Can financial planners win back the public’s trust?

In the wake of recent corporate scandals and the global financial crisis, Ray Griffin asks whether the label ‘financial planner’ has become a burden to the industry.

A few weeks ago my wife and I attended a friend’s 70th birthday party. We mingled with a hundred or so other guests at the celebration, which was held in the single class room of a small school in a tiny village.

In some respects the guests were a microcosm of Australian society, albeit a touch overrepresented by farmers and graziers and their spouses, who are all getting on in years.

At one point one of the other guests whom I had met previously questioned me about a segment I conduct for ABC Radio.

As a regular listener, she was most kind in her words about how much she looks forward to the segment, which is aimed at making sense of economic and investment events here and overseas.

She then said to me: “So, you’re an economist are you?” Right then, for a split second, I so wanted to be able to answer in the affirmative. As I began to utter an answer she joined me and “financial planner” emerged from both of us, simultaneously.

From that point on her enthusiasm for the conversation seemed to diminish and she quickly changed the subject.

While I’m sure almost every financial planner has at least one similar story to tell, and it would be easy to dismiss this as a sign of the turbulent times, it does raise a question about the strength — and the marketability — of those two words.

Branding and brand protection are vital aspects of any product or service and many businesses will at some stage have to deal with problems in these areas.

Indeed, the risk management plans of well-run businesses large and small should include policies and procedures on how to deal with events that could damage ‘the brand’.

The ‘how to’ sections of those plans will include steps and actions in the event, for example, of a chemical leak to the surrounding environment from a manufacturing plant.

Central to managing the post-event risk will be dealing with the media, which will greatly influence the public’s opinion of the business.

Managing the message is what it’s all about in such a situation.

Business-specific brand management and protection plans are one thing, however, such plans for a whole industry are impossible to fathom. If financial planning were a single business, a well thought out plan would have been dusted off in the early 1990s, when unlisted property trusts went into disarray and actions were taken to minimise a repeat of the brand damage.

The trouble is in the real world it’s not possible to protect the brand of financial planning unless there is an across-the-board commitment from all participants to simply do the right thing by clients. That would mean ‘walking the walk’ clients really do come first and not the interests of practitioners.

About this time 10 years ago during a long haul flight I penned the words of my inaugural speech as chair of the Financial Planning Association.

The one thing that can be said for long hauls is that they afford plenty of thinking time, and the thought resonated with me that the only asset any financial planner or planning business really has is the trust held in the planner by clients.

It’s a simple equation — an untrustworthy planner eventually equals a business in trouble regardless of how much funds under management it can boast.

The issue of trust became the central theme of my year as chair when speaking with members, and my otherwise naïve hope had been that it would resonate with most market participants and be but one step to building a trustworthy profession.

Ten years later and I struggle to recall any headlines that extolled the great job that most financial planners do for their clients.

Admittedly, good news is rarely the stuff of headlines, but the bottom line is that financial planners and planning seem to only ever get negative media coverage.

So, post the global financial crisis, post Westpoint, post Storm and amid the often questionable marketing tactics of industry superannuation funds, it really is worth asking how much more damage the label ‘financial planner’ can withstand in the public arena.

It would be quite easy to conclude that the words are beyond help in terms of broad community respect. Indeed, in my 20 years in the role there’s been plenty of negative coverage to reflect on, but most financial planning businesses have withstood the bad PR — the overwhelming majority have survived.

Up until the recent economic and market downturn, surveys of people who were already clients of financial planners attested to the value they placed on having someone in their life who cares for their financial wellbeing.

On that basis, it’s not unreasonable to say that several million Australians have lives that are financially more secure than they would otherwise be if not for having a financial planner in their lives.

However, the broad findings of a 2009 CoreData survey points to financial planners having lost 215,000 clients in the 12 months to April 1.

The worst markets for more than 70 years were always going to have an impact, however, what is not clear from such an outcome is the degree to which the departing clients blame the planner for their problems.

And what might alternatives titles be? Terms such as ‘portfolio managers’ and ‘investment advisers’ are distinct but by definition restrictive.

They do not encompass the more broad aspects of the daily work of a financial planner — strategy development, risk management advice, estate planning, cash flow management and liaison with accountants, lawyers, Centrelink, super funds and investment institutions.

None of the above examples adequately describes the multi-faceted work that a typical week for a financial planner involves.

So where to from here for ‘financial planner’ as a brand, per se? The brand has definitely been damaged, if only from the myopic concentration by the mainstream media on dramatic headlines — the catastrophic failures.

Note that any calls for the Financial Planning Association to further promote financial planning to the public at large are wishful thinking.

The association’s budget will never extend to the tens of millions of dollars that might be required to wage a marketing and public relations campaign to offset some of the brand damage.

Protecting the brand of financial planning comes down to a firm by firm basis underpinned by professional practice and the setting of realistic expectations for clients. The industry as a whole, as judged by the public opinion setting mainstream media, has failed.

That battle is largely lost, however, individual financial planners and business owners can and will impact on the perception of them by their clients.

Thousands of financial planners doing ‘the right thing’ across the country will quietly, collectively, protect their professional reputations.

Maybe, just maybe, there will come a time when all planners will not have even a moment of hesitation when stating their occupation, even in tough economic times.

Perhaps the barbeque conversation stopper will become a thing of the past. Perhaps, one day, the community will instinctively sense trust when these two words are spoken.

Before you go about your daily duties, ask yourself how it might feel to be giving evidence before a Senate Inquiry into the collapse of your business.

Individuals who protect their own name — protect their business reputation — will build strong, enduring, professional relationships with their clients. Really, nothing has changed — it still is all about trust.

Ray Griffin is a director of Capricorn Investment Partners.