Demand for financial advice surges as Australians grow more concerned

Key findings of the Investment Trends 2014 Advice & Limited Advice Report:

– Demand for financial advice surges as Australians grow more concerned
– Cost remains the largest barrier to further growth of the financial advice market. Advice providers can circumvent this by providing limited advice and transition these clients to different advice models as their needs develop
– However, the industry is still wrestling with how best to deliver limited advice

The 2014 Advice & Limited Advice Report is an in-depth study of Australian adults’ usage and appetite for financial advice. The study is based on a survey of 6,256 Australian adults concluded in late 2014. This year’s study highlights a number of interesting trends:

Demand for financial advice surges as Australians grow more concerned

After declining from 3.0 million to 2.4 million over the four years to 2013, the number of active financial planner clients began recovering again, reaching 2.5 million in 2014.

“Not only are clients rating their planners better overall in 2014 than in 2013, they feel they’re getting significantly more value out of their relationships,” said Investment Trends Analyst King Loong Choi. “This has driven a natural uplift in client referrals.”

Looking forward, there is increasing demand for financial advice, with 1.9 million Australian adults saying they intend to look for a (new) financial planner within the next 2 years, up from 1.5 million in 2013. This is partly driven by Australians becoming more concerned about their finances.

“The increase in demand for financial advice is partly driven by Australians becoming more concerned about their finances,” said Choi. “In particular, Australians are more worried about the adequacy of their retirement savings, the impact of inflation, and managing their cash flow.”

Cost remains the largest barrier to further growth of the financial advice market. Advice providers can circumvent this by providing limited advice and transition these clients to different advice models as their needs develop

There remains a vast gap between the cost of delivering comprehensive financial advice and what consumers expect advice should cost. This discrepancy continues to act as a barrier to a greater take-up of financial advice among Australians.

“When cost is taken into account as a factor, only a small proportion of Australians would prefer to receive the traditional model of comprehensive advice delivered face to face,” said Choi. “Instead, there are five times as  many Australians who prefer to receive limited advice if it’s delivered at a lower cost.”

Most people are very open to transitioning between different advice models. This means that while people may initially prefer limited advice, they are still open to receiving comprehensive financial advice.

“Financial planning businesses need to consider developing a multi-pronged advice delivery approach to both help attract and retain clients,” said Choi. “Planners have already started to recognise this opportunity, with half saying they intend to provide more limited advice in 2015.”

However, the industry is still wrestling with how best to deliver limited advice

The early experiences of limited advice clients typically trail that of financial planner clients. Overall satisfaction with limited advice providers is 11% lower than with comprehensive advice delivered by a financial planner, on average.

“The actual experiences of those who have received limited advice doesn’t appear to be lining up to what they were expecting. If a person gets limited advice from their bank or super fund, then, given that they have an ongoing relationship with their bank/super fund, they expect the bank/super fund to follow them up on it occasionally – limited advice may not be as one-off as the industry expects.”

About Investment Trends

Investment Trends is the leading specialist market research organisation in the Australian wealth management industry. We provide new insights and decision support information to over 200 leading financial services businesses.  We combine analytical rigour and strategic thinking with the most advanced research and statistical techniques to help our clients gain competitive advantage.

Investment Trends’ clients include all of the top five Australian banks, the top ten investment platform providers, the top five online brokers, as well as industry regulators, leading margin lenders, dealer groups, financial planning software providers and risk product providers.

About the report

The results are drawn from the Investment Trends 2014 Advice & Limited Advice Report. This report is based on a survey of 6,256 Australian adults in late 2014.