Trust - or the lack of it - is the most significant challenge coming out of financial services reforms, the heads of Equity Trustees and MLC have said.
Equity Trustees managing director Robin Burns said much general comment was not well informed, "failing to come to grips with how trust works, and not enough has been said about how it can be restored".
"Indeed, the way some have reacted to proposed industry reforms - which should help improve trust - has only added to the general disquiet," Burns said.
MLC advice and marketing executive general manager Richard Nunn said that, contrary to what some believed, more administration for legislative compliance was not "the most significant challenge coming out of FOFA (Future of Financial Advice)".
"It is the need for some advisers to significantly improve the way they articulate and tangibly demonstrate value for clients and to subsequently establish more trusted, long-term relationships with them. Many advisers already do this well. But for others, this is absolutely where their focus should be. Clients not only ask for it, they deserve it," Nunn said.
Burns said a high level of trust was needed "if the industry is to regain its proper role in the economy - helping as many investors as possible build and manage wealth".
The financial services industry had to recognise how trust worked and communicate that to clients and prospective clients.
"It's no longer enough to say 'trust me', although a few years ago this may well have worked. Investors and the wealthy are now more questioning of the people in financial services that they deal with," Burns said.
Nunn said advisers must engage with clients, clearly and regularly, and have a well-articulated client service package and value-add services, such as client newsletters and tailored briefings.
"This will also help them to explain their fee structure, which is a crucial component of the new world order," he said.
Burns said many organisations mistakenly believed a reputation for trust could be built through extensive brand communication. But, by itself, familiarity did not breed trust.
"At the moment, enhancing reputation is a better investment than brand recognition. Third-party endorsements, such as referrals from satisfied clients, are much more likely to result in new business than prime-time advertising and other marketing techniques," Burns said.
Another increasingly important element was the other organisations and people the company itself dealt with. If a practice had strategic alliances with other organisations, did those other companies enhance or detract from trust, Burns said.
"Perhaps these points are self-evident, but if so, why is lack of trust still a major issue?" he said.
"The challenges faced recently in reaching a workable definition of 'best interests' illustrate this point.
"That the advice industry has not to date had to adopt this concept (although many advisers no doubt genuinely feel they offer a high standard of integrity in looking after their clients' affairs) is probably itself a considerable and unwelcome surprise to many investors."
Nunn said trust was built through the evolution of offerings to meet the changing needs of clients.
"We've long known that a one-size-fits-all approach doesn't work and that has led to good developments in the provision of holistic and tailored advice solutions. The rising popularity of limited advice, however, shows our customers' needs are changing yet again," he said.
"We can no longer insist that everyone has full advice from the start in order to achieve financial success. We have to respect that this is not what some clients want or need because of their circumstances or because of financial constraints, and we need to innovate our businesses and alter our advice models in response.
"By offering a range of solutions to clients, they can trust that we will help them to find the right option, whether that's full or partial advice or a mixture."
