YourLifeChoices’ members say that they are less likely to seek advice from financial planners in the aftermath of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Tellingly, for the retirees who have sought financial advice before, satisfaction with the quality of the guidance has fallen sharply from 75 per cent to 50 per cent in the past two years.
YourLifeChoices’ 2016 Insights Survey showed that of 4155 respondents, 56.7 per cent had visited a professional to discuss finances.
The main reasons given for not visiting a planner were: perceived high costs, insufficient assets or funds or because they believed they could satisfactorily manage their own financial affairs.
Lack of trust in the profession was also cited regularly.
Among the most stinging of critics was one member who said he had worked in the financial planning industry and did not “trust most of them (advisers)”.
Said another: “They’re all rip-off merchants pushing their own products.” Yet another: “Absolutely no faith in them as a breed, having been badly stung.”
Another sizeable group said they had not sought advice because they did not understand how to assess the quality or independence of the guidance.
Still others claimed they had received bad advice that had hampered their returns – an experience that had put them off seeking financial advice again.
Today the vast majority of YourLifeChoices members (86.4 per cent) say they manage their own finances.
And they are not timid with their funds. In YourLifeChoices’ Boomer Consumer Survey conducted in October 2018, 36.6 per cent said they would be willing to take an average risk in order to receive average returns. Almost nine per cent said they would take a substantially risky punt with investments and less than a third said they were not willing to take financial risks.
The 2018 Insights Survey found the proportion of members that had sought financial advice had grown from 56.7 per cent in 2016 to 63 per cent in two years. However, the level of satisfaction with the advice received had plummeted from 75 per cent to 50 per cent.
In July last year, just as the banking royal commission was getting under way, members had started to lose even more faith in the financial services sector.
The percentage of those who had or would consider consulting a financial adviser about their retirement had fallen to 53.4 per cent.
Asked where they had sought advice, of 1719 respondents, around 500 had reached out to their superannuation fund and about 500 to financial planners.
The next highest category was banks (200 respondents), an accountant (158) and Centrelink (140).
The bank most commonly sought out was the Commonwealth, followed by AMP, Westpac, ANZ and the National Australia Bank.
The interim report on the banking royal commission’s findings continued to highlight failures in the financial planning sector, leaving many Australians wondering if they should pay for advice. The final report is due on 1 February.
“Whether the conduct is said to have been moved by ‘greed’, ‘avarice’ or ‘the pursuit of profit’, it is conduct that ignored the most basic standards of honesty,” said Commissioner Kenneth Hayne about those providing advice.
On World Financial Planning Day in October, the Financial Planning Association of Australia outlined six steps to help people locate a reputable adviser. We outlined those steps in an article, Who can you trust with your money?
Judging from the responses of YourLifeChoices members to that article, it will take more than a how-to guide to restore confidence in a profession that has taken a battering.
Here is a sample of what retirees told YourLifeChoices after reading the article:
- “Why is it taking so long to bring in education/regulations for new and existing advisers? This should be immediate. Why should it take five years for current advisers to meet the required standard? Either they meet it now through ‘recognition of prior learning’, which allows for experience to be accepted, or they should be suspended from working until they can. There could be another five years of poor advice before we get anywhere near lifting competency.”
- “Massive internal changes and changes in ethos are required now to restore any faith or trust in financial institutions.”
- “Financial advisers want profit, and they will always put their own income ahead of client interests. (Now) they will make noises. They will change the technicalities in a few rules, but nothing will change for the client.”
Other commentators on the article blamed the regulators – the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA). They are, after all, entrusted to ensure misconduct in the financial services sector is minimised.
Last month, Round 7 Hearings of the royal commission got under way. Issues the hearings focussed on were the causes of misconduct and conduct falling below community standards. Possible responses, including regulatory reform, plus the roles of ASIC and APRA in supervising the actions of financial services entities were also considered. The final report is due on 1 February 2019.
This article first appeared in financial newsletter Cuffelinks.