This article is the fourth in a series written by leading retirement website YourLifeChoices. It draws on surveys that show the level of satisfaction with the financial services sector.
YourLifeChoices’ members say that they are less likely to seek advice from financial advisers in the aftermath of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Tellingly, for those who have sought financial advice, satisfaction with the quality of the guidance has fallen sharply from 75% to 50% in the past two years. Our members are aged from 55 to 75 years and have a focus on maximising their retirement income.
Reasons for not visiting a financial adviser
Two years ago, the YourLifeChoices 2016 Insights Survey showed that of 4,155 respondents, 57% had visited a professional to discuss finances in the previous year.
The main reasons given for not visiting a planner were:
- Perceived high costs
- Insufficient assets or funds
- Ability to satisfactorily manage their own financial affairs
- Lack of trust in the profession.
Many responses complained of financial planners pushing their own products. Another sizeable group said they did not understand how to assess the quality or independence of the guidance. Still others claimed they had received bad advice that had hampered their returns, which had put them off seeking financial advice again.
Royal Commission will affect use of advisers
Early this year, the 2018 Insights Survey found the proportion of members that had sought financial advice had grown from 57% in 2016 to 63%. However, by July 2018, after the Royal Commission had been in hearings for a few months, members started to lose faith in the financial services sector. The percentage of those who had or would consider consulting a financial adviser about their retirement had fallen to 53%.
The vast majority of members, 86%, say they manage their own finances, although some may also see a financial adviser. In the YourLifeChoices Boomer Consumer Survey undertaken in October 2018, 37% said they would be willing to take an average risk in order to receive average returns. Almost 9% said they would take substantial risk with investments and less than a third said they were not willing to take financial risks.
Asked where they had sought advice, of 1,719 respondents, about 500 had reached out to their superannuation fund and approximately 500 to their own financial planner. The next highest category was banks (about 200 respondents), an accountant (158) and Centrelink (140).
The recent Interim Report on the Royal Commission’s findings continued to highlight failures in the financial planning sector, leaving many Australians wondering if they should pay for advice. Commissioner Kenneth Hayne said about those providing advice.
“Whether the conduct is said to have been motivated by ‘greed’, ‘avarice’ or ‘the pursuit of profit’, it is conduct that ignored the most basic standards of honesty.”
Winning back client confidence
On World Financial Planning Day in October 2018, the Financial Planning Association of Australia outlined six steps to help people locate a reputable adviser. We outlined those steps in an article, Who can you trust with your money?.
Judging from the responses to that article, it will take more than a how-to guide to restore confidence in this profession. Here is a sample of what retirees said:
- “Why is it taking so long to bring in education/regulations for new and existing advisers? This should be immediate. Why should it take five years for current advisers to meet the required standard? Either they meet it now through ‘recognition of prior learning’, which allows for experience to be accepted, or they should be suspended from working until they can.”
- “Massive internal changes and changes in ethos are required now to restore any faith or trust in financial institutions.”
- “Financial advisers want profit, and they will always put their own income ahead of client interests. (Now) they will make noises. They will change the technicalities in a few rules, but nothing will change for the client.”
Other survey respondents blamed the regulators – the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA). They are, after all, entrusted to ensure misconduct in the financial services sector is minimised.
Olga Galacho is a writer at YourLifeChoices, Australia’s leading retirement website for over-55s. It delivers independent information and resources to 230,000 members across Australia.