Financial advisers believe improved consumer financial literacy is key to enhancing the reputation of their profession, and see themselves as being primarily responsible for driving that improvement. These are two of the headline findings from a recent survey of advisers conducted by Lewers Research on behalf of Zurich Financial Services Australia Limited (Zurich).
The same survey also found that advisers believe pro-advice messages from the industry– including institutions and professional associations – are likely to lack credibility with consumers, and believe that endorsements from colleagues, family and friends are more effective.
The random survey of 227 advisers active in the life advice sector sought to examine adviser attitudes towards consumer financial literacy, including the role that education plays in the advice process and the methods used improve financial knowledge.
Of those surveyed, 93.4 percent agreed that customers who were more financially literate were “more likely to understand, value and accept” the advice they were given, compared to just 6.6 percent who felt more financially literate clients were more likely to self-serve.
Along similar lines, 87 percent agreed that improved literacy would directly and positively impact the reputation of the financial advice profession.
When asked specifically about who held primary responsibility for improving life insurance literacy, almost half (49.8%) said it was advisers themselves, with 46.3 percent believing the responsibility should be shared between advisers and life insurers. Only 1.3 percent responded that the government should be primarily responsible.
Zurich’s Head of Distribution for Life and Investments, Kristine Brooks, said the findings show it is clear that most advisers understand that more financially savvy clients are more likely to place a high value on professional advice and actively seek it out.
“Rather than encouraging people to self-serve, high levels of financial literacy can actually help reinforce clients’ appreciation of the value of advice, encourage deeper relationships, and increase loyalty and advocacy for their own adviser and for the advice profession generally”, said Brooks.
When asked about the most credible source for pro-advice messages, 56.4 percent of those surveyed said consumers were more likely to trust and pay attention to messages from a relative, friend or colleague, and 11.4 percent said such messages would be most credible if delivered by advisers themselves. Messages from institutions (4%) and professional associations (3.1%) were seen as the least credible. Client testimonials were also seen as ineffective (4%).
“In this context, the research is telling us that the best and most effective people to promote financial advice are existing advice customers, and the more financially educated they are, the more likely they are to be advice advocates”, Ms Brooks said.
“It does invite the question whether, in our quest to see more Australians access quality financial advice, we should be doing more to leverage the advocacy of the 20 percent who already use an adviser, rather than focussing primarily on the 80 percent who don’t.
“It can be argued that, based on these finding, our industry should devote an equal amount of effort to making advocates of existing customers by helping them better understand the advice and underlying product solutions recommended to them.”
Zurich’s research also offers clues as to how client education could be improved. The findings show that only one third (35.7%) of advisers are using multimedia educational resources such as online tools, apps and videos with their clients.
“Tapping into the power of video and other interactive educational resources can create a more engaging and contemporary client experience and is also more likely to improve the effectiveness of adviser efforts to impart their knowledge and wisdom”, said Ms Brooks.
