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How to find a great financial services provider in a world of fake news
Posted on: 4th April 2017 in
In the beginning, there was news. Then there was “breaking news”. Then “viral news”, then “trending news” – and now we have “fake news.” “Fake news” has always been with us. It’s just a term for rumours that are being presented as fact. This has always happened. But now we’ve got the internet as everybody’s main source of news, and the internet amplifies news – whether real or not – with unprecedented power. Ideas spread exponentially. Mountains are made of molehills on the internet landscape as a matter of course: a single bad-tempered review can give the wrong impression to literally thousands of consumers. It’s just the way the web works. So “fake news” presents us consumers with a real problem: if the published news contains inaccurate news as well as accurate news, which news do you trust? Which professionals can I trust? You may know the saying: “never lie to your banker, doctor or lawyer.” In other words: “don’t lie to your professional advisers because they can only help you if you trust them and tell them the truth.” That’s all very well. But, how can we trust any professional nowadays? Somewhere on the internet there is bound to be a bad review of their services. And, in this new and disturbing era of “fake news”, we simply cannot tell what is true and what is not. It is in the financial services sector that “fake news” has found a very real home. It seems like every day that a new horror story emerges online about pension scams or Ponzi schemes. There are even – on otherwise reputable websites – tales of the formidable FCA taking dramatic action that simply hasn’t happened. This is fear combined with fancy. Not fact. And, for us consumers, it’s bloody unhelpful! With investments and pensions, we as consumers have our life savings on the line. With mortgages, our homes are on the line. Ultimately, the need for financial services means that we as consumers have to put our very futures, and that of our families, on the line. So which financial services provider is going to hold that line safely for us? How can we tell who’s “fake” and who is not? Well, no method is foolproof. But here’s a checklist of where to look for signs of a legitimate company:
- Is the company registered and licensed? Legitimate financial service providers will have an FCA registration page. If the company is an insurance service provider too, they will be registered with the Insurance Authority.
- How long has the company been in business? The longer a financial services company has been in business, the more likely it is that it can be trusted. Do you agree? Certainly this is not always the case. But what is certainly true is that criminal enterprises get found out pretty quickly in financial services and go bust – simply because consumers get treated consistently badly and take their business elsewhere.
- How does the company respond to criticism? The more forcefully a company responds to criticism, the more likely it is that there is something to hide. Again, this is more of a rule of thumb than a law of consumer physics! But check out, as an example from another area, what happened when rumors surfaced that Richard Gere and Cindy Crawford were getting divorced. They over-reacted. They took a full-page ad out to refute the rumor. A lot of fuss was made. And then, predictably, they got divorced anyway.
- How many Assets Under Management? Often this information is not publicly available. But if you can least get a feel for it, the market value of the financial assets of a service provider is usually a very strong indication of the legitimacy of the company.
- What do trusted contacts say about the company? Tap into your inner Nancy Drew and do some sleuthing. Find out the current clients of the company. See if you are connected to any of these clients via social media – and ask them what they think. Simple as that! Get a peer review. You still can’t be sure that the news you are getting isn’t just bad-tempered inaccuracies. But there’s more of a chance that it involves MORE accuracy if it comes from an existing client rather than one who lost their money to a movement in the markets a while ago and has since got very bitter.
- How qualified are the staff? The calibre of staff is often (but not always!) a good indication of the professional ethics of the company. Here’s why: legitimate financial services companies want to be sustainable. And a legitimate company knows that the only way to thrive over the long-run is to consistently provide a service that consumers trust. So generally such companies want to employ staff who are committed to providing an ethical, professional service and are willing to work hard for the privilege to do so. In the world of financial services, a company should have a solid base of advisors with at least Level 4 qualifications.
- What do the staff actually offer? Generally when you make a first approach to a financial services company, you will be asked to come in for a consultation. This is obligation free, so take it! It will give you an opportunity to find out for yourself what the company is actually like and what commercial deal is on the table. You will also be able to get stuck into any “fake news”; take the chance to cross-examine the staff over any rumours and accusations you have discovered for yourself on the internet.
- What else does the internet say about the company? This is all about search engines. Nobody looks past page one of search results. There is a saying that the best place to bury a stinker of a news story is on page two of Google – because nobody ever gets past page one! So bear this in mind when you are doing your research. Google loves a scandal as much as anybody else, so fake news is often favoured with a page one positioning and the real story (the less-exciting story) turns up on page two.
- What do trusted review sites say about the company? We as consumers simply cannot trust online reviews unless they are verified? How we do know a bad review hasn’t been put up by a competitor? How do we know that the reviewer isn’t simply having a bad day? How do we know that a good review hasn’t come from the company itself? Well, it still remains difficult to tell who we can trust. But what we can probably trust more readily are reviews verified using 3rd party systems such as Trust Pilot. The technology is there to give us more accuracy; it’s just a question of finding sites which support it, and giving it the added weight it deserves in your conclusions.
- What is the quality of a company’s social media? While it is true that people generally share only happy news on social media, the quality of the articles posted on a company’s social media pages are usually a good indication of the pulse of the company and the calibre of its leadership.
It would be a damn sight easier if we could trust what we read. But we can’t, because of “fake news”. So where does “fake news” come from? Well that’s a whole story in itself. But one can perhaps safely observe that when it comes to aggressive and inaccurate claims being made against a person or organization, there’s often one of two explanations:
- When the market moves the wrong way, it is easier to blame the messenger than blame yourself for poor decisions – or just simply accept that, with all investments, sometimes you can just get very unlucky.
- When a rival company is delivering on a message and your company is not, it is easier to undermine that company than look at why your own company is not doing so well.
Use our Holborn Assets checklist as a tool to find legitimate companies. Use the checklist to attack “fake news.” Use it like a scalpel to cut away all of what is not true and you will be left with nothing but what is true. In the often obscure world of philosophy, this technique – this scalpel – is called “Occam’s Razor.” Fictional writer Sir Arthur Conan Doyle put it more accessibly when he has super-sleuth Sherlock Holmes observe that, “once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth.” #RealNews
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