The demand for advice has doubled in the last five years, with 2.6 million non-advised Australians now saying they intend to seek help from a financial planner in the next two years according to researcher Investment Trends, up from 1.3 million in 2015.
The pandemic has sparked a surge in the need for advice, with half a million more people indicating they intended to seek advice since the 2019 survey, when the figure was 2.1 million.
“Against a backdrop of economic uncertainty and volatile markets, a record number of non-advised Australians realise they need professional financial advice,” said Investment Trends senior analyst King Loong Choi. “Among these potential advised clients, the pandemic has been a major catalyst, with 44% saying the COVID-19 situation had increased their likelihood of seeking advice.”
The Investment Trends 2020 Financial Advice Report, concluded in July 2020, was based on a survey of 4,501 Australian adults.
While the results support the notion that a large slice of unadvised Australians want financial advice, the research indicates that most potential clients are more likely to pay for limited or scaled advice than full comprehensive services.
Choi noted that while potential clients “overwhelmingly” prefer to receive comprehensive advice over limited advice (76 per cent over 35 per cent), the preference for limited advice “markedly” increases when cost is factored in.
“Still, there are opportunities to transition those who want limited advice to a holistic advice offering, since the vast majority of potential clients (61 per cent) are open to upgrading to comprehensive advice over time,” the analyst added.
Richard Jackson, an adviser at Richard Jackson and Associates, says a lot of the increased demand is due to demographics. “The Boomers are retiring and increasing numbers of them have had super for 30 years or so,” he tells Professional Planner.
The compliance burden
According to Stickman Wealth adviser Berin Delforce, increased demand for advice is a good sign but only translates into more advice for Australians if there is a regulatory framework that supports the delivery of that advice.
“Currently we have an overburden of compliance, regulatory oversight and body membership requirements,” Delforce says.
Policy makers do have a hard job in shepherding the advice industry into a profession, the adviser says, but more needs to be done to minimise the compliance burden.
“The cost to serve our clients increases, meaning that people who need advice can’t get it even though the demand may be there,” he says.
Reaching out to clients
Advisers have stepped up during the pandemic and increased their level of engagement with clients, according to the report, with three in four existing advice clients having been in contact with their adviser to discuss the impact of the pandemic by July this year.
Clients reported that most commonly it was their adviser that reached out to them (49 per cent), while 24 per cent said they were the ones to reach out.
“Most financial planners have proactively engaged with their clients during this period,” Choi said, noting that the market volatility of March and April was a typical catalyst.
The proactive engagement was well broadly received; the report says clients who initiated first contact typically reported lower satisfaction levels (56 per cent) than those whose whose adviser reached out to them first (73 per cent).
Jackson says he pro-actively contacted his clients during the early months of the pandemic and, in most cases, adjusted portfolios. “These actions were very well-received,” he adds.
When advisers do reach out, Choi said, it needs to be through the channels that are most in demand right now.
“In light of the lockdowns, just a third of advised clients still insist on receiving face-to-face review meetings (down from 48 per cent in 2019),” he explained. “Appetite for alternative, socially distanced regular reviews has substantially increased.”
Delforce agrees, and says newer, alternative channels of engagement are linked to the continued demand for holistic advice.
“The face of advice is changing and the engagement methodology is changing,” Delforce says. “Social collaboration and more entrepreneurial approaches have been taken through the use of digital marketing and social media, bringing awareness.”