Planners and clients: mind the gap

Financial planners are delusional about the value they add and over-estimate their clients’ appetite for risk, according to new research from Queensland University of Technology Business School.

Preliminary results from QUT Business School’s Value of Financial Planning Advice ARC Linkage Project reveal a considerable mismatch between the perceptions of financial advisers and their clients.

All of the advisers surveyed by QUT said they contributed to their clients’ sense of security and peace of mind, yet only 75 per cent and 72 per cent of clients, respectively, agreed.

Around 90 per cent of advisers said the financial planning process reduced clients’ levels of worry and gave them a sense of control over their finances, yet only 66 per cent and 70 per cent of clients, respectively, agreed.

Over 500 clients and 77 financial advisers participated in the ARC Linkage Project between September and December last year. Its primary aim is to quantify the effects of the financial planning process on consumer well being.

Speaking at the Financial Services Council conference last week, Queensland University of Technology Professor Natalie Gallery said the research showed a gulf between the views of advisers and their clients.

Gallery said financial advisers were quick to take credit for contributing to their clients’ positive financial outcomes but tended to hold clients accountable for negative ones.

“The adviser thinks the client has played a bigger role in negative outcomes than the client does,” she said.

The research also showed advisers rated their clients’ risk tolerance much higher than the actual clients. Only 12 per cent of clients assessed their risk appetite as “aggressive”, compared to 21 per cent of advisers. A further 45 per cent of clients described their risk appetite as “moderate”, compared to 50 per cent of financial advisers, while 42 per cent of clients said they were “conservative” against 29 per cent of advisers.

Gallery said the university was about to embark on the next stage in the project and urged the financial planning community to get involved.