Only one in every three businesses in Australia makes use of a financial adviser. While this proportion is surprisingly low, there is an opportunity for financial advisers, with three in 10 businesses saying they intend to engage an adviser in the next 12 months. These findings come from the latest Bibby Barometer, which has been conducted bi-annually since July 2011 and gauges Australian business sentiment on economic conditions, cash flow, financing and key business challenges.
The survey of 620 business owners, conducted Bibby Financial Services in March, found that just one in three businesses uses a financial adviser, but that three in 10 businesses which currently do not use a financial adviser, intend to use one in the future. However, around one in five businesses have no intention of using a financial adviser at all, possibly reflecting a lack of confidence in the financial planning industry.
Mark Cleaver, Managing Director, Bibby Financial Services Australia and New Zealand, said: “The financial advice industry has gone through a huge shake-up in recent times. Press coverage of banks giving poor financial advice could well have deterred many businesses from seeking financial advice. At Bibby, we encourage businesses to take independent advice from qualified and well-respected financial advisers. In our experience, businesses that seek financial advice make better decisions and are better placed to manage their cash flow.”
The March 2015 Bibby SME Cash Flow Index score of -3.3 reveals that overall cash flow sentiment remains weak among Australian businesses. The Index remains in negative territory and is considerably lower than it was in February 2014 (+5.3), although it has improved from its July 2014 score of -5.8. The Bibby Cash Flow Index, which forms part of the Bibby Barometer, is a composite measure of current cash flow and forward projections, providing a snapshot of Australian businesses’ cash flow expectations.
“The most common areas where businesses seek advice are business advice (59%), tax (57%) and superannuation (33%), while they also seek advice on investing (29%), managing risk (23%) and property investment (20%),” Mr Cleaver said.
“Business advice is less commonly sought by micro-businesses. However, they are more likely than larger businesses to receive advice on other areas, particularly tax, investing, superannuation and family financial matters.
“Family-owned businesses are more likely to use a financial adviser (36% versus 27%), possibly reflecting the fact that the families have more of their financial future tied up in their businesses and are therefore more ready to seek advice,” he said.
By state, respondents in Western Australia are the most likely to use a financial adviser (47%), while those in New South Wales have the greatest intention to use one in the future (33%).
“Queensland respondents are the most likely not to use a financial adviser in the future (25%), which could be due to the optimistic outlook held by these businesses in terms of their future prospects and hence the perception that it’s not necessary,” said Mr Cleaver.
“Businesses in manufacturing are the most likely to use a financial adviser (49%), possibly because of their general pessimism about the economy and cash flow difficulties, which are greater than those of businesses in other sectors.”
“The general reluctance to seek financial advice could also be due to the fact that one in five businesses holds its assets in cash rather than in riskier assets. Compared to July 2014, the proportion of businesses holding more than half of their assets in cash and cash equivalents has fallen slightly (20% versus 22%), possibly reflecting persistently low interest rates,” Mr Cleaver said.
The Bibby Barometer involved questioning businesses employing between 1 and 199 people. Almost half the businesses (46%) employ 20 to 199 people, while close to two in five (38%) employ five to 19 people and one in six (17%) owns a business that employs one to four people. Slightly more than half of the businesses surveyed are family-owned.
