Can a leopard really change its spots?
When it comes to the banks providing financial advice to their customers, the answer is something we are all going to find out in the next few years.
Banks have had a catastrophic period that has seen them pilloried by the regulators and the public for providing what was termed "poor financial advice". In reality, it was the banks’ corporate strategies of increasing profits without regard for the interests of their clients that were at fault.
A culture existed within the banks that put profits for shareholders and bonuses for staff far above the interests of customers. It ended in tears as the regulators eventually called a halt by imposing substantial penalties and, in essence, forcing the banks to withdraw from the provision of financial advice.
When it comes to corporate memories, however, it seems that such events soon fade into the mists of time. What we see today is that most of the big banks are actively exploring ways of getting back into what they rightly deem to be a business opportunity.
In doing so, it appears they are responding to encouragement from the Treasury and regulators who, no doubt concerned by the post RDR shortage of financial advisers and the continuing savings and protection gaps, recognise the public’s need for advice.
This is further reinforced by surveys such as the recent one from ILC-UK, which so clearly demonstrated the benefits to consumers of financial advice. This detailed and comprehensive report, which has won praise from Jeff Prestridge and Nic Cicutti, showed that even as little as 10 years of financial advice could make an individual about £40,000 better off compared with a person who did not have advice.
The big question for everyone is: “Can we trust the banks to deliver advice?” Will the leopard really have changed its spots? I believe the jury is still out and it will probably be at least five years before we can start to make meaningful judgments. A further question for financial advisers in particular is: “Should we be concerned at the re-entry of the banks into the financial advice marketplace?"
In my view, absolutely not, as the banks will never be able to emulate the quality of service, advice and care of financial advisers.
Ken Davy is chairman of SimplyBiz