Trust in financial institutions and advisers took a battering during the banking royal commission and new research shows it is struggling to rebound.
A report from the Australian Securities and Investments Commission (ASIC) released yesterday reveals that 35 per cent of respondents believe financial advice is too expensive and that it is difficult to assess the value and veracity of financial advice.
The report, Financial advice: What consumers really think, focused on the use of financial advisers and the barriers to seeking advice.
Eighteen per cent of the 2545 participants said they did not see the value in consulting a financial adviser, 19 per cent said they did not trust financial advisers, 26 per cent said they preferred to manage their own finances and 29 per cent said their financial circumstances were too limited to warrant seeking financial advice.
Many participants in the group discussions and interviews also considered the financial advice industry to be opaque, noting that it was difficult to find a financial adviser, assess an adviser or assess the quality of the advice.
ASIC commissioner Danielle Press said that while Australians believed financial advisers could offer significant expertise on financial matters, the commission’s research showed that many don’t seek advice, citing high costs, distrust of the industry and a perception that financial advice is only for the wealthy.
According to the research, 41 per cent of Australians intend to get personal financial advice, but many will not proceed because of those perceived barriers.
The research found that 27 per cent of Australians had received financial advice in the past, and 12 per cent had received advice in the past 12 months.
“The good news for industry is that consumers who had recently received financial advice had more positive attitudes towards financial advisers than those who had not,” Ms Press said. “Moreover, even limited knowledge of industry reforms, such as FOFA (Future of Financial Advice), appears to have improved consumer attitudes towards the sector. So, it is even more important for industry to get on board with the reforms (recommended by Commissioner Kenneth Hayne).
“Although not all Australians need financial advice, it is imperative that people wanting advice when making critical financial decisions are able to access high quality advice and, equally, feel confident that the advice is in their best interests.”
The research found that consumers generally sought financial advice for investments such as shares and managed funds, retirement income planning, growing their superannuation and budgeting or cash flow management. It highlighted that use of digital or robo advice was unpopular (one per cent). However, 19 per cent of participants said they were open to getting digital advice once it had been explained to them.
“Financial advisers have an important role to play in helping consumers improve their financial position, and there is a real opportunity for the advice industry to rebuild that trust by reorienting itself and putting consumers at the heart of its services,” Ms Press said.
The report, based on quantitative and qualitative research commissioned by ASIC and undertaken by independent market research agency Whereto Research, yielded the following key findings.
Attitudes towards financial advisers
The research indicated that there is significant distrust of the financial advice industry. For example:
- 49 per cent of participants agreed that financial advisers were more interested in making themselves rich than in helping their customers
- 37 per cent agreed that financial advisers did not generally have the customer’s best interests at heart.
Overall demand for advice
- 27 per cent of participants had received financial advice in the past
- 41 per cent intended to get financial advice in the future
- 20 per cent had considered getting financial advice in the past 12 months, but had not gone ahead.
Digital advice
- 1 per cent of participants had used digital advice (also known as robo-advice)
- 19 per cent said they were open to it (once it was explained to them)
What Australians want advice on
- 45 per cent –investments (e.g. shares and managed funds)
- 37 per cent – retirement income planning
- 31 per cent – growing superannuation
- 22 per cent – budgeting or cash flow management
- 18 per cent – aged care planning.
Reasons people use financial advisers
Statements participants most commonly agreed with were:
- Financial advisers have expertise in financial matters that I do not have – 79 per cent
- Financial advisers can recommend products I would not normally find on my own – 75 per cent
- It is the job of a financial adviser to read the fine print and notify their client of anything important – 74 per cent
- Financial advisers can introduce me to good ideas I might not have thought of – 73 per cent
- Financial advisers can educate me about financial matters – 69 per cent.
How people choose financial advisers
- 41 per cent – level of experience
- 38 per cent – reputation
- 36 per cent – the ability to talk to customers in a way they can understand
- 32 per cent – taking the time to understand the customer and their goals
- 30 per cent – low cost.
Has your faith and trust in financial advisers rebounded since the royal commission? How do you select an adviser? How do you measure the value of that person’s advice?
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