Cost and scale of advice and mistrust of financial planners are key issues that adversely impact consumer access to advice, according to a new report.
The report, Access to Financial Advice in Australia, was released by ASIC just before Christmas. It identifies six main reasons that impact consumer access to financial advice. They are:
- Cost of advice: A significant gap exists between what consumers are prepared to pay for financial advice and how much it costs industry to provide advice.
- Scale of advice provided: Many Australians, particularly those who have never previously accessed financial advice, want piece-by-piece simple advice rather than holistic advice. Many advice providers still provide holistic advice as the default option.
- Consumer perceptions that advice is out of their reach: Evidence suggests some people do not seek financial advice because they feel their financial circumstances do not warrant advice.
- Consumer mistrust of financial planners: Lack of trust in financial planners to provide unbiased, professional advice limits the number of consumers who seek advice and the value they place on financial advice.
- Access to general advice and information: The provision of general advice or factual information is less extensive than it could and should be. For many consumers general advice and factual information may be sufficient to meet their current advice needs.
- Financial literacy: Gaps in financial literacy, especially among certain demo-graphics and in relation to certain financial topics, limits some consumers‘ engagement with financial matters and so stops them from seeking advice.
These six factors cover a vast range of issues that are already being addressed by the industry, either as a natural consequence of industry and social change or through the Government’s Future of Financial Advice (FoFA) reform proposals.
One of the many issues raised in this report relates to the question of whether consumers prefer simple advice as opposed to comprehensive or holistic advice.
The report, which draws heavily on a December 2009 consumer survey conducted by Investment Trends, says more than 50% of respondents in that survey, across all age groups, prefer a simple or DIY option rather than advice that covers a comprehensive plan.
Commenting on this finding, xLife Managing Director, Russell Cain, said his growing practice operates under an advice structure that reflects only the area of interest nominated by the client:
“If clients call us to inquire about their superannuation needs, that’s what we focus on. If they ask only about insurance, then that is all we discuss with them,” said Mr Cain, whose practice operates under the Millenium3 Financial Services licence.
Mr Cain goes further, telling riskinfo that the provision of piece-by-piece advice to clients is one of the key reasons for his firms initial and continued success in its five years of operation.
However, the report also indicated that the preference for piece-by-piece simple advice was higher for those respondents who had never used a financial adviser than for those who had.
In other findings, the report found that face-to-face meetings were the preferred method for receiving advice, but that once the client/adviser relationship had been established, most consumers were happy to communicate by phone or email with their adviser.
… the appetite for non face-to-face advice is the greatest in insurance
However, the report goes on to note that anecdotally, the appetite for non face-to-face advice is the greatest in insurance. ASIC says this might be because most consumers already have some experience in getting car insurance, home and content insurance and travel insurance online or by phone.
Advisers can click the following link to access ASIC’s report on Access to Financial Advice in Australia. The report does not appear to have been widely covered because it was released on December 23 2010 and also because some of its key findings are addressed in the Government’s FoFA reform proposals.
