The recent referendum on whether the UK should leave the EU definitely brought up an old debate of whether we can really live in a world where expert opinion is seen only as valid as all other opinions.
It wasn’t just the politicians, but the Bank of England, the International Monetary fund and the Institute for Fiscal Studies felt the wrath of critics following various warnings, opinions and forecasts in the lead up and aftermath of the vote.
Clearly serious mistakes were made. The UK Treasury strained its own credibility when it decided to project potential Brexit losses due to lower growth until 2030. Critics were correct to question such a long-term projection. They also queried whether it was appropriate to divide a potential loss of GDP among each UK households. It was certainly a very unconventional way of calculating things for the sake of creating a hard-hitting headline figure.
But it isn’t just economists that need to pay heed to the lessons of the vote. Many big City institutions raised concerns about Brexit both at a corporate level and in various analysts’ reports, though some fund managers were less worried.
There are still a lot of arguments to be had about Britain’s trading status, access to the single market (perhaps) and any new approach to immigration. So the heat may not be about to go out of the issue.
Looking at all of this selfishly, as an adviser who aims to communicate with clients on as honest and indeed frank basis as possible, it certainly presents a dilemma.
As we have seen, expertise has been called into question on many occasions in the last few months. Yet those financial planners who want to engage with clients and the wider community need to consider their approach carefully.
I think it can be dealt with and here are five steps advisers can take to help rebuild trust in UK institutions:
- Advisers owe it to their clients to identify what they think are the trusted sources of information. If you believe an institution is principled, is serious about its duties and speaks the truth as far as it sees it, then we should always set great store by its statements and tell clients as much. It doesn’t mean everything it says will be correct. We might have been cynical about how forward guidance worked out, but we clearly need its insight now
- Advisers’ priority is communicating with their own clients but some may feel there is a wider duty to the broader community whether locally or nationally to explain things. We should spread the message about the basics of good money habits and basic planning. But perhaps we need to check ourselves a little. Does everyone really understand what a forecast is? As for risk on and risk off. Part of our role may be to translate such terms into everyday understandable language.
- Advisers have to explain the motives of some organisations. So for example, a pension company with a large annuity book may not want the hassle of the second hand annuity market reforms. It may also genuinely fear that people could sell on annuities to their own serious financial detriment. Having an interest doesn’t always mean a company is biased. Maybe advisers have to help explain this too.
- We may need to say that fund managers tend to talk their own books ‘selling’ their own ideas. It may be a case of highlighting the fact that they will already have invested according to their market view. They put their mouth where their money is. There is nothing inherently wrong with this but perhaps it is not widely understood.
- Experts are clearly not always right and indeed experts can disagree with each other. Yet perhaps the point is that we need to ask clients their views and maybe convey those views more widely. Advisers like to think they are at the coalface, and that is why they were rightly worried about the lack of IFA representation for the FAMR for instance. Yet maybe IFAs also need to be sure they are conveying clients concerns about issues too. One lesson we have learned in recent weeks is that a lot of people don’t think they are being heard.
Advisers don’t have all the answers and in recent weeks may have been confronted with clients who are probably more divided on an issue than they have ever been before. It is certainly the most divisive issue which also had economic and investment implications.
There are some who fear the internet is resulting in what they call a post-evidence based world with people retreating to their own filter bubbles to confirm their opinions. But financial planning is based on careful appraisal of the evidence. Thankfully it lends itself to looking at things over time rather than making hasty decisions. Without taking sides, we need to make the case for it.