Should I trust online financial recommendations?
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Rarely do I go to a restaurant without looking at the online reviews. Nor do I quaff a bottle of fizz without investigating the Vivino app for an assessment.
As we continue to endure turbulent economic conditions, I’ve been reviewing whether my financial service providers are right for me and the challenges ahead. I run a mile from online reviews and recommendations on financial advice. Is my scepticism well founded or am I making choices based on unfounded assumptions?
Making money is one thing. Once you have it, how can you keep hold of it? Who’s best to advise you and how can you make decisions that will enable your investments to grow and flourish? Surely the internet and groupthink recommendations are worth considering.
My grandfather was a wise man. Over the years he built up a list of people he’d go and see. Whether it was a dentist, doctor, tax specialist, lawyer or accountant. And of course, financial advisers. His black book of contacts was comprehensive, comprising the best of the best. If he didn’t know the answer to a particular query, he certainly knew someone who did. And he was pretty good at restaurant recommendations too.
Arguably, that’s what internet recommendations should also do. Sometimes it’s an effective tool. Sometimes it lies like a mischievous eight-year-old.
A few weeks ago, wandering the streets of Paris, I received a rather strong attack of the munchies. Unadvised, one can pop into pretty much any café and be assured of a tasty croissant. But the hunger pangs were more pronounced. As we were in Paris and it was lunchtime we wanted to dine, not snack.
Like many big cities there’s a huge variation of quality and some restaurants are simply awful. Even in Paris. My French friends weren’t answering their phones. So I turned to my other friend, Mr Google.
There were myriad options but one shone out. A family-run bistro, Vivienne, tucked away in a covered historic precinct that I’d never have found but for the recommendation. 4.8 out of 5, said the review. When the soupe à l’oignon arrived, steaming hot with just the right amount of molten cheese covered, toasted baguette, I knew we’d arrived at the right spot.
On that same trip we found ourselves wandering down the Avenue de Champagne in Épernay, a region with 319 villages or “crus” and more than 16,000 growers, many making just a few thousand bottles a year. Finding exceptional produce can be far easier with an app. I’d never heard of Marion-Bosser before. Google gave the house a 4.8 and its Premier Cru gets a 4.2 rating on Vivino. Having popped open a bottle at the weekend, I can confirm that the small bubbles and fruity notes make a delicious opener for a pre-dinner fizztacular.
Yet if I want to look after my finances, I just don’t trust the online advice. Perhaps it’s that the reviews often focus on customer service and aren’t driven by investment performance. And the positive reviews often feel “placed”.
I’ve been considering whether I should leave my investments with my current advisers or move to take advantage of lower fees and different investment strategies. Online investigations reveal a two-star rating for the wealth manager I’ve used for several years now, as judged by a financial adviser online. The firm is “expensive and because it follows an active methodology, is academically questionable”, it said.
All I know is that the performance of their funds under management has been top quartile and resilient in these challenging times. I welcome the personal service I receive, the continuity of staffing and the personal responsibility taken in looking after me and my investments.
If I’d followed reviews, I’d switch to the investment adviser that’s all over the news for its high fees and suspended property fund — rated 4.2 on Trustpilot. This is where financial advice differs from going to a restaurant or buying a bottle of fizz. We’re not talking about a product that has consistency or a service that follows a recipe. It’s expertise and personal service you should be looking for. And your appetite for risk. Seemingly, the reviews can’t be trusted.
If you want to find a new bank account, there are plenty of reviews out there. If you want your bank to provide you with a card, interest on savings and not a lot else then maybe an online recommendation is worth following. However, I want more from my bank: flexibility, personal service and bespoke advice when I need it.
My bank is privately owned, yet looking at the reviews I’d never choose it. It’s bottom of the list. Perhaps that’s because it’s more expensive than a high street variant? Or because its small customer base is unlikely to post a review, so the internet doesn’t assess it fairly?
I opened an account there because that’s where my family banked, not because they offered a pink porcelain pig to junior account holders. Over the years I’ve learnt to value their advice and service as others have questioned being de-banked and treated as another number who’s happy to wait for an eternity on an automated phone answering system.
My bank answers phone calls within two rings and refers to me as Mr Max without the presumption that I wish to be called James (I don’t, by the way). Big banks and large financial institutions may command good online ratings but they won’t necessarily provide the service I need.
When it comes to choosing financial services there’s no substitute for doing your research. Establish what you need from your adviser, determine your attitude to risk and weigh up whether a big impersonal provider is right for you. I prefer a personal recommendation and personal service from someone I trust. I just wish my grandfather was still around. He’d know what to do.
James Max is a broadcaster on TV and radio and a property expert. The views expressed are personal. X, Instagram and Threads @thejamesmax
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