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Ethics matters

Panacea Comment for Financial Advisers and Paraplanners

4 Mar 2019

Ethics matters

”Real integrity is doing the right thing, knowing that nobody's going to know whether you did it or not.” – Oprah Winfrey

Financial advisers are fiercely proud of what they do and since RDR, most are 100% fee-based businesses. All are professional and most aspire to be treated as a profession. 

I have not been an IFA for over 14 years, as many of you will know, but I have always been fascinated with how firms present themselves and their proposition to their clients and prospective clients. And how that proposition can appear to competitors

In the digital world, the constraints of print medium are no longer there. Now, more than ever, it is vital to ensure that the consumer has a full appreciation of the value of advice and the service you offer, this in turn creates a trust in the industry.

In my day to ‘big up’ your business by criticising you competitors was known as ‘knocking copy’. It was considered a no-go, not just with the ASA, FCA and FSA but also your fellow advisers. No-one should undermine another’s business’s model based on poor research or plain false assumptions just to promote your own. 

It still should be. 

So, when a community member passed this ‘about us’ content from a firm promoting its services, in particular some introductory statements on the firm’s website that noted their “Difference”compared to other firms, I thought I would ask you….

Is this the professional way to go about things? 

Firstly, they extoll:

Focus: Unfortunately, most ‘advisers’ just sell products; this is true whether they are IFA’s, Wealth Managers or Private Bankers. Our service focus is on planning, not products.  It is designed to help clients identify, achieve and maintain their desired lifestyle, whatever happens. We use traditional fund management and insurance companies as little as possible!

and then:

Continuity: “A typical private banker or wealth manager will have more than 100 ‘relationships’ to handle and the average adviser also moves jobs every 6 years.  We have just 65 retained clients and plan to cap the number at around 80. With two advisers this gives us the lowest adviser to client ratio in the business. You may also be assured that we won’t be leaving for other jobs and many clients have been with us over 20 years. 

They go on to say “Almost uniquely, we are both Lifestyle Financial Planners and investment advisers. Most top financial planning firms outsource their investment management which results in extra costs”.

I cannot comment on the service by the firm or indeed name the firm. My area of concern is around the sweeping, uncorroborated statements above. 

You can promote your business far better by being very positive about your own firm without resorting to ‘knocking’ your competitors in such a blatant way. It looks unprofessional and almost certainly counterproductive. In other professions such copy could be grounds for a disciplinary hearing.

Suggesting you are the only honest fish in a sea of sharks does not give consumers confidence to join you in the water. We already have the regulator, ambulance chasers and the media talking advice down – we do not need to do it to each other.

Comparative advertising is a great way to make your IFA firm stand out in the crowd But it can be an area that generates complaints, both from competitors and consumers and can fall foul of the Advertising Standards Authority too.

Here are some helpful tips around what you can say, should say, cannot say.

What are you claiming, is this just fantasy?

Think carefully about the claim you want to make and how it will be understood by consumers. When making an objective claim, like those above, you should hold documentary evidence to support it before making the statement. Your website and statements on it are, after all, an advert for your business and they should be true

“Most top financial planning firms outsource their investment management which results in extra costs”. 

On what basis is this deemed to be factually correct?

Who are you comparing with?

If your marketing statements refer to an identifiable competitor, in the case above think other IFAs nearby, then specific rules apply. This applies to marketing activity which in any way, either explicitly or by implication, identifies a competitor or a service offered by a competitor – so not just where you name a competitor. 

“The average adviser also moves jobs every 6 years”. 

Is this based on reliable research evidence? Here you would expect to find an asterisk and footnote stating where this fact derives from.

Apples v Pears. Are you comparing services meeting the same need or intended for the same purpose?

Comparisons with identifiable competitors must compare services meeting the same need or intended for the same purpose. You still need to ensure the basis for the claim is made clear and that the statement isn’t likely to mislead.

“With two advisers this gives us the lowest adviser to client ratio in the business”.Is this a fair, relevant or supported assertion? Additionally, how do they know?

Is the comparison verifiable?

Comparisons with IFA competitors must objectively compare one or more material, relevant, verifiable and representative features of yours versus theirs. If checking that information requires special knowledge most consumers are unlikely to have, your website readers should be able to get a knowledgeable and independent person or organisation to verify the comparison on your site.

In the areas mentioned above you should ensure the website statement clearly shows how the comparison can be verified. “Most ‘advisers’ just sell products”, how can you verify?

I spoke with Garry Heath who has recently released the Heath Report 3. He noted that many of the assertions above required information which few have. For instance:

  • The Heath Report shows that IFAs on average have 160 clients in 2018. But in the 250+ responses there were some with just 10 clients. So, the firm is not “the lowest in the business”
  • It also shows that advisers have shed over 11m clients in the last decade – Advisers now have more potential clients than they can handle. Knocking copy is simply not necessary.
  • If advisers moved around every six years it would demand that 5,000 advisers are in flow in any year. FCA figures show they aren’t!
  • In the current market advisers do not sell products and to truly avoid using established fund management would require an extraordinary amount of expensive research.

The FCA has some useful information around advertising, from my business experience there are many out there who will say and do anything at the expense of others.

Thanks to the ASA for some really useful research. Year on year, roughly 70% of the complaints the Advertising Standards Authority(ASA) receives relate to misleading advertising, proving that this is an issue that consumers take seriously and that all marketers should be mindful of.

Here are their top tips to help you avoid the most common mistakes.

Be careful out there!

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