by Tony Vidler
Choosing a good financial adviser has always been a bit of a leap of faith for consumers I guess, but picking one today is harder than ever. With the tendency to use search to screen possible contenders, and with most contenders having to use the same acronyms and titles and so on, it is difficult to separate them….the end result being that most consumers cannot tell a good adviser from a bad one until they have experienced working with the financial adviser for some time.
As individual advisers there is the ongoing challenge of differentiating ourselves to begin with, however we also need to consider as an industry how we portray ourselves to members of the public.
Lifting technical education, and adviser qualifications, and enshrining certain terminology in law, or lifting the conduct standards are all excellent and necessary steps on the path to professionalism and the creation of widespread consumer confidence. Self-imposed improvements in education, ethics and the safeguarding the reputation of a professional reputations must continue, if not accelerate. These are all excellent levellers that go towards minimising the risk of consumers getting a bad adviser, and thus creating confidence that working with ANY financial adviser is a good thing.
However; asserting that good v bad advice can be defined by how good someone was at exams is simplistic and dumb. Even more simplistic and dumb is asserting that good v bad advisers can be defined by their ability to sign a behavioural pledge which they may or may not honour.
One aspect that the industry continually shoots itself in the foot over is this: Educating the public on what a good adviser actually is.
The onus is upon the industry itself to help consumers get a better understanding if we want them to engage more readily with financial advice.
Most articles you google will tell you that a good adviser is someone who miraculously negates all potential conflicts of interest and divorcees themselves entirely from bias. The reason for this is WE are spending all this time debating it. Relatively few consumers are.
(sidebar: Does that human who can be totally conflict and bias free actually exist?)
The trending definition of the moment globally is that the “good adviser” is one who operates to a supposed fiduciary standard which eliminates all possibility of bias or confict. It is a ludicrous aspiration in my view, because no matter the remuneration model there will continue to be human beings or poor moral character who look to take advantage of the unsuspecting. Equally, there are many many mkore who will do the right thing for the clients they serve regardless of the remuneration model. So while remuneration models may have a part to play in minimising risks to consumers, they are not in themselves the answer.
As an industry we are spending too much effort debating whether one is a good adviser simply because of their remuneration method. Sure we talk about technical competency, and professional designations and duty of care obligations too…but too much public discouse reverts to the mean: good = fee-based; commission = bad. We spend an inordinate amount of time arguing our philosophical differences publicly, further undermining the effort to create confidence amongst consumers.
Allowing good v bad to be defined by remuneration models is simplistic and dumb.
At the same time there are various attempts to claim legitimacy (or even superiority) by claiming titles and taglines. One of the most recent in this part of the world involves claiming the word “trusted” as a quality mark to help consumers separate good financial advisers from bad financial advisers. I’ll refrain from commenting upon the qualification criteria for the use of this which has been mooted, and instead focus upon the core issue:
Trust cannot be claimed in advance from a consumer. It is granted by the consumer when it is earned by the adviser. It comes after engagement. Trust accrues from the interaction therefore, which is a result of the consumer having engaged the adviser in the first place.
The industry cannot successfully assert that any adviser showing a particular logo on their business card is automatically a good person worthy of trust. Claiming that good v bad is defined by a character attribute we granted ourselves is simplistic and dumb.
It is absolutely true that all of these simplistic measures collectively increase the probability that a financial adviser is of good character, and will do good work. However they do not guarantee it….they are not and can not be absolute measures which provide assurance for consumers.
The only measure that matters I suspect when it comes to helping consumers pick the good from the bad is the experience of other consumers. We now operate in an environment where peer recommendations virtually trump all other research and quality measures in the consumers mind.
So the new paradigm for us to consider is this: While trust can not be claimed, it can be transferrred by one consumer to another.
All the rules, business models, qualifications and courses matter….but the key derminant in whether a consumer is likely to get good advice is more likely to be assessed by them on the basis of whether other consumers have received good advice previously from that person or business. If this is correct then it follows that for us to create greater confidence in the advice industry we need to be sharing the good consumer experiences and stories. We need to show consumers what good advice has helped to achieve…we need to show them how it changed other consumers positions and choices….we need to tell more good stories about the good outcomes created…we need more case studies….we need more good (truthful) headlines and stories.
We need to show them not that we are good, but that we have a demonstrable history of delivering good outcomes.
If the industry at large cannot grasp this and utilise it, then perhaps it is an opportunity for individual practices to build a point of differentiation around?
Perhaps the opportunity is for your practice to understand how consumers are trying to differentiate the good from the bad and make sure you tap into that while everyone else is debating their various fiduciary philosophies and trying to create new titles and logo’s.
Understand the challenge that your future prospective clients have in trying to figure out who to use and address their concerns in a way that makes sense to them and I believe you will get a lot more of them beating a path to your practice door.