The compliance anxiety being experienced by some financial advisers in the wake of pending industry reforms is being transferred to clients, with an increasing number questioning their advisers’ technical abilities.
The latest Lifeplan ICFS Financial Advice Satisfaction Index found consumers have become significantly less happy with the technical abilities of their advisers over the past six months.
The latest in a series of surveys of financial advisers’ clients, undertaken in April, sought feedback about the performance, trust and reliability, and technical ability of their financial advisers.
However, it was not all bad news with two other indicators showing improvement.
Since the previous survey in October 2012, perceptions of financial advisers’ technical abilities have dropped by 4 per cent, while the other two drivers – performance, and trust and reliability – have both improved, up 11.6 per cent and 5 per cent respectively. The strong perceptions of performance helped pull the overall index up by 3.1 per cent.
Change causes confusion
Matt Walsh (right), head of Lifeplan, said some of the most likely reasons for the drop in perceived technical ability relate to the ongoing regulatory change affecting the financial planning sector, and overall loss of confidence in, and confusion about, the Future of Financial Advice (FoFA) reforms.
“Clients have been exposed to the significant changes taking place in financial planning, such as the impact of FoFA requirements including fee-for-service, which can easily be misinterpreted as critical of financial planners,” he said.
“There are two probable causes. Firstly, clients could well be thinking, ‘There must be an issue if the government is creating regulation to fix it’.
“Secondly, the effort of responding to the changes has distracted advisers from the very thing they’d prefer to be doing – working with their clients and giving quality advice.”
Walsh said many clients could still be unfairly blaming their advisers because they have missed out on recent market gains or waited too long due to conservative investment strategies.
Contact and information reign supreme
“The movements over time in the Lifeplan Index indicate client communication is a critical aspect of the relationship,” he said.
“There needs to be more individual contact to give advisers the opportunity to explain how they are dealing with the many issues around, and show they have the skills and knowledge to manage them.
“Education and information programs for clients will also enhance relationships and show the adviser has the technical knowledge required, and also helps reinforce the image of trust.”
He pointed out that those who have had an adviser for only a short time are more likely to have a positive perception of their advisers’ technical abilities than those who have had an adviser for a significant period of time.
“This is probably because advisers have spent more time with new clients than those they have had for some time.
“The perception of technical ability among those who have only had an adviser for two years or less has improved since the last survey, and it is those who have had an adviser for 10 years or more who have displayed a decline in their perception of their advisers’ technical ability,” he said.
“It would make sense for advisers to consider ways to remove themselves from the ongoing noise and distraction around legislation and market movements, and ensure they are maintaining a healthy range of advice strategies that are not dependent on market performance or superannuation alone, with a focus on communicating this to clients.”
