August 3, 2016
The financial advice sector should move away from describing advice professionals as ‘financial planners’ or ‘financial advisers’ and adopt more descriptive definitions in order to demystify financial advice, according to a former planner and dealer group marketer.
myonlineadvisers.com.au, Chief Marketing Officer, Fraser Jack said while the two current terms are well understood by those who receive advice, those who do not receive advice consider advisers and planners differently and do not see the need to deal with them.
“Consumers often think financial advice or financial planning is about investing. This may be the reason why only 20% of people get advice because if you do not have the cash to invest, why see an adviser or planner?” Jack said.
He called for greater definition in the labelling of advice professionals to offset consumer confusion, pointing to the medical profession which clearly distinguishes between different types of doctors according to their training, skill sets and expertise.
“We need to start with a clear definition and categorisation of the many different types of adviser or planner, let’s make it very clear for consumers to understand what different advisers do,” Jack said.
“…let’s make it very clear for consumers to understand what different advisers do”
“If we take a look at the medical profession we have GP’s and a long list of specialists, so we know that a cardiologist can help us with any heart or cardiovascular issues, and we understand our GP’s role in our general health,” he added.
He stated that in the area of financial advice there are only two terms despite the fact that some practitioners provide holistic advice, while others specialise in life insurance, self-managed superannuation or retirement, leading to consumer uncertainty as to whom they should see for their particular needs.
“When it comes to financial advice we are all either financial advisers or financial planners. What does that say to consumers when we can’t even work out what we do ourselves?” Jack said, adding the advice sector needs to take a few steps back and consider consumer perceptions first before it can move forward
“If we just stick with financial adviser or financial planner we will not get over the confusion that exists. These new terms will still need parameters and rules around their use and practitioners will still have to be educated and licensed to provide the advice,” he said.
“If we have to explain what we do for consumers, then we have lost them, like when you have to explain a bad joke.”
These new descriptions for advice providers, with their relevant conditions, should be enshrined in law as a profession, according to Jack, who stated the sector and government was already considering enshrining terms based around skills, experience and this would be an expansion of that process.
“The terms should be enshrined in law as a profession, but let’s get more than just these two words, let’s come together and document all the specialist areas, and set out the standards of what we do for our clients. We can then give this to the policy makers to enshrine,” Jack said.
“If we have to explain what we do for consumers, then we have lost them, like when you have to explain a bad joke. Simplicity is important because we don’t have time to grow into the terms we are currently using.”