When consumers trust a brand, they are more likely to be loyal, repeat customers. This is as true for financial advice firms as it is for any other business. In fact, according to a study of major global brands like Wells Fargo, Volkswagen, Uber, and Facebook by The Economist, a company can lose an average of 30% of its value when it loses consumer trust.
So, if trust is fundamental to building strong long-term relationships with clients, it is important to understand the factors that might influence a person’s belief in you and the advice you give. To help you gain an understanding of consumer faith in financial advisers, we reviewed data from the UK’s largest tracking survey of financial behaviour, perceptions, and experience of the UK financial services industry.
The Financial Lives survey (FLS)
Every two to three years, the Financial Conduct Authority (FCA) carries out a massive survey of UK consumers. The Financial Lives survey is intended to provide nationally representative data about consumer attitudes to things like managing their money, experiences of dealing with financial services firms, and the financial products they have.
This year, the FCA have published the third instalment of the FLS report. The data comes largely from the regular survey carried out in March 2022, supplemented with answers from a shorter survey conducted in January 2023 which looked at the impacts of the rising cost of living on people living in the UK.
Among the masses of valuable information to be gleaned from this year’s report are key insights into levels of consumer trust in the financial services industry. What makes this even more interesting is the comparisons gained by comparing results from the previous two surveys carried out in 2020 and 2017.
What are the key takeaways for financial advisers?
At a sector level, the FLS report shows that trust in the wider industry has grown a little but still remains low. Just 11% of adults surveyed in 2022 strongly agreed that they had confidence in the UK financial services industry. That’s one in nine people.
If you include those who answered ‘strongly agree’ and ‘slightly agree’, the figure is still less than half with only 41% of adults saying they have confidence in the UK financial services industry. Moreover, just 36% of those surveyed agreed that most financial firms are honest and transparent in the way they treat them.
“People with particularly low levels of trust and confidence are at a higher risk of failing to address their own financial needs.”
This is problematic for many reasons, not least because people with particularly low levels of trust and confidence are less likely to engage with financial services firms and at a higher risk of failing to address their own financial needs. While this all sounds rather bleak it is interesting to note that figures are significantly improved when respondents were asked about levels of trust in their own providers.
When consumers were asked to rate their own providers, they showed far higher levels of trust than they had in the UK finance sector in general. For example, of the respondents who had received financial advice (known as ‘advised adults’ in the survey results), 58% had high levels of trust in their adviser, and 51% were highly satisfied with them.
What makes financial advice clients trust their advisers?
In 2022, just over half of advised adults (53%) were highly confident in the advice they were given. A further 32% were moderately confident in the advice received. Of those same respondents, 57% highly agreed that the advice they received was clear and understandable. These results are slightly down on those given in 2020, but still show that there is a clear correlation between clarity in communication from advisers and trust in their advice.
That’s not the only factor though. Advised adults were asked about the reasons for trust levels in advisers/firms. 62% cited the fact that the adviser is regulated by the FCA, making this the most common reason by far. The next highest influence was their adviser’s brand or reputation (41% of advised adults said this), followed by the adviser’s professional credentials or qualifications (34% cited this factor).
Are referrals important for financial advice clients?
Referrals are a fantastic way to gain new business for your advice firm. A massive 38% of advised adults with high levels of trust in their advisers said that the adviser having been recommended by a friend or relative contributed to their confidence in them. This number is simply too big to ignore.
If your firm doesn’t have a referral scheme in place, you should seriously consider this as part of your lead generation strategy for next year!
The FCA’s Financial Lives 2022 key findings were published in July 2023. The report includes insightful data in areas like consumer vulnerability, financial resilience, the cost of living, access and exclusion, fraud, and scams as well as product holdings, assets, and debts. Check it out!
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