Financial advice plagued by cost and trust issues, survey finds

One-third believe financial advice is too expensive and of doubtful value, says report

financial advice

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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    COMMENTS

    To make a comment, please register or login
    MarLin
    27th Aug 2019
    10:12am
    I read most of the recent criticism of financial advisors with growing astonishment and dismay because our own experience was quite different. Our (then) tax agent charged us $22,000 capital gains tax about 10 years ago when we sold our apartment, but it was refunded after I happened to mention it in passing to our financial advisor - who immediately contacted the agent and pointed out his mistake.
    That same (CBA) financial advisor showed us how to legally minimise tax with an allocated pension fund that's still returning profits every fortnight some 10 years later!
    Caveat emptor - financial advisors should not all be tarred with the same brush!
    MarLin
    27th Aug 2019
    10:52am
    Just clarifying that the $22k was charged by the agent who compiled our income tax return that year, and it was subsequently refunded by the ATO after intervention by our (CBA) financial advisor.
    Tricky
    27th Aug 2019
    10:39am
    ASIC in there report concerning financial advisors failed to mention how government policies concerning retirement have a major impact on our quality of life.
    gerry
    27th Aug 2019
    11:06am
    as I worked for myself I could not do super and even when I retired ,so I went with allocated pension and with a good firm, but Ing took them over and in 19 months squandered 50% of mylife savings,and they were using an advisor I never had any contact with yet he was ripping me off fees. ASIC ..turned down my pleas for help and even lost all my records
    gerry
    27th Aug 2019
    11:06am
    as I worked for myself I could not do super and even when I retired ,so I went with allocated pension and with a good firm, but Ing took them over and in 19 months squandered 50% of mylife savings,and they were using an advisor I never had any contact with yet he was ripping me off fees. ASIC ..turned down my pleas for help and even lost all my records
    Nerk
    27th Aug 2019
    11:22am
    Your only buying a opinion, if your investment fails and you lose, they walk away saying next please.... better off studying and learning, making your own decisions
    pedro the swift
    27th Aug 2019
    11:26am
    Financial advisers. Use them ? Maybe. Trust them? No. Its a business. They want to make money for them selves. If you find one that can make money for you too,great. Just remember, they aren't in the game to lose.
    mogo51
    27th Aug 2019
    11:50am
    In a word 'NO'
    casey
    27th Aug 2019
    11:53am
    Must admit I am quite happy with my financial advisor. He has been looking after our assets for the last 7 years and in that time we have made quite a large financial gain. In saying that I do check our financial position every Friday to check on things. So far there hasn't been a problem
    slapsy
    31st Aug 2019
    2:55pm
    If you are smart enough to spot a problem,why do you require an advisor?
    danielboonjp
    27th Aug 2019
    12:07pm
    financial advisers are as corrupt as the banks and insurance companies they work for and paid by, for selling shit products, which they then have suckers move every so often, to keep the money rolling in
    Janus
    27th Aug 2019
    12:14pm
    Can't complain about my advisor - I have him on a percentage basis, so the more he makes me, the more he makes ! Since I retired some years ago, my financial assets have not decreased, actually they have risen slightly, despite our spending habits on travel etc.

    I am trying to die with a dollar coin left over, so he is making this a hard ask.

    The secret is (of course) to give them a reasonable asset base to work with. Advisors can't work with a thimbleful.
    KSS
    27th Aug 2019
    12:53pm
    "It is the job of a financial adviser to read the fine print and notify their client of anything important – 74 per cent"

    WOW! You cannot outsource personal responsibility. It is not the role of a financial advisor to 'read the small print' that is your job. The Advisor can explain it to you but ultimately if you can't read and understand it, don't agree to it.
    cupoftea
    27th Aug 2019
    1:24pm
    If you go to Centrelink you get it free
    cupoftea
    27th Aug 2019
    1:24pm
    If you go to Centrelink you get it free
    TREBOR
    27th Aug 2019
    1:53pm
    Australians have trust in financial advisors? That's a new one....
    Aussie
    27th Aug 2019
    4:02pm
    Never did and never will ..... I have been doing my taxes with an accountant for years Never Never deal with Financial adviser .... they have no idea of the real world all they know is based on statistical info from others .... all bullish.
    Over the last 5 years I do the taxes myself after all ATO has all the info is setup for you and is all correct so I just sign up and sometimes get some money back ...
    Anonymous
    27th Aug 2019
    9:17pm
    Good on you Aussie hate em I hear Shortens missus got a job with the Industry funds he's got to pay for his former family and the two Sheila's he raped she is going to pick up a million bucks for being on there committees all Union scum what would she no about financial advising she was a former stripper probably give the boys a lap dance at morning tea
    GeorgeM
    27th Aug 2019
    8:37pm
    I can't believe that only "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." It should be more like 80-90% I think. Maybe most of the remaining don't even consider them in their planning!

    The only way these FAs can be trusted and useful is of they have NO links to any Financial Institutions to promote their products, and they only receive advice for each consultation without any commissions. Hard to find such people who will deliver any reasonable outcomes. FP Industry should set up a web site for such people with ratings from customers.
    David
    30th Aug 2019
    1:20pm
    I know from reading extensively & following the recent Royal Commission into the financial sector that it has received a well deserved hammering in a vast majority of cases. My wife & I consulted an independent financial adviser & it was one of the best decisions we ever made. Although the first consultation is not tax exempt all follow ups were. His advice had no hidden agendas & no bank kickbacks lining the big four & others. Do your research thoroughly as seeking professional independent advice earlier rather than later (although never too late) will pay substantial dividends. We have never regretted our decision at all.
    johnbclay
    30th Aug 2019
    3:38pm
    If you have some spare money you don't want, go and see a financial adviser and they will get rid of it for you. This has happened to me twice. First time was advised to invest in gold coins. Worst investment ever. Had to pay insurance every year and value dropped dramatically. Sold them at a loss with great difficulty. Still have one left and can't get rid of it. Second time advised to invest in a fund. I had $30,000 saved up. Not bad for a pensioner. Lost $13,000 in first 3 months. Got the remainder refunded before they took that too. Tried to get me to leave it there. "It'll come good. Don't be a chaser, etc. etc." Now if I had some spare money, I'd put it in a term deposit in the bank. Not much interest, but much more secure.