Nick Bamford: Trust issues

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Jan 09, 2020

Trust is a small word but one with big ramifications. It is debated quite frequently in the financial services world, generally in the context of whether or not consumers trust the financial planning profession. The classic retort is: “of course our clients trust us, after all they wouldn’t be our clients if they didn’t”.

There is undoubtedly some truth in that statement. Generally, clients who have had a positive experience of working with a financial planner, often over many years if not decades, express the greatest degree of trust in their adviser.

Those with little or no experience of a professional relationship with a financial planner are more likely to be seduced by the negative stories that appear from time-to-time in the media. Recently I sat with the neighbour of a long-standing client and our conversation wandered to the subject of how longevity might be a positive virtue in the trust stakes.

Like many readers we are very conscious that any advice we deliver to our clients is going to be tested over long periods of time. None of us wants to be embarrassed at a client review meeting when we discover that our advice from two decades earlier turns out to be faulty. Certainly, nobody wants to involve clients in the kind of investment scandals that have too frequently blighted the profession. Knowing that we are going to be there with our clients in the future imposes on us an important discipline around suitability of advice.

Trust though is a two-way street. We trust that our clients answer our questions honestly and fully disclose everything of importance that we ask them about. Some considerable skill is needed on the part of the financial planner to ask the right questions and listen to the answers, and indeed to probe where there are elements of uncertainty.

How much trust though do financial planners have in the product and service providers that they use? It would be interesting to see how advisers feel about the way they are treated.

Take the platform provider who for the past month has prevented us from producing review reports for our clients by disabling the link to our back office system. Last month it worked fine but this month it stopped working. Multiple requests to sort it out have been met with the usual platitudes rather than any real action.

Or how about the product provider who claims not to have received an email from us instructing a client investment rebalance, even though the Standard Mail Transfer Protocol confirms that they did? How will we be able to trust what they tell us ever again?

I like the quote “I’m not upset that you lied to me, I’m upset that from now on I can’t believe you”.

How much trust does the financial planning profession have in the regulatory world in which it operates? Have the FCA, FOS etc earned our trust and demonstrated that they are trustworthy?

Trust takes a long-time to build and a very short time to destroy. It is though, what we do that matters as much as what we say. My view though is that trust is more of a doing thing than a saying thing. Trust and integrity are close allies and they need to be genuine. And while I think funny, we need to avoid the saying attributed sometimes to Groucho Marx, “success in business is based on trust and integrity, if I can fake those I have got it made.”

Nick Bamford is executive director at Informed Choice

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