Almost half of advised clients (43 per cent) attribute the reason for ending the relationship with their financial adviser to be the cost of advice, according to a report from Netwealth.
The platform provider’s Creating loyalty that lasts report found that clients will use cost as a justification because they believe they either don’t see enough value or they feel like their finances are large or complex enough to justify the cost.
Some 36 per cent said the reason for lapsing was wanting to manage finances independently, with 29 per cent believing they’d learnt everything they could from their adviser.
But 17 per cent of those who stopped seeing a financial adviser say they are “not receiving value”, and 14 per cent lapsed because they were unsure about the quality of the adviser.
The report defines three distinct groups of clients to show how the perception of value changes for different types of clients: “newcomers”, being clients with an adviser for under three years; “settled” clients who have had an adviser for between three and five years; and “loyals”, the clients who have had an adviser for over six years.
The research finds clients believe their adviser delivers more value over time, with “newcomers” rating the value they receive at 7.2 out of 10, “settled” clients at 7.8 and “loyals” at 8.2.
The report’s findings also showed confidence in one’s financial literacy and ability to handle finances was another driver of clients’ no longer using an adviser.
The research suggests this confidence in one’s self-sufficiency is slightly misguided, with almost half (43 per cent) of classified “loyals” considering their financial literacy to be very high. In reality, the same percentage have low financial literacy and only 2 per cent have high financial acumen.
An even higher percentage of “settled” clients (50 per cent) perceive their financial literacy level to be high when the number is also about 2 per cent.
Across the three groups, perceived financial literacy is significantly higher than the actual scores when these clients underwent a standardised financial literacy test set by Netwealth.
Even 57 per cent of newcomers consider their financial literacy to be moderate when it is in fact low for 79 per cent.
Last October, the Financial Advice Association’s Value of Advice Index found nine out of 10 advised clients believed the benefits of financial advice outweighed the cost, contradicting findings from the Netwealth report.
The Value of Advice Index found the quality of life improved for advised clients from 68 per cent in 2023 to 77 per cent in 2024. This included improved personal wellbeing, confidence in finances and a reduction in financial worries.
