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Consumers’ thoughts on Financial Advice

With the Royal Commission into Banking and Financial Services taking (only) a negative view on some of the primary providers of advice, there have been several recent attempts to garner the opinions of the average Australian consumer to determine what they think about financial advice in order to help bring a client-centric focus back to these examinations.

 The IFA and Momentum Intelligence (a highly regarded industry publishing house) have recently carried out Client Experience Surveys and, along with the recent release of ASIC Report 627 Financial advice: “What consumers really think”, each report seemingly espouses the value of advice and asserts a deep endorsement for the majority of the adviser community. The results have provided additional insights into Australians attitudes, perceptions and priorities in relation to financial advice.

 Advice Clients

The release of ASIC’s 627 Report highlighted that among Australians who had received professional financial advice, 89% intended to get advice again in the future.

The report also highlighted that almost four times as many Australians who received advice in the past 12 months had a ‘great deal of trust’ in their advisers compared to those people who had not received advice. This was mirrored in the IFA Client Experience Survey where Ninety-four per cent of the 1,008 Australians who currently engage a financial adviser, said they were satisfied with their financial adviser.

The ASIC report also highlighted that advised consumers are more engaged with their financial affairs, have higher incomes and levels of education. If their interaction with advisers has improved their financial behaviour, then that is another reason to seek advice.

When it comes to fees, around 50 per cent of advice clients have gaps in clarity on what their fees are paying for. Half of all advice clients surveyed said they “always” know what their fees are paying for, while the remaining 50 per cent have various levels of knowledge gaps around what their adviser fees can be

attributed to, with 35 per cent knowing “most of the time”, 3 per cent “about half the time”, 8 per cent “sometimes” and 3 per cent “never”.

The royal commission has dented client perceptions of the industry but not so much on their adviser. Three-quarters of advice clients said their perception of the financial planning industry have been impacted by the Hayne royal commission. However, only 28 per cent of advice clients said their perceptions of their adviser have been impacted by the royal commission.

Non-advice Clients

The Client Experience survey also explored the attitudes, perceptions and priorities of 311 Australians who do not currently engage a financial adviser.

It was found that most non-advised clients don’t completely understand the services advisers offer. Seventy-one per cent of non-advised clients had gaps in understanding what services advisers offer. Further, 56 per cent of non-advised clients agreed with the statement, “I am not sure how a financial adviser could help me”.

The other very important piece of information that Australian consumers provided in the ASIC research was that the main reason individuals did not obtain advice was that advice was too expensive. And yet the industry is about to have a reform agenda thrust upon it that will greatly increase costs to the consumer.

The Survey found that Fifty-five per cent of non-advised clients who previously had an adviser quoted “cost” as the reason for ceasing the engagement. In addition, 44 per cent of non-advised clients agreed with the statement “I cannot afford

the cost of a financial adviser”. However, the survey noted that the statement is contextual and respondents were not provided a cost to evaluate, which means that they are applying their own experiences and are potentially uninformed in how much it costs to engage an adviser. Other reasons cited included the performance of investment/financial products (38 per cent), communication skills (18 per cent) and technical skills (18 per cent).

The ASIC report indicated that there was significant mistrust of financial advisers, but that it was mainly prevalent among people who had never received financial advice.

The only conclusion that can be reached from this is that those people who don’t trust advisers have formed that opinion from statements by politicians and mainstream media coverage. It could not be from people who have received financial advice because the overwhelming majority of them were positive about their experiences with advisers.

The negative perception of financial advisers can also be attributed to lack of understanding. As the ASIC report acknowledged: “Even limited knowledge of recent reforms (e.g. the Future of Financial Advice (FOFA) reforms or the professional standards reforms for financial advisers) appeared to improve perceptions of the financial advice industry”.

These surveys have provided helpful insights into how, in the aftermath of the royal commission, financial advisers are still held in high regard. The surveys also give vital understandings on how advisers could further enhance the advice process by better understanding advice clients, and highlighting the expectation gaps of fees and services in the advisers’ offering.

The results of these examinations have had the effect of complimenting financial advisers, with the overwhelming majority of them seen to be acting in the best interests of their clients to improve their financial circumstances.

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