Higher educated and high-income financial advisers have seen improved client relationships, while lower educated advisers have no change in relationship quality according to research.
The report released this week, ‘A Move in the Right Direction: Client Relationships in Financial Advice’, compared advice relationship quality between 2009 to 2016 which covered the industry’s change of perception during FoFA reforms, but before the Hayne Royal Commission.
The research found advisers with low education (below a bachelor’s degree) had no change in perceived relationship quality from 2009 to 2016, while educated (at least a bachelor’s degree) and high-income financial advisers had increases across relationship quality, trust, engagement, and empowerment.
Griffith University financial planning lecturer Katherine Hunt co-authored the report with fellow Griffith academics Mark Brimble and Brett Freudenberg. Hunt tells Professional Planner the implementation of professional standards in the industry is not a causation that can be validated from the data.
“It’s hard to know with a correlation,” she says. “Higher educated advisers had a higher increase in relationship quality, but we don’t know if that’s because advisers who are more invested in their client relationships went in and received more education or if the education caused more investment in relationships.
“We don’t know which way that correlation goes and what is the chicken or the egg.”
Hunt says the findings show trust is the key element of relationship quality. “It was then and it still is now,” she says.
Period of turmoil
The period between 2009 and 2016 included the FOFA reforms, the anticipated implementation of the code of ethics, and talks of professionalising the industry.
“There was quite a period of turmoil from the data collected in 2009 and 2016,” Hunt says. “We hadn’t had the royal commission yet but there was still a lot of media interest in financial advice and still the higher educated advisers got a significant increase in their relationship quality based on the sample.”
Additionally, it is the events during this the time period that led to the royal commission.
“[There was] Storm Financial and everything that happened post-GFC so there was a lot happening in the media in financial advice,” Hunt says.
Post-RC world
The limitation to the research is that the landscape post-royal commission has further drastically changed the industry, but Hunt says she predicts that given the trend from 2009 to 2016 client relationships have likely strengthened further.
“There’s [now] fewer financial advisers, clients are paying more on average so there’s a bigger self-selection of clients who are going to be more committed to their financial advice relationship to begin with so that would only strengthen.”
