As our nation continues its path to economic recovery, consumer confidence is a critical component in providing stability to our financial system. It is the primary ingredient in our success and is, without question, a financial services provider’s greatest asset.
It is also a concept that is a driving force for the members of the Financial Planning Association (FPA) as they are committed to following our Standard of Care which attests to their adherence of fiduciary principles. This extends to many of our corporate and institutional members who have reached out to us to pledge their support of our Standard of Care while applauding our efforts to elevate this matter and continue our role as the leading voice for the fiduciary standard. FPA also recognizes the Certified Financial Planner designation as the standard for financial planning and it, too, binds its recipients by a fiduciary code of conduct, adding yet another component which serves to reassure consumers.
However, FPA’s work in this area won’t single-handedly restore consumer trust. It won’t return to any meaningful level until our profession takes the steps necessary to demonstrate to the public that we deserve their trust. The publicity surrounding Bernie Madoff and other schemers made consumers increasingly wary of putting their trust in financial professionals.
The meltdown of 2008 had consumers asking why their advisors did not do a better job in keeping them out of trouble. Many now feel that the markets are nothing more than gambling—or that they are stacked in favor of only the very wealthy. In short, people are fed up. They are afraid to invest and it is up to us to address those fears. One way we can do that is to get back to basics: old fashioned financial planning. If ever there was a time that the consumer was asking for someone to sit down and listen to their worries, concerns, ambitions and goals, it is now. That starts with the financial planning process. People’s fears diminish when they start to feel like they are gaining control of their situation; financial planning does that for them. We need to be doing a lot more of that, and if we do, the public (and the press) will respond positively.
Another necessary step is to make it absolutely clear to consumers that we will always place their interests ahead of our own. Legislators and regulators cannot continue to kick the can down the road in terms of embracing new rules like designating all those that provide financial services as fiduciaries. This is essential if we wish to regain the consumer’s comfort level with respect to our services. It’s simply absurd for industry lobbyists and organizations to assail potential regulations that will, in fact, be good for business because they will increase confidence, transparency and accountability.
Today, the sobering news is that surveys indicate that the public does not know who is a fiduciary and who isn’t. There’s an easy fix: make everyone a fiduciary and level the playing field. Don’t force consumers to figure this out on their own because often it’s too late. Make it simple for them to understand and they will respond with increased trust, confidence and business.
This isn’t hard, but it requires courage and a willingness to embrace change. Like I said, consumer confidence is critical.