Your IndustryNov 16 2015

FSCS tells advisers to build consumer trust

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FSCS tells advisers to build consumer trust

A growing trust gap between consumers and financial services has seen independent financial advisers given only a ‘trust score’ of 57 out of 100, according to a new report from the Financial Services Compensation Scheme.

Researchers from the Warwick Business School surveyed 2,591 respondents in September using a nationally-representative random sample.

Respondents were shown a list of industries and organisations and were asked to rate how highly they trusted each one.

IFAs did beat banks (trust score of 51) and insurance companies (49), while the media (44) and political parties (37) also ranked poorly in terms of trust.

Up at the top of the trust list was the Citizens Advice Bureau (77), followed by the FSCS (67) and the Bank of England (64).

Trust in financial services is low more generally though, with the report noting that globally it is the second least trusted industry and only 36 per cent of UK consumers state they have trust in financial services firms.

The research suggested that low trust is primarily a reputational issue. Consumers believe firms are capable of acting in consumers’ interests but choose instead to act in their own interests.

Crucially, trust that consumers will be compensated for losses they incur as a result of poor financial advice is considerably lower than trust that the money in their accounts is safe and secure.

This is something which the FSCS said it will need to work with the industry to address.

• Dealing with a poor reputation with regards to fair pay and not excessively rewarding senior staff;

• Acting transparently in customers’ best interests by offering the same deals to both new and long-term customers;

• Telling customers when they would be better off with another product; and importantly;

• Providing more information to consumers about the FSCS which helps to instill trust in people.

Mark Neale, chief executive of the FSCS, commented: “One finding we heard loud and clear is that raising awareness of FSCS protection among consumers is a key to restoring trust.”

Professor Nick Chater, who carried out the research, said that the UK financial services sector has a reputation for high levels of competence.

“If the public can be justifiably convinced that the energies of the industry are being channelled into serving the best interests of customers, rather than the immediate goals of the firms themselves, then there is a real opportunity for dramatic improvements in the trust of the sector.”

peter.walker@ft.com