Advisers have an important role to play in supporting individuals to make the right financial decisions. Charles Relecom, chief executive officer of Swiss Life France, explains what good advice is.
The 2008 financial crisis didn’t just erode global economies—it caused a loss of confidence as well. People are now more critical of financial services providers.
Over the last eight years financial regulators have been working to repair as much as possible the loss of confidence brought by various institutions and ensure that the mistakes of the past are not repeated. As a result, many new provisions have been drawn up and company regulations tightened to improve transparency and consumer protection.
At the same time, savers and investors have had to rebuild their trust in the financial sector following the financial crisis. This was complicated further by the post-crisis market environment staying unpredictable and difficult. Moreover, tax and legal environments are now more complex than ever before.
That is why financial advice has never been so important for individuals who want to take control of their financial affairs.
Finding a reliable adviser
Customers want impartial advice. However, if advisers receive commission for certain products, that can go against the customer’s wish for impartiality. Against this backdrop, legislation in the UK known as the Retail Distribution Review (RDR) abolished commission payments between provider and adviser at the end of 2012. It is entirely possible that the rest of Europe will follow the British lead. The EU is updating the Markets in Financial Instruments Directive (MiFID II), which oversees the conduct of financial services companies and proposes greater fee transparency to protect investors.
In the meantime, advisers must focus on the relationship they have with their clients and prioritise building trust over selling products. It often takes a year or more to build a level of trust that can be lost within seconds by one monetary lapse in judgment.
Good advisers know their clients and their family relationships, job and long-term goals. Only then can they develop solutions to meet their clients’ objectives.
Only with this knowledge can the adviser accurately assess the level of risk individuals are willing to take. Market volatility, along with a lack of trust in the long-term future of the markets, has caused some investors to have less risk tolerance. But in the face of persistent low interest rates, investors may also need to have the confidence to venture into growth assets that carry higher levels of risk. That is where an adviser with specialist knowledge should be able to help.
The growing online option
Of course, the Internet is also gaining ground as a possible source of financial support. However, websites cannot yet offer sophisticated, tailored solutions due to current rules and regulations. To fill this gap, a growing number of financial institutions are investing in robo-advice, or advanced digital advice services that can help individuals plan their finances and test different scenarios. The use of such technology will allow individuals to monitor their savings and take control of decision-making at the touch of a button.
Robo-advice or advanced digital advice services definitely have potential for the future. However, they will never offer the same support as an adviser who is familiar with the many nuances of life.
Even if digital opportunities are on the rise, the role of the financial adviser is more important than ever. While they may not carry the same social gravitas as a doctor or even a lawyer, the right one will have your best interests at heart—and are worth their weight in gold.
Charles Relecom is chief executive officer of Swiss Life France
Mr Relecom graduated from the University of Namur in Belgium with a degree in mathematics and subsequently gained a master’s degree in actuarial science from Belgium’s University of Louvain. Mr Relecom began his career with Swiss Life in 1978, when he was appointed Chief Actuary and Chief Technology Officer in Belgium. He held various posts across Swiss Life in Switzerland and Belgium until 2008, when he assumed his current role as CEO, based in Paris.