When it comes to choosing an adviser, almost a quarter of Australians who say they’d seek advice would look for an own-AFSL adviser to get it from, according to new CoreData research.
Where consumers say they would seek out a specific licensee, Commonwealth Financial Planning leads the way, followed by Westpac – even though that bank is currently withdrawing from providing face-to-face advice – and AMP.
About three in 10 (29.7 per cent) people say they would seek advice from an “other” licensee – and the list of names that cropped up when they were asked to nominate which licensee was extensive, containing names of both licensees and authorised representatives (suggesting lack of awareness of what licensees are and what they do), and a range of other responses, including “accountant”, “family member” and “government-recommended” advisers.
Australians are also significantly more likely than they were this time last year to seek financial advice in the event of receiving a windfall gain, and they are most likely to seek advice from an own-AFSL firm, according to the research.
But even as Australians indicate a renewed willingness to seek financial advice, overall trust in the advice industry remains stubbornly low.
Our latest survey of trust in financial services has revealed that the percentage of Australians who say they would seek advice if they were to receive a $1 million cash sum leapt to almost 60 per cent in the second quarter of 2019, after hovering around the 30 per cent mark for each of the five previous quarters.
By comparison to those who say they’d seek advice, about half as many (30 per cent) say they would leave the $1 million in a bank; and about one-sixth the number (10.3 per cent) say they’d put it into superannuation. Hardly anyone (0.5 per cent) says they would buy, or buy more, life insurance.
This apparently renewed confidence in financial advice still isn’t yet reflected in CoreData’s regular and broader analysis of trust. Before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry kicked off in early 2018, trust in financial advice stood at 60.1 per cent*.
In the latest survey trust stands at 39.9 per cent – still well below its pre-royal-commission level, but up slightly from a low point of 35.2 per cent recorded in the second quarter of 2018. For the first time, in the latest survey, CoreData asked respondents to rate their level of trust in accountants, and the trust score for that profession came back at 55 per cent, indicating that accountants remain far more broadly trusted within the community than financial advisers, and illustrating the gap that the advice industry needs to try to close.
The CoreData research has found that almost half of all financial planning clients do not know who authorises their financial adviser to give them advice. Even though the identity of the adviser’s licensee must be disclosed in a Financial Services Guide, and it’s a legal requirement that the FSG be provided by the adviser to the client, 47.2 per cent of clients cannot name their adviser’s licensee. It’s not clear if that’s because they did not receive an FSG at all; if they received an FSG but didn’t read it; if they received an FSG and read it, but have forgotten the identity of the licensee; or whether they just don’t care.
Almost a quarter of clients say they do know their adviser is self-licensed. It seems that clients are more likely to know (or to remember) their adviser is self-licensed than if they are licensed by one of the major institutions.
Even so, and even though licensee brand names clearly do not resonate strongly with the public, CoreData’s 2019 Licensee Research, conducted in parallel with the Q2 2019 trust research, has found that advisers generally rate the brand strength of their licensees reasonably highly, but the same can’t be said for the marketing support licensees are providing to advisers.
More than half (55 per cent) of advisers rate their licensee’s brand strength a six or higher, with 45 per cent rating the brand strength 5 or less including 8 per cent who rated the licensee brand strength as absolutely zero.
The support provided by licensees is, across the industry, rated as patchy. Only four in 10 (39 per cent) advisers rate their license marketing support a six or higher; well over half (57 per cent) rate marketing support as five or less, including 11 per cent who rated their licensee’s support as zero. (Three per cent of advisers declined to provide a rating).
Financial advisers are facing a multitude of challenges in their practices as new regulations sweep across the industry, including the task of retaining desirable clients and attracting new ones. Licensees, as a whole, do not appear to be offering a terrific job of backing advisers in this regard. If licensees want to support advisers and help advice practices grow by establishing a profile and attracting new clients, then revisiting the level and effectiveness of marketing support they provide would not be a bad place to start.
* The trust score is calculated by asking respondents to rate their trust in a sector of the industry on a scale from zero to 10, where zero denotes complete mistrust and 10 denotes complete trust. The trust score is the percentage of respondents who rated their trust in a sector at six or higher.
