Data from investment research firm Boring Money has shown that financial advisers are less trusted than lawyers, accountants and priests.
Only 16% of non-advised UK adults see financial advisers as being the ‘most trusted’ with that figure doubling among advised adults.
A lack of trust of financial advisers is a “significant issue for the public at large”, Alex Ingrim, senior investment analyst at Chase Buchanan told International Adviser. People are reluctant to engage with advisers causing them to take a ‘DIY’ approach when it comes to saving, investing and retirement planning.
This can lead to serious mistakes being made to their financial futures. Stuart Ritchie, GSB Capital managing partner, warned: “I can see this potentially exacerbating with tools like ChatGPT.”
Historically, the industry had been built around a sales process and renumeration through commission. Which Ingrim suggests is what has caused the scepticism towards advisers.
Ritchie highlighted that many people in the UAE have also had bad experiences with advisers, further fuelling distrust of the industry.
He said: “Normally people have been sold products that are unsuitable, however the poor victim finds this out much later down the line and typically, by then, the adviser has disappeared off into the sunset having banked a large up-front commission on day one.”
Boring Money chief executive Holly Mackay added: “A lack of clarity about the benefits of financial planning, combined with opacity around charging, are key contributors to a lingering sense of suspicion about the profession.”
Long term decline
A host of bad experiences has led to fewer people approaching advisers, ultimately causing them to lose out financially long term.
According to the Boring Money data, since 2021, there has been a 9% decline in the number of UK adults reporting that they would go to a financial adviser.
The decline in use of IFAs has created a barrier to a greater adoption of advice in the UK.
To bring this barrier down, Ingrim believes that the industry needs to communicate better with clients about how things have changed in the past decade.
“Our industry should promote ourselves to the public as a new generation of service provider on par with other professionals like lawyers and accountants,” Ingrim added. “Clients need to be made aware that business models, educational standards and service offerings have changed to mirror other industries held in high regard.”
One way that the industry can improve its image is to uphold a level of professionalism.
Sally Plant, assistant director of financial planning and education development at Chartered Institute of Securities and Investment (CISI), said: “As a professional body we set standards and ensure these standards continue to be met. Whether that be assessing initial competence via exams, online learning, professional assessments or by providing a varied and stimulating CPD programme to ensure these skills and knowledge are update to date and relevant.”
GSB’s Ritchie thinks that more education needs to be provided so that people can be better informed about the industry and what advisers can do for them.
He said: “Advisers should spend time in schools helping educate the next generation as well as providing education on the benefits that ‘real’ cash-flow modelling can bring to all of us.”
The Money & Pensions Service (Maps) published survey results on 14 June showing that only 47% of children have received a meaningful financial education at home or at school.
By providing people with a better understanding of what advisers do, and the benefits that they can bring to their finances, it can go some way towards building up trust between clients and advisers.
Ingrim emphasises how crucial transparency is to building better client relationships at Chase Buchanan.
He said: “We want our clients to understand that as a business we have a responsibility to be both fair and profitable with our charging structure. After all, no client wants to work with a failing advisory firm.”
Similarly, Ritchie explained that his firm clearly defines “the process that clients will go through in financial planning and what they can expect to receive,” to help create a trustworthy rapport with clients.
Providing transparency and better education on the financial advice industry can help to de-mystify the profession and highlight the many positives that advisers can provide to people’s finances.