Many professional advisers will recognise that, regardless of specific events, most people outside of our profession are, for different reasons, vulnerable when dealing with complex financial matters.
The very nature of financial planning, when considering the potential impact it can have on a person’s current and future wellbeing, means that clients find themselves in a position of knowledge-based dependency, and with that comes a lot of responsibility for the adviser which we have a duty of care to recognise accordingly, writes Keith Richards, chief executive of the Personal Finance Society (PFS).
The events of 2020 have led to a startling increase in financial fraud according to figures released by the Financial Conduct Authority (FCA) in January.
The increase in fraud during the pandemic highlights an important issue: the public needs to be especially vigilant when making significant financial decisions under unusual circumstances.
When under these sorts of pressures, everyone should be ready to consider themselves to be potentially ‘vulnerable’ and take additional precautions by involving trusted advisers to offer balance and scrutiny before making financial decisions which may not be fully understood.
Trust in the industry
Despite the Bank of England’s bullish prediction of an economic bounce back, the true impact caused by the events of the pandemic are not yet fully realised, and so the public needs to be extra vigilant about making long-term financial commitments, especially when they do not yet have a full picture of their long-term needs.
Seeking extra guidance or professional advice is crucial and, increasingly so, this is being acknowledged by policymakers.
It is in circumstances such as these that clients can feel the benefit of a long-term financial adviser relationship, but as well as this, it must be a priority to build on the trust in the profession as a whole.
Trust is the single most important factor to determine our ability to best help society because public confidence has a direct impact on public engagement. Therefore, it is vital for the profession, if we are to improve the nation’s wealth and health, that we take action that will enable us to be seen as a trusted adviser, a safe pair of hands.
Support the vulnerable
Financial advice professionals have a lot of interaction with other professionals, such as solicitors and accountants, and it is important to collaborate across the entire personal finance landscape, and facilitate a consistent approach involving a clear understanding, and exemplary service delivery.
It is with this in mind that the PFS launched an independent Financial Vulnerability Taskforce. The aim of the taskforce is to support the profession to better recognise and address the various forms of vulnerability to improve client outcomes and increase access to financial advice.
Based on consumer feedback, the taskforce aims to promote greater understanding of clients in vulnerable circumstances and encourage appropriate behaviour through the sharing of good practice whilst also addressing the expectations of regulatory standards and the expectations of the public.
To attest to these commitments, financial advisers will be able to sign up to a charter comprised of nine core consumer guide pledges.
Financial advisers who sign-up to the charter will have access to subject matter experts plus a resource library from the PFS, which contains information about the latest scams targeting clients in vulnerable circumstances, the latest regulatory guidance and links to agencies that can assist clients at risk of abuse.
In facilitating collaboration in this way, we can also build upon the benefits of a united profession which agrees on the principles of good practice and high professional ethics.
Shift public perception
As a profession, the more united we are behind transparent and consistent standards, the more we will be trusted as that safe pair of hands for all clients.
The current regulatory focus on vulnerability provides a timely opportunity to change public perception through the way in which we consciously deal with those in vulnerable circumstances, and address perceptions of commercial conflicts of interest, whilst also addressing barriers to engaging advice.
Last year presented a lot of hurdles and, in general, the sector demonstrated the key role it plays and stepped up the that challenge.
The need for greater access to financial guidance and advice is back on the agenda as an essential strategy to combat the public’s increasing vulnerability to scams, and help the country return to a more comfortable position.
The events of 2020 actually present a good opportunity for the profession to show its ability to be proactive in helping to safeguard, support, and serve those in vulnerable circumstances, and in so doing, secure that image of financial advice professionals as the go-to resource when it comes to a person’s financial livelihood.
The confidence of the public is as important now that it has ever been, and committing to the Financial Vulnerability Charter is a great start to building a foundation of trust by displaying publicly those important pledges which, at their core, are pledges of competence, integrity, and care for the client.
This article was written for International Adviser by Keith Richards, chief executive of the Personal Finance Society.
