Advisers lose out in client trust ratings

This article is part of
Outlook for 2016: What’s in store?

For years advisers have been the most trusted figures in the financial services sector. But now they are not.

There is little merit in attempting to soften the blow when the potential implications are so serious. The inescapable fact is that advisers are losing the trust of consumers, the very people whose interests they should have at heart.

This message comes courtesy of consumers themselves, via the data gathered for Nottingham University Business School’s Trust and Fairness Index. At least once a year since 2009 we have produced the index to gauge client perceptions of trustworthiness and fairness, and on each occasion advisers and brokers have earned by far the highest scores – until now.

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The index divides providers into seven categories – advisers/brokers, banks, building societies, general insurers, life insurers, investment companies and credit card firms – and awards each a score based on responses obtained from online surveys.

Each section receives an index score of between -100 and 100, with scores below zero indicating a perceived lack of trustworthiness/fairness and scores above zero indicating increasing trustworthiness/fairness.

In early 2010 the score for survey respondents’ perceptions of their own advisers and brokers was comfortably above 25. By stark contrast, all other providers scored negatively. With the financial crisis still raging and the industry in general on the back foot, it appeared consumers valued the personal touch that advisers have traditionally provided.

Fast-forward to the present day and we find a quite different picture. A lead that once looked unassailable has been not only dramatically narrowed, but completely eroded. Building societies are now top of the pile. The broker/adviser category is unique in plotting a downward trajectory, with its score plummeting to an all-time low of 11.

Does this mean that building societies, insurers and credit card companies have recently hit upon some sort of magical, trust-engendering formula of which advisers remain blissfully unaware?

The incremental nature of their gains would suggest not. It is more likely the answer lies not in what others are doing right, but in what advisers are doing wrong.

How this downfall has come about in such a comparatively short time is bound to be a matter of pure speculation, at least in the absence of further research. But it is perhaps worth noting that the slide can be traced back roughly three years – a period that neatly coincides with the existence of the RDR.

We first remarked in 2013 that the RDR might be having a negative impact on consumer perceptions, with more explicit charging encouraging clients to re-evaluate service. We posited that in some cases greater clarity might bring about a spell of retrospective resentment, and expressed the hope that this would prove short-lived.

The optimism of the latter sentiment is becoming ever clearer. It may well be that our data offers a reflection of more and more clients viewing their adviser relationships through the prism of RDR and reaching less-than-favourable conclusions. In the academic world the decline of the past six months would be deemed significant; in the real world it might reasonably be described as dramatic, if not downright alarming.