Consumers Still Wary of Financial Advice – Report

Consumer trust in the financial advice industry remains low but Australians are hopeful that regulatory changes will turn things around, according to a new report.

Investment Trends Senior Analyst, King Loong Choi …consumer trust in the financial advice industry remains low

In its 2019 Direct Client Report, Investment Trends surveyed non-advised Australians on what they think about financial advice, investing and digital self-help tools.

The research found that financial planners and banks have yet to regain the full trust of the Australian public post-Royal Commission.

The average Australian gave financial planners and banks the same rating of 4.8 out of 10, when asked to rate their level of trust, similar to levels seen in 2018.

“Consumer trust in financial planners and banks remains at the all-time lows that were reached in 2018, hovering in the ‘distrust’ zone below a score of five out of 10,” said Investment Trends Senior Analyst, King Loong Choi.

“While confidence in the financial advice industry is low, Australians are optimistic that changes are underway.”

“Consumer trust in financial planners and banks remains at the all-time lows that were reached in 2018…”

He said the majority of respondents (76 percent) expect the regulatory changes proposed by the Royal Commission will bring about positive improvements for the industry, with “…most often expecting more severe penalties for adviser malpractice, greater fee transparency and improved professionalism,” said Choi.

The report also found that digital self-help advice tools are popular, with 54 percent of non-advised Australians indicating they are interested in using online tools to help them make superannuation, insurance and investment decisions.

“The demand for digital self-help advice tools reflects Australians’ growing range of unmet advice needs, which centre around strategic advice, buying property and post-retirement issues,” said Choi.

“While there is healthy appetite for online advice tools, converting interest into actual usage will require these tools to satisfy a core set of demands. For instance, non-advised Australians strongly prefer tools that blend digital engagement with human assistance, with the younger cohort being most open to receiving human support when using online tools,” explained Choi.

The report noted that online tools can also be an effective referral mechanism for advisers, since 53 percent of non-advised adults who are interested in using these tools say they are happy to be referred to a financial adviser if their financial situation required expertise beyond the scope of the tool.

The research also found that there is growing demand for consolidated reporting tools that allow users to see all their financial accounts and holdings in a single webpage or app (cited by 46 percent of non-advised Australians, up from 41 percet in 2018), particularly among younger Australians.

“Australians generally have ongoing relationships with more than one financial institution – their main day-to-day bank may not necessarily be their mortgage lender or investment platform,” said Choi.

“Each of these providers deliver information and reporting, but many Australians would like a convenient way to view their entire financial situation across all accounts, all in one place.”

The Direct Client Report is in its fourth year and drew on the responses of 4,501 Australian adults.

  • Phil Smith

    Trust? Well, I’m just a lowly risky of 30+ years experience. But the so called ‘advice’ I see from some sections of the FP market is nothing short of disgraceful when it comes to risk insurance components of the] advice being given.

    ASIC’s very clear on its view about SMSFs with under $500k of assets, particularly when buying direct [e.g. own business] property.

    I was asked [as a favour] to give a second opinion on the insurance recommendations provided as part of a new SMSF set-up…

    100% of the IP, Life & TPD cover were owned by the SMSF. No ‘linking’. 2 of the 4 members had pre-existing health issues. But still all their fund assets were taken out out of their industry supers; and by default they lost their Life & TPD ‘AAL’ covers. Now they have at least 1 exclusion each on their TPD policies. No mention of the tax implications of TPD inside super.

    Based on my Needs Analysis the cover inside super should have been increased to compensate for the tax payable at claim time [for TPD].

    The adviser stated that putting it all under the SMSF was in their best interests – 100% deductible to the SMSF. At a whopping 15%!

    And the icing on the cake – whilst paying monthly premiums, the FP showed ONLY the commissionable annual premium in the commission disclosure section. Nowhere else within the [overly long] 30 page risk insurance SoA did it show the total monthly premiums, including frequency loadings, stamp duty and policy fees.

    $7,500 of commission [incl. GST] on top of the $5,000+ in fees charged in relation to the FP advice on setting up the SMSF…really!!

    Oh, and as they weren’t ready to buy their business property for another 18-24 months – 100% of their assets were then put in a CMT account. The annualised monthly premiums being charged alone, exceeding the interest potentially earned over the next 12 months within the CMT, let alone all other associated costs.

    And I’m the one being forced out of the industry because I’m NOT an FP and won’t sit the FP-centric exam[s]. Yet this clown is allowed to do this, whilst meeting FASEA requirements, but NOT the clients’ best interests.

  • Robert Coyte

    A survey of people who don’t use financial advisers commenting on whether they are trustworthy.

    Next up a survey on people who live in Australia on what it would be like to live in the US.