Missing The Message of Independence

1996: Independence Day - Emmerich

As a financial planner that seeks to improve our services to clients, it seems sensible to me to read a report produced by the regulator about financial advice. As an Independent Financial Adviser (or IFA) I can take general comfort in the findings of their report, which broadly suggests that IFAs provide a better experience and understanding of financial products. 

11% of the people surveyed had a problem with some form of financial services organisation in the previous 12 months. These included being pressed to buy products, delays transferring money, refused service, insurance, customer service and how complaints were handled. The bulk of the problems were around customer service and how complaints were handled, but only represented about 6% of those people surveyed. Whilst we take our service to clients seriously, this is always an area that can be improved and I would welcome any constructive comments about how we might do this ourselves. According to the survey the overwhelming majority were also very or fairly confident that any complaint had been resolved fairly.

When asked who had been seen for financial advice in the last 12 months only 17% responded that they had sought advice, of these 47% of respondents sought advice from an IFA and 41% from a Bank or Building Society, with 12% seeking advice elsewhere. This is perhaps a little disturbing as it suggests that the majority of those surveyed did not seek any advice in the previous 12 months - even for a basic review. IFAs came out of top, but frankly not by that much, which is still rather disappointing, however the research also reveals that respondents had far more confidence in the advice provided by IFAs.

Having had a good look at the 54 page report, (Consumer Awareness of the FSA and Financial Regulation) I'm struck by several observations - firstly that the respondents do not not seem to be very financially literate and the majority have failed to grasp even a basic understanding of investment and risk. Therefore I would imagine it is probably quite plausible that so few (17%) had had any form of advice in the last 12 months and also not surprised that when they do, these people still turn to their banks, in whom they have relatively little confidence anyway. It may be a "bad sample" but equally this could be a fairly typical snapshot of adults in the UK in 2012. The concern therefore is why those that represent Independent Financial Advisers have failed so miserably to convince the majority of the population to regularly review their financial planning with IFAs, who provide a significantly better service and degree of confidence. It also seems to imply that the regulator would find more merit in ensuring that people received good advice and service from Banks.

The lack of understanding of the type of adviser and the reliability of the advice is also very alarming, particularly because from January 2013 advisers will fall into only one of two camps - restricted or independent, yet the qualification levels for both are the same and in the most recent survey it is estimated that something like 50% of Independent Financial Advisers will opt to become restricted within the next 3 years. Sadly I can only foresee more confusion and disappointing results. However, as a result of the report I'm going to be surveying our clients to see how they find the experience.