The financial planning sector has been the focus of government and regulatory attention over the past decade. Part of this concern relates to perceptions about the quality of the relationship between, and advice from, financial planners to their clients, with such things as education and professional standards, structure of fees and clients’ interests all areas of concerns.
This has led to the recent legislating of the Future of Financial Advice (FoFA) reforms in 2015 which includes a best interest duty, a ban on conflicted forms of remunerations and further licensing requirements. Further regulation on enhanced professional and education standards is also expected.
However, what attributes determine a quality relationship between financial planners and their clients? Research prior to the introduction of FoFA in 2009 surveyed 106 Australians (either financial planners or clients of financial planners) about what characteristics were determinative in a quality professional-client relationship. This research found that of factors measured, trust was the most critical for a quality client-professional relationship (Hunt et al., 2011).
While both financial planners and clients rated “trust” as the most important, there seemed to be a misperception of advisers about what their clients thought of them, as financial planners perceived a higher level of relationship quality compared to what was reported by clients. This non-alignment of ‘trust’ is of concern as the concept of trust was found to be a significant positive indicator of relationship quality.
Furthermore, research from South Africa (van Tonder; 2016) found that trust had a significant positive relationship with consumer loyalty towards insurance agents.
Participate in the survey, Relationship Quality – Beyond the dollar of financial planning
Empowerment through improved financial literacy
Another positive indicator in the Australian research, pre-FoFA, of good relationship quality was client engagement, with clients valuing engagement more than financial planners realised they did (Hunt et al., 2011). After trust, the next four important factors for relationship quality from the client’s perspective (in order) were commitment, engagement, ownership and client activity. While financial planners recognised the importance of most of these factors identified by clients, financial planners did not fully recognise the importance of the ‘empowerment’ to relationship quality.
This pre-FoFA research led the authors to recommend that education of financial planners should reflect ethics and subsequent trustworthiness of clients, and that regulation be in place to support this development. Also, the authors argued that financial planners should consider ways they could empower their clients more, in particular through financial literacy, to assist clients to understand how their wealth grows.
Also of interest is how the recent and ongoing reforms and reviews have affected the attributes that contributed to client-professional relationships in the financial planning sector. Also, to what extent does empowerment through improved financial literacy affect this? Researchers at Griffith University are commencing research, supported by the financial planning industry, which will examine the financial planning client relationship to determine which aspects of the relationship contribute most to relationship quality in financial planning. This will provide a pre and post-FoFA comparison regarding financial planning client relationships, as well as update the literature and provide updated evidence to inform policy and practice.
Participate in the survey, Relationship Quality – Beyond the dollar of financial planning
Expanding the research
The research project seeks to expand upon the 2009 research (Hunt et al, 2011), as well as consider whether the moves towards greater professionalism has affected the client-professional relationship. The researchers are seeking participation from both financial planners and their clients to undertake a short anonymous 15 minute online survey.
Recognising the importance of this research, it has been assisted by a grant from the Financial Planning Education Council through its Academic Research Grant Scheme, sponsored by the Financial Planning Association of Australia. Industry is also involved, with GPS Wealth co-funding the project.
Consequently, research into financial planning relationships is more critical than ever. The past few years have seen the reputation and trust of financial planner’s slide as government and media focus on advice and product failures has attracted headlines. The relationship between a client and their adviser is a complicated thing, being a mix of technical, behavioural and financial issues which is surely more than just about dollars. Thus furthering our understanding of this through evidence is of importance to inform practice and policy developments.
Participate in the survey, Relationship Quality – Beyond the dollar of financial planning
