ASIC: Shadow shopping not to ‘name and shame’

The Australian Securities and Investments Commission (ASIC) has confirmed that “shadow shopping surveys are here to stay” after it announced that it is poised to begin shadow shopping research focused on retirement.

“We are not out to ‘name and shame’,” says Delia Rickard, senior executive leader of consumer and retail investors at ASIC.

“We’ve very clearly designed this in a different way to previous shadow shopping surveys.

“We’re in the middle of major reforms to the financial advice sector through the FoFA [Future of Financial Advice] reforms so there would be no point in a ‘naming and shaming’ exercise.”

Despite being an unpopular method amongst financial advisers, Rickard says the research’s primary focus will be on retiring consumers.

“What we’re really interested in doing is understanding the consumer experience in seeking advice at the point of retirement, working with industry to really help define what good-quality advice looks like and ensure that across industry there’s an agreement that quality advice is being given at this very critical point,” she says.

Andrew Inwood, principal of research firm CoreData, says if a financial adviser thinks or suspects that a prospective client is a shadow shopper they should ask.

He says the “giveaways” financial advisers can look out for to determine whether a client is a shadow shopper is “they’re not very well-organised and they ask a lot of questions that aren’t specific”.

In previous surveys conducted by CoreData, the shadow shoppers used were people who genuinely wanted advice.

“If the adviser performed well, then they’d get the shopper as a real client. We had 440 shopping events and more than 50 per cent got the client,” Inwood says.

Rickard says ASIC was promoted to conduct the survey as the first of the baby-boomers are beginning to retire and “if there’s ever a time when consumers probably need advice, it’s at that point of retirement”.

“We know that about 20 per cent of retirement superannuation savings are in the deaccumulation phase right now,” she says.

“We predict that fairly soon that number will be doubled [to] 40 per cent by the end of the next decade. So it’s really a critical point for consumers in terms of advice.”

Rickard says the research needs to be seen as “one part of a boarder suite of work” that ASIC is working on in the retirement income sector.

“We’re putting together an expert advisory panel of respected elders amongst financial planners who have specific experience in this area to really help define what good-quality advice looks like,” she says.

“In addition, we’re working on a consumer guide about retirement income products. It’s really about having a good close look at the whole retirement sector.

“This is one aspect that will help us understand what the consumer experience is when they’re getting advice and the extent to which they understand the process.”

Rickard says the shadow shopping research is expected to start “in the near future” as the appropriate recruiting field agency, who will provide the people partaking as shadow shoppers, has not yet been confirmed.

“At this stage, we’re expecting the report to be issued in the first quarter of 2012,” she says.

This is the only shadow shopping exercise ASIC has planned over the next year.