IFAs: how are they perceived by the general public?

Not so well, argues financial journalist David Prosser – though eliminating commission bias would certainly help.

Do Britons trust and respect independent financial advisers? The Personal Finance Society, one of the industry’s professional bodies, doesn’t think so: it is so worried about what people think about IFAs that earlier this year it launched a new campaign to improve consumer perceptions.

If the campaign succeeds, the PFS will have pulled off one of the greatest ever public relations tricks, for the lack of trust in IFAs has dogged the sector for decades.

Put “trust in IFAs” into Google and you’ll find three damning surveys on just the first page of results: the first, an Insurance Times report from 2000, reveals that “the public don’t yet trust IFAs”; six years later, research conducted by Standard Life reported: “we don’t like saving and we don’t trust IFAs”; and as recently as this year, Citywire research revealed that “only half of clients would recommend their IFA”.

It doesn’t take a rocket scientist (or even a Financial Planning Certificate) to work out why IFAs are so poorly regarded. In the 20 years I’ve been writing about personal finance, a new scandal implicating IFAs in bad practice or outright dishonesty has emerged roughly every two years. From mortgage endowment malpractice to personal pension mis-selling and from precipice bonds to split-capital investment trusts, the list of shame is a lengthy one.

Nor is it just during these periodic one-off episodes where advisers have let down their clients so badly. A whole generation of IFAs has lived high off the hog of commission – both initial and trail – invariably offering their clients poor service, bad value and, worst of all, results and returns that have been mediocre at best.

That’s not to tar all advisers with the same brush. I’ve come across many talented, committed and trustworthy IFAs who were (and are) doing a fantastic job for their clients. But these advisers have been in the minority – the good apples in a bad barrel – and their professionalism hasn’t been sufficient to drag the reputation of the sector as a whole out of the mire.

You will forgive me, then, if I’m sceptical about the PFS’s PR initiative. What advisers need, rather than a marketing campaign, is a sustained scandal-free period during which clients feel they’re getting what they pay for.

The good news is there is more chance of this happening than at any time in living memory. The Retail Distribution Review introduced at the beginning of this year has the potential to hugely improve standards – and, therefore, public perceptions, though this will take time.

The elimination of commission bias is crucial. How can any profession that gets paid to favour the products of certain providers be seen as having integrity? Higher qualification standards will be crucial too. There’s a reason people respect lawyers and accountants, but not IFAs – they know the former professions only admit people who’ve spent many years studying to practice.

And if, as expected, the RDR does result in a significant reduction in the numbers of IFAs – some analysts predict a third will leave the sector – that’s a positive development too. Those who quit will be the IFAs who are unable to prosper in a world of greater professionalism and transparency.

I have just one caveat. The danger of RDR is that far fewer people will access independent financial advice. Perceptions amongst those who use the sector may well improve, but plenty more will not be able or willing to pay fees – and their exclusion from an improved IFA sector will be to their detriment.

Share:

12 thoughts on “IFAs: how are they perceived by the general public?

  • It’s a very dangerous game to make statements such as ‘As everyone knows…’. I recall Steven Fry being questioned by some students, and one of them started a statement with that phrase, and Mr Fry launched at him. “How do you know?” he said. “Have you spoken to them all? Did they appoint you to speak for them?”

    What that person really meant is ‘My perception is…”. In this instance, David, I’m sure you are in a better position than most to gauge public opinion, but I would still question whether anyone can be in a truly authoritative position unless they’ve done a full survey. I for one would seriously question whether the man in the street would have a higher opinion of lawyers over financial planners.

    Having said that, I agree with much of the first half of the article. I do find the conclusions rather simplistic, however, lumping the financial ‘advice’ one used to get from a bank with a professional practice. Different market, different demographic, different method of payment. Different outcome.

    We used to see a lot of articles like this 10+ years ago, in fact I may have written one or two myself! But the market for financial advice has moved on enormously. Perhaps it’s time the media’s approach to us did so too.

    Reply
  • The Public? The Public??? Are these the same folk who they stop in the street on BBC Breakfast and ask their opinion on the Syrian conflict? Insightful.

    I have no doubt that the majority of the respondents have never and will never seek financial advice (and more fool them). Therefore relying upon their opinion as a basis of the state of our industry is akin to relying upon them on how to act against Assad’s regime; utterly pointless.

    Freelance journalist led by the nose methinks. Be in the industry to know the industry marrer; there are a lot better stories to be written. If only you knew where to look – woods & trees.

    Reply
  • I think “As everyone knows” translates as “In my experience it is the received wisdom”. In my 37 years in this intermediated business,with Fund Groups, Life Companies and Platforms, there is much in David’s article that I recognise but is thankfully being culled. But the perception remains. I believe the industry has advanced immeasurably since regulation, but where previously there was skulduggery and incompetence abounding, at least the former is almost extinct. The latter is, I suspect, no less normally distributed than in any other profession.

    I’m sure there will be readers who will argue that David’s views may not be authoritative. There will be more who will opine that the public don’t know what they’re talking about any way, and that may be correct. However, “The Public” are the ones who need to save. They’re the ones who hold the capital. They don’t know the difference between The Bank, and the ‘professional practice” because the latter is still a cottage industry that has no voice or commercial champion, and hence hackneyed phrases and beliefs about financial advisers persist. If advisers as a cohort want to be regarded with more respect, then they need more robust representation. If, on the other hand, you care less about the advice industry and more about your own clients, then the desire for respect should ultimately be self-fulfilling.

    Reply
  • I appreciate that there is always work to do to ensure that as a profession we are (in my opinion) rightfully perceived as professionals doing a fantastic job for their clients.

    Whist you can argue about the effectiveness of any campaign I firmly believe that we should support the PFS in promoting our profession.

    David raises some interesting points in his article….

    He mentions that individual incidents of shocking behaviour in the world of financial advice have negatively impacted our profession.

    Whilst this may contribute towards a negative perception of financial advisers or planners examples of this sort of behaviour is not unique to our profession.

    A quick google search reveals that there has been recent examples of Accountants (as sourced from Accountancy age) and Lawyers (as sourced from the BBC website) engaging in unethical and shocking behaviour (Both of these stories are from the 6th September)

    Do these negative stories reflect their profession as a whole? I’d suggest not.

    The lions share of solicitors, accountants (and IFAs) are working hard on behalf of their clients without concerning themselves with the ‘bad apples’.

    I’d actually agree that there have been periods in the past where as a profession we didn’t do ourselves any favours by engaging in behaviour which didn’t reflect our professionalism in the best light.

    However I believe that RDR was a great move in the right direction. There’s more work to do but it was a great start.

    David mentions certain surveys. Two of the surveys he mentioned were from a long time ago and were conducted in a pre RDR environment.

    The third stat (that only half clients would recommend their IFA) doesn’t shed much light on the public perception of the financial planning industry.

    To understand where we truly sit we need to ask pertinent, relevant questions relevant to the advice environment today and build a plan designed to ensure we help as many people as possible achieve financial security.

    Reply
  • There are so many points that could be made in response to this article but time is short so I will keep to the key points and keep it brief.

    Keith Richards is kicking off a debate that is saying, as I understand it, lets stop bickering among ourselves and focus on increasing professionalism – who could argue with that! Its not a PFS only initiative, but they’ve been the ones to start the ball rolling.

    The IFP supported the Question of Trust campaign started last year by Shane Mullins and because of our involvement in that, i know that trust is multi-faceted. For example, the trust index measures both ‘do i trust my adviser to do what they say’ and ‘ do i trust my adviser to act in my best interests’. Its the latter that is key to professionalism and to clients recommending their adviser (or in our case ‘Financial Planner’) to friends and colleagues. What I suspect most clients are missing in some of the surveys referred to in the article is the belief that their adviser is acting in their best interest. RDR will move us in the right direction, but until every adviser’s proposition is client-centric (as opposed to product-centric) we will struggle to change perception.

    Reply
  • So it’s Independent Financial Advisers that have the poor reputation? Or is it Financial Advisers? Or is it bank sales people? If bad reputation and lack of trust arises from poor advice, and poor advice could be correlated with referrals of complaints to FOS then the numbers simply defy the fundamental assertion behind this piece.
    And it’s crass beyond belief to suggest that the numbers leaving the industry correlate with the loss of the unprofessional and those who have no interest in transparency.
    Not recommending your IFA does not correlate with lack of trust.
    The Trust Indices published by The Financial Services Research Forum have demonstrated regularly over many years that brokers and advisers demonstate significantly higher levels of trust than any other financial institution – although sadly they stopped distinguishing between IFAs and others a while ago.
    To be perfectly honest, the perpetuation of the lack of trust myth could be argued to arise more from the perpetuation of publishing of articles which assert lack of trust with as little substance or backing as this particular specimen.

    Reply
  • I appreciate that there is always work to do to ensure that as a profession we are (in my opinion) rightfully perceived as professionals doing a fantastic job for their clients.

    Whist you can argue about the effectiveness of any campaign I firmly believe that we should support the PFS in promoting our profession.

    David raises some interesting points in his article….

    He mentions that individual incidents of shocking behaviour in the world of financial advice have negatively impacted our profession.

    Whilst this may contribute towards a negative perception of financial advisers or planners examples of this sort of behaviour is not unique to our profession.

    A quick google search reveals that there has been recent examples of Accountants (as sourced from Accountancy age) and Lawyers (as sourced from the BBC website) engaging in unethical and shocking behaviour (Both of these stories are from the 6th September)

    Do these negative stories reflect their profession as a whole? I’d suggest not.

    The lions share of solicitors, accountants (and IFAs) are working hard on behalf of their clients without concerning themselves with the ‘bad apples’.

    I’d actually agree that there have been periods in the past where as a profession we didn’t do ourselves any favours by engaging in behaviour which didn’t reflect our professionalism in the best light.

    However I believe that RDR was a great move in the right direction. There’s more work to do but it was a great start.

    David mentions certain surveys. Two of the surveys he mentioned were from a long time ago and were conducted in a pre RDR environment.

    The third stat (that only half clients would recommend their IFA) doesn’t shed much light on the public perception of the financial planning industry.

    To understand where we truly sit we need to ask pertinent, relevant questions relevant to the advice environment today and build a plan designed to ensure we help as many people as possible achieve financial security.

    Reply
  • I think “As everyone knows” translates as “In my experience it is the received wisdom”. In my 37 years in this intermediated business,with Fund Groups, Life Companies and Platforms, there is much in David’s article that I recognise but is thankfully being culled. But the perception remains. I believe the industry has advanced immeasurably since regulation, but where previously there was skulduggery and incompetence abounding, at least the former is almost extinct. The latter is, I suspect, no less normally distributed than in any other profession.

    I’m sure there will be readers who will argue that David’s views may not be authoritative. There will be more who will opine that the public don’t know what they’re talking about any way, and that may be correct. However, “The Public” are the ones who need to save. They’re the ones who hold the capital. They don’t know the difference between The Bank, and the ‘professional practice” because the latter is still a cottage industry that has no voice or commercial champion, and hence hackneyed phrases and beliefs about financial advisers persist. If advisers as a cohort want to be regarded with more respect, then they need more robust representation. If, on the other hand, you care less about the advice industry and more about your own clients, then the desire for respect should ultimately be self-fulfilling.

    Reply
  • It’s a very dangerous game to make statements such as ‘As everyone knows…’. I recall Steven Fry being questioned by some students, and one of them started a statement with that phrase, and Mr Fry launched at him. “How do you know?” he said. “Have you spoken to them all? Did they appoint you to speak for them?”

    What that person really meant is ‘My perception is…”. In this instance, David, I’m sure you are in a better position than most to gauge public opinion, but I would still question whether anyone can be in a truly authoritative position unless they’ve done a full survey. I for one would seriously question whether the man in the street would have a higher opinion of lawyers over financial planners.

    Having said that, I agree with much of the first half of the article. I do find the conclusions rather simplistic, however, lumping the financial ‘advice’ one used to get from a bank with a professional practice. Different market, different demographic, different method of payment. Different outcome.

    We used to see a lot of articles like this 10+ years ago, in fact I may have written one or two myself! But the market for financial advice has moved on enormously. Perhaps it’s time the media’s approach to us did so too.

    Reply
  • The Public? The Public??? Are these the same folk who they stop in the street on BBC Breakfast and ask their opinion on the Syrian conflict? Insightful.

    I have no doubt that the majority of the respondents have never and will never seek financial advice (and more fool them). Therefore relying upon their opinion as a basis of the state of our industry is akin to relying upon them on how to act against Assad’s regime; utterly pointless.

    Freelance journalist led by the nose methinks. Be in the industry to know the industry marrer; there are a lot better stories to be written. If only you knew where to look – woods & trees.

    Reply
  • There are so many points that could be made in response to this article but time is short so I will keep to the key points and keep it brief.

    Keith Richards is kicking off a debate that is saying, as I understand it, lets stop bickering among ourselves and focus on increasing professionalism – who could argue with that! Its not a PFS only initiative, but they’ve been the ones to start the ball rolling.

    The IFP supported the Question of Trust campaign started last year by Shane Mullins and because of our involvement in that, i know that trust is multi-faceted. For example, the trust index measures both ‘do i trust my adviser to do what they say’ and ‘ do i trust my adviser to act in my best interests’. Its the latter that is key to professionalism and to clients recommending their adviser (or in our case ‘Financial Planner’) to friends and colleagues. What I suspect most clients are missing in some of the surveys referred to in the article is the belief that their adviser is acting in their best interest. RDR will move us in the right direction, but until every adviser’s proposition is client-centric (as opposed to product-centric) we will struggle to change perception.

    Reply
  • So it’s Independent Financial Advisers that have the poor reputation? Or is it Financial Advisers? Or is it bank sales people? If bad reputation and lack of trust arises from poor advice, and poor advice could be correlated with referrals of complaints to FOS then the numbers simply defy the fundamental assertion behind this piece.
    And it’s crass beyond belief to suggest that the numbers leaving the industry correlate with the loss of the unprofessional and those who have no interest in transparency.
    Not recommending your IFA does not correlate with lack of trust.
    The Trust Indices published by The Financial Services Research Forum have demonstrated regularly over many years that brokers and advisers demonstate significantly higher levels of trust than any other financial institution – although sadly they stopped distinguishing between IFAs and others a while ago.
    To be perfectly honest, the perpetuation of the lack of trust myth could be argued to arise more from the perpetuation of publishing of articles which assert lack of trust with as little substance or backing as this particular specimen.

    Reply

Leave a Reply