Most would agree that trust and confidence in financial planning are absolutely essential to the industry’s future and a key to more Australians seeking financial advice.
However, an objective reading of the media in recent years would have us all believe that our industry is anything but trustworthy and is undeserving of the public’s confidence.
To test how this perception manifests among advice businesses and their clients, MyNextAdvice conducted a study of the state of financial planning in Australia. In January and February this year, we allowed access to our service for any practice that wished to collect feedback from its clients based on a survey measuring the client experience across a range of 12 drivers. Below is a summary of the results.
Participation:
A total of 2139 invitations were sent to clients to complete a combination of online and offline surveys and 843 responses were received. Responses were received from clients from most mainland states, including New South Wales, Victoria, Queensland, South Australia and Western Australia.
Participating practices received a report enabling them to compare their results with those of their peers. They were also able to use their results to calculate client lifetime value, and identify valuable client segments and referral opportunities.
Results
Overall, the clients of participating practices are more than satisfied with their experience, which is at odds with current negative perceptions portrayed in the mainstream media. Key results include:
Understanding: examines the extent to which the planner understood the client’s financial situation, needs and goals. Clients scored their planners at 92 per cent, which indicates that planners are doing a great job of making sure they clearly understand their clients’ needs. This result should lead to a greater degree of confidence in the industry for anyone thinking about reaching out for advice.
Communication: the importance of being able to communicate clearly the nature of the advice and how it fits the client’s circumstances is central to the whole advice process. Once again, clients scored their planners at 92 per cent.
Best interests: not only is this a critical legal requirement for all planners, it is a central plank in being able to create trusted relationships with clients. Clients rated their planners at 92 per cent.
Value for money: planners need to demonstrate to their clients that they are delivering a service that represents good value and that seeking advice is a worthwhile endeavor in the short and long term. Clients rated their planners at 88 per cent, which indicates that there’s some way to go to convince clients of value.
Trust: central to any meaningful relationship. Without it, not much can happen. If we believe the headlines, no one trusts planners and the situation is deteriorating every year. But there is good news on this front, because 90 per cent of clients stated they trusted their planner completely.
Advocacy: how willing a client is to refer other people in their network to their planner and the real test of whether a planner has a strong relationship with clients. In this survey, 8 per cent said they would discourage others from doing business with their planner. This underscores the need for individual planners to address issues quickly to minimise reputational damage.
Our proprietary metric (Strength of Relationship Index or StoRI Score) assesses the strength of relationships between clients and their planners. The mean score on this measure was 90.7 per cent (the best-performing planner was rated 98.6 per cent and the worst was rated 74.5 per cent).
Based on the results of our study, it is clear that trust and confidence are present in spades among existing clients, but individual practices and the industry need to do much more to spread that message to the general public. The main areas for planners to focus on include value for money, trust and satisfaction. Suggested actions include:
- Communicating to clients how they bring objectivity to the table
- Anticipating clients’ life transitions and preparing proactively
- Recommending a reading list of resources clients can use to improve their financial literacy
- Clarifying what results the client wants and surpassing expectations
- Quickly acknowledging mistakes and implementing solutions.
Clients are among the most powerful sources of truth. Practices should be using their client relationships to establish trust and confidence with prospects and improve the reputation of the wider industry. The primary goal should be to encourage more Australians to seek financial advice from a professional.
Simone Poulter is co-founder of MyNextAdvice.
