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 (QUT) 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 say they contribute to their clients’ sense of security and peace of mind, yet only 75 per cent and 72 per cent of clients, respectively, agree.
Around 90 per cent of advisers say the financial planning process reduces clients’ level of worry, and gives them a sense of control over their finances, yet only 66 per cent and 70 per cent of clients, respectively, agree.
More than 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 wellbeing.
Queensland University of Technology Professor Natalie Gallery says the research showed a gulf between the views of advisers and their clients. She said financial advisers were quick to take credit for contributing to their clients’ positive financial outcomes but tended to make the client more accountable for negative financial outcomes.
“The adviser thinks the client has played a bigger role [in negative outcomes] than the client does,” she said.
The research also shows advisers rate their clients’ risk tolerance much higher than the actual clients do.
Only 12 per cent of clients assess their risk appetite as “aggressive”, compared to 21 per cent of advisers.
