Sam Dunn: When in polite company, financial advisers are coy

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The Independent Online

Taking pride in your job is no bad thing. The alternative is to labour away every day without satisfaction, and that can be dispiriting even if the money's good.

Taking pride in your job is no bad thing. The alternative is to labour away every day without satisfaction, and that can be dispiriting even if the money's good.

Professional standing isn't everything, of course; I wouldn't be doing this otherwise.

Journalists, as countless polls love to remind us, are usually considered as little more than sewer rats in "respected job" tables - often just a notch above estate agents and politicians.

I've long believed this is a distortion of our true worth, but I would never pick a fight about our "contribution to society" with a nurse or teacher at the dinner table.

We hacks aren't the only ones to struggle against a low public perception of what we do, though.

The financial services industry has been tarnished by mis-selling scandals in recent years, ranging from endowment mortgages to split-capital investment trusts and high-income "precipice" bonds. These products were all flogged like fresh fruit on a trader's stall, only for punters to find on the way home that they were rotten inside.

The subsequent outrage and cries for compensation have left advisers in all parts of the financial services industry - mortgages, insurance, investments - carrying that baggage around with them.

I know at least three independent financial advisers (IFAs) who won't admit to their job when out socially. Having been at the sharp end of a verbal attack on her profession, one of these IFAs now has a stock response that she's "a consultant for a finance company", which is technically the truth but economical with it.

Her sleight of hand is a shame; there has never been a more urgent need for decent advice.

I suspect another reason for the reticence is that, once strangers' eyebrows have been raised and teeth sucked, she might then be asked where the best place is to put some money.

People may have lost money in the past but they will always want to know where to put it in the future. Yet where to turn to for the answer continues to elude the majority of consumers.

Just one in four of us are in control of our personal finances, according to IFAP, a marketing body for IFAs. This situation is reflected in a great chunk of correspondence from readers asking for help with financial planning. In many cases, they have yet to contact an IFA, choosing to come to us instead. This is usually down to lack of awareness but sometimes it's a question of trust or strong reservations about paying for advice.

Our unwillingness to spend money on advice is alarming and widespread. David Elms, head of IFAP, rightly argues that consumers don't value independent financial advice highly enough.

It is also a concern that has caught the attention of the Association of British Insurers. Last month, it launched a consultation - Financial Advice: How Should We Pay For It? - to find outwhat makes the consumer mind tick when looking for advice. It wants the public to add their voices (see News, page 23).

Paradoxically, independent advice's greatest asset is also one of its perceived liabilities. The freedom of IFAs to pick any product on the market comes with a catch: they'll be paid commission for doing so.

The price of this will vary between products and companies. As a result, while an adviser can search far and wide for the most suitable product, this benefit can be tainted by a sneaking suspicion on the part of the consumer that the recommendation will be coloured by the size of the pay cheque.

However, there will soon be an alternative way to pay for independent advice.

New rules coming into force on 1 June demand that an IFA offer you the choice of paying an upfront fee instead. This can be hourly - typically ranging from £120 to £220 - or a prearranged fixed fee based on an anticipated amount of work on your behalf.

In both cases, commission paid by the companies whose products are bought for you is simply reinvested.

Such fees might seem imposing, especially when you won't be seeing a return on your cash for a number of years. But at least they will remove any suspicion of partiality.

Other welcome changes taking effect from June include greater transparency: IFAs must tell you upfront about their specialist areas, their costs and - in the case of commission - how this compares with the industry average.

The changes will also mean that customers understand the difference between an IFA and the new "multi-tied" adviser, who offers only products from a limited range of companies.

This openness will hopefully encourage more people to come forward for advice. At its very best, professional financial guidance can turn modest savings into a valuable nest-egg.

Start by visiting two or three IFAs for an initial meeting. A good rule of thumb is to check how much you understand. If you come away feeling unsure or uncomfortable, it's probably not your fault but the adviser's.

s.dunn@independent.co.uk

Sam Dunn was last week named Personal Finance Journalist of the Year by the Wincott Foundation

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