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Financial advisers lose most trusted standing

Advisers and brokers have lost their longstanding status as the most trusted providers in financial services, new research has revealed.

A study by Nottingham University Business School suggests public faith in the industry as a whole is gradually rising from post-crisis levels.

But consumer perceptions of the trustworthiness and fairness of advisers and brokers have deteriorated “significantly” in recent months.

Retail Distribution Review to blame

Researchers believe the Retail Distribution Review, which came into effect three years ago, could be to blame for the dramatic fall.

Building societies now rank as the most trusted financial services providers in the UK, while banks retain their position as the least trusted.

The findings are contained in the latest Trust and Fairness Index, produced by the School’s Centre for Risk, Banking and Financial Services.

The research divides providers into categories and awards each a score based on data from a sample survey of over a thousand consumers.

Until the latest round of data collection the adviser/broker category had easily topped the standings ever since surveys began in 2009.

Wake-up call for advisers

Professor James Devlin, CRBFS’s director, said: “We need more research to fully understand what has happened, but it may well be RDR-related.

“The adviser/broker category’s lead first began narrowing a couple of years ago, and we speculated then that the RDR could be a factor.

“What we know for certain is that during the past three years clients have been re-evaluating service quality in light of more explicit charging.

“We also know that some haven’t reached particularly favourable conclusions about the service they receive relative to what they pay.

“It could well be that our data are now reflecting resentment among a growing number of clients – and that represents a wake-up call for advisers.”

Index scores below zero indicate a perceived lack of trustworthiness, while scores above zero indicate increasing trustworthiness. In early 2010 the score for survey respondents’ perceptions of their own advisers and brokers was comfortably above the +25 mark. All other providers – banks, building societies, general insurers, life insurers, investment companies and credit card companies – scored negatively.

Now the broker/adviser category has plunged to around +11, with building societies on +19 and every other provider on an upward trajectory.

Professor Devlin, a Professor of Financial Decision-Making, said: “In the past the lead enjoyed by brokers and advisers looked almost unassailable.

“Now it’s a case not just of building societies taking top spot but of every other provider narrowing the gap. The fall has been quite spectacular. It will be interesting to see whether the downward trend continues and whether brokers and advisers find ways to halt and reverse it.

“We know from related research that some advisers have taken trust to a completely different level, and this is to be commended. But others have been content simply to sit atop a pretty unimpressive pile in which the majority of providers even now earn negative scores.

“Across the whole spectrum of providers there still seems to be an unhealthy reliance on edicts from above and customer indifference.

“As advisers and brokers are perhaps now finding out, these are assumptions that can prove dangerously misguided over the longer term.”

The Centre for Risk, Banking and Financial Services (CRBFS)

The Centre for Risk, Banking and Financial Services is a research centre based at Nottingham University Business School. Its aim is to produce world-leading research, insight and commentary focused on financial services consumers, markets and institutions.

Professor James Devlin

James Devlin is a Professor of Financial Decision-Making at Nottingham University Business School and Director of the Centre for Risk, Banking and Financial Services. His research interests include marketing and strategy, consumer behaviour, distribution, brand issues, policy issues and marketing and public policy issues in financial services.

An article about this research was first published in FT Adviser on January 11 2016.

Posted on Wednesday 13th January 2016

 

 

 

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