse to compensation.
For example, should the regulated adviser or the underlying investment manager fail, claims may be covered by the Financial Services Compensation Scheme within a certain limit, and consumers always have the right to complain about bad or misleading advice to the Financial Ombudsman Service.
Clearly, if more consumers were aware of such protections, they would be more willing to seek advice from the offset. As a result, this will mean that individuals will become better equipped to save for their financial futures, which should be a win-win.
Likewise, the Financial Conduct Authority clearly has further work to do when it comes to restoring trust within the industry. Although it has made admirable progress – by clamping down on IFAs collecting commission, for example – the public wants to see the body go further.
To this end, the overwhelming majority (78 per cent) of the respondents in the My Pension Expert survey believe that harsher punishments for independent financial advisers engaging in unethical practice are in order.
As a further measure, a similar number (73 per cent) of those surveyed stated that tighter regulations surrounding independent financial advice are needed.
Naturally, rebuilding consumer trust is not something that can be achieved overnight. This is something that will require a great deal of time and effort on behalf of both regulatory bodies and financial advisers themselves.
So, to foster a positive relationship between IFAs and consumers, advisers must commit to being completely transparent with individuals.
From ensuring that little to no jargon is used throughout the advisory process, to clear and comprehensive discussion about how fees are calculated, both savers and advisers alike stand to benefit from greater clarity in the industry.
Ultimately, the more the public understands about how independent financial advisors work, the more they will understand the value they offer – especially in such a challenging economic climate.
