- The financial services royal commission has profoundly impacted perceptions of the financial planning industry.
- Trust in financial planners and banks are at all-time lows.
- But there is still is significant demand for financial advice.
Trust in financial planners and banks are at all-time lows because of the bad behaviour revealed in the financial services royal commission, according to 2018 Financial Advice Report by analysts Investment Trends.
Most who use a financial planner are still satisfied with the service they get but are now less willing to recommend it.
The latest research from Investment Trends, followed closely by the financial planning industry, shows that two-thirds of Australians are aware of the inquiry, including a quarter who say they have been keeping a close eye on proceedings.
“So far, the general sentiment has not been positive,” says King Loong Choi, Senior Analyst at Investment Trends.
“More than 40% of Australians do not believe that the financial services and banking industry has met its obligations to everyday Australians, while half reject the notion that the industry has been treated unfairly in the media.”
2018 Financial Advice Report asks Australians to rate their level of trust (from a scale of 0 to 10) in 11 different professions and financial services sectors, ranging from accountants to super funds to their friends/family.
Australians trust their friends/family the most (average score of 7.0) while politicians sit at the other end of the spectrum (3.0).
But in the last 12 months, trust levels have fallen most severely for banks and financial planners to below five out of 10, and into the “distrusted” range.
Banks fell to 4.8 from 5.5, while financial planners dropped to 4.8 from 5.1.
“The trust impact of the Royal Commission is real, and the financial advice industry must take proactive measures to rebuild trust among the wider population,” says Choi.
“One of the most important steps involves lifting transparency in every single aspect of the advice process.”
However, the majority are still happy with the service they get from their financial planner.
The satisfaction levels of Australians who use a financial planner only fell to 74% from 81% despite the royal commission hearings.
And these people are less willing than they had been to be to recommend their financial planner.
But there is a strong and growing demand for advice.
In the next two years, an estimated 2.1 million adults intend to turn to a financial planner for advice, up from 1.6 million in 2017.
“For Australians, the top barriers to seeking financial advice involves not having the time to find an adviser, perceptions of high fees and perceptions of insufficient wealth,” said Choi.
“It is therefore vital that advice providers demonstrate the value of advice to potential clients in the context of their time and money. Potential clients must be convinced they need financial advice now, not later in life, and that the fees justify the service.
“Raising Australians’ understanding of the value of advice is vital since many Australians only seek and receive advice when they approach retirement, when in reality they need advice earlier in the accumulation phase,” explained Choi.
The Financial Advice Report, now in its eleventh year, draws on the responses of 7,639 Australian adults in September 2018.