Sophisticated clients are increasingly prepared to pay for top financial advice with a strong correlation now evident between cost and quality of advice.
A Rice Warner Actuaries survey of the self managed super fund sector, commissioned by the SMSF Professionals’ Association of Australia (SPAA) and Vanguard Australia, found people are willing to pay extra for good strategic advice.
“The survey found there was a strong correlation between the levels of satisfaction with financial advice and what people paid their advisers,” said Rice Warner founder and CEO, Michael Rice.
“Less than half (44 per cent) of respondents are satisfied when the advice cost less than $500, perhaps indicating that simple advice is not sufficient in this complex professional area.
“Conversely, people who paid $1000 to $2000 are more likely to be satisfied with the advice (76 per cent). And reinforcing this point is the fact that the respondents are strong users of a range of advice services – 87 per cent wanted strategy and investment advice.”
Huge opportunity for advisers
In this respect it comes back to commonsense principles: advice costs more if it is complex. For strategic advice, 25 per cent of plans cost more than $2000, while for advice that includes strategic advice and assistance in making the investments, 50 per cent of plans cost more than $2000.
The Rice Warner survey asked SMSF trustees 69 questions to identify the financial needs of members and to review their general concerns about retirement. 384 trustees took part – including many clients of SPAA members – with 279 completing it in full.
Vanguard principal of market strategy and communications, Robin Bowerman, said the survey reconfirmed the huge opportunity for advisers with SMSFs driving growth in the need for specialised advice.
“The value of good advice comes through clearly in this report and advisers should take heart that the huge growth in SMSF establishment will in turn drive growth in the need for advice,” he said.
“For advisers developing their value proposition, the survey also demonstrates the level of sophistication of these self-directed investors with their asset allocation decisions showing clear differences in pre and post retirement choices – in particular the shift from commercial property as the investor advances into their retirement years.”
Develop a value proposition
SPAA CEO Andrea Slattery said her organisation would continue to stand for higher competencies for specialist advisers and auditors in the SMSF sector.
“SPAA spends a lot of time and resources promoting the benefits of specialization, with our accreditation program the first in this field to recognise practitioners who had attained high levels of competency,” she said.
Rice says the survey found that 66 per cent of respondents considered their adviser met their expectations, while 34 per cent of respondents were not satisfied.
Some of the negative comments included:
- The adviser is more interested in the products sold rather than the return for the client.
- Advice given is too simple and general in nature for the cost to be justified.
- The adviser doesn’t make contact; the client has to contact them.
- Financial advice from the major channels is highly conflicted by what is on their approved product lists and platforms.”
Rice says half of the respondents intend to seek professional financial advice in the future.
“There is a clear relationship that, if someone was satisfied with previous advice, they are willing to pay more for the next piece of advice with 75 per cent of people who are willing to pay more than $1000 for future advice are the respondents who say their advisor met their expectations,” he said.
“There is a clear challenge for advisers in these findings: Develop a value proposition for your clients.”
