Visibility key to boosting confidence in advisers, says PAA
With the Financial Advisers Act 2008 under review, a consumer survey for the Ministry for Business, Innovation and Employment found that public confidence in the professionalism and integrity of financial advisers needs to be raised.
Independent board member of the Professional Advisers Association (PAA) Angus Dale-Jones told NZ Adviser that public confidence in financial advisers is low because the benefits of financial advice are unclear in the public mind.
“I think the real problem isn’t a lack of confidence because of lack of wrong doing,” he says. “I think the real confidence issue that New Zealand and to a large extent Australia have with financial advisers is visibility.”
Dale-Jones says the low confidence levels have less to do with a negative perception of advisers through publicised cases when things go wrong and more to do with their visibility and consumers’ understanding of what financial advisers can do for them.
“If you analyse the period of the last three or four years while this legislation has been in place, who has actually lost money from financial advisers? There are not too many examples that spring to mind of financial advisers causing loss.”
Especially in the current digital era, he says it’s easy for the consumer to think they can find everything via the internet and cut the financial advisers out of the equation altogether.
“But the problem with that is your financial health is as risky as your physical health and we would never contemplate going and prescribing our own medications. It’s changing the visibility of advisers so people feel the same way about having a conversation with an adviser. You need a trusted professional there to help you ask the right questions and to help you look for the right things, just as in medicine.”
He told NZ Adviser the building of a life-long relationship with the client is what sets advice from a real person apart from finding advice online but is particularly crucial for mortgage advisers as they are often responsible for a client’s first impression of the profession.
“What is important for mortgage advisers is they are often at the start of the relationship with consumers - long before an average consumer needs investment advice or even insurance advice, they are thinking about their house and getting a mortgage. What the mortgage adviser does in terms of their professionalism and the impression they give to their client will influence the client’s view of advisers for the rest of the client’s life.”
Although lack of government funded advertising has been suggested as a cause of low confidence in consumers, Dale-Jones says it is only part of the solution and real change in turning consumer outlook around will come from the profession itself and a unified one.
“This is a profession that really needs to speak with one voice. This is about positioning financial advisers in the eyes of the consumer and understanding that consumers have a lifecycle relationship with advisers - you can’t do that in a divided sense.”
He says the three main areas that will help transform public opinion on advisers are improving the public’s financial understanding and the positive benefits of financial services; consumer advocacy throughout the entire client lifecycle rather than just dispute resolutions; and an openness around commissions.
“In life when we deal with anybody - if we think the other person is conflicted in some way it reduces trust, it reduces the level to which we will go in engaging that person to help us,” Dale-Jones says.
“We as a profession have to bring the conflicts around remuneration to the surface and find ways of being much more upfront and open about that if we really want to grow the visibility of financial advice and advisers.
“The success of the Review will be not in avoiding losses to consumers because I don’t think that’s the fundamental problem. The success in the Review will be more people who are confident and able to use financial advisers - and the visibility of advisers and advice I think has to be a key aim.”