The cost of financial advice is still the biggest barrier to attracting more clients, according to Investment Trends.
In its 2014 Advice and Limited Advice Report, Investment Trends found that there is a vast gap between the cost of delivering comprehensive financial advice and what consumers expect advice should cost. This follows similar results in previous surveys conducted by the firm.
However, the researcher found that clients were very open to receiving limited or scaled advice, if this was provided cost-effectively. Investment Trends observed also that people were also happy to transition between different advice models, suggesting that while many may initially prefer limited advice, there is a likelihood that these clients will go on to seek or receive comprehensive financial advice.
Financial planning businesses need to consider developing a multi-pronged advice delivery approach
“When cost is taken into account as a factor, only a small proportion of Australians would prefer to receive the traditional model of comprehensive advice delivered face to face,” said Investment Trends Analyst, King Loong Choi.
“Instead, there are five times as many Australians who prefer to receive limited advice if it’s delivered at a lower cost.
“Financial planning businesses need to consider developing a multi-pronged advice delivery approach to both help attract and retain clients. Planners have already started to recognise this opportunity, with half saying they intend to provide more limited advice in 2015.”
Despite this growing desire to deliver scaled advice, Investment Trends said advice businesses were struggling to meet client expectations. The researcher found that early experiences of limited advice clients typically trail that of financial planner clients. Overall satisfaction with limited advice providers is 11% lower than with comprehensive advice delivered by a financial planner, on average.
“The actual experiences of those who have received limited advice doesn’t appear to be lining up to what they were expecting. If a person gets limited advice from their bank or super fund, then, given that they have an ongoing relationship with their bank/super fund, they expect the bank/super fund to follow them up on it occasionally – limited advice may not be as one-off as the industry expects,” said Mr Choi.
