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Senior Australians’ changing relationship with financial advisers

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.

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5 Comments

Jason M

December 03, 2018

The comments here are based on the incorrect thought that Financial Planners manage investors money. What we actual manage is investors behavior.

When you manage an investors behavior and use the tools of tax laws, centrelink laws, estate planning, cashflow planning, forecasting software, and have an understanding of a persons goals, but not only understand those goals but understand why they the person want to achieve those goals and why it's so important. Having a person on your side like that and walking beside you is a pretty important ally.

Carolyn

November 30, 2018

The general impression that financial advisors want to make my money their money, with the least possible input or hard work, is probably true of a percentage of fin advisors to the detriment of the good ones, but unfortunately, they are all tarred with the same brush.

For me, I am sticking to a good performing (over 10 Years) industry fund for my super. I will put the rest of my money into diversified dividend paying shares with DRI programs. The shares I invest in will be well-known brands I like to use or who have long-standing strong performances. For tax advice, I will consult my accountant. I will let compound interest do the rest.

I will continue to take an interest in investing and continue to educate myself on the subject. Upon retirement, I shall reevaluate and probably get advice via my trusted industry Superfund.

I am sure there are flaws in my plan but to be honest I don't think I could do any worse than most fin. advisors and if I am going to lose money I would rather it be because of my mistakes than the mistakes of an advisor to which I have paid thousands of dollars, which I could have invested as above.

Eliza

November 30, 2018

I am with you Carolyn, why pay someone to lose your money when you can lose it for free. It boils down to risk and trust. One tends to trust the risk you knowingly take.
Unfortunately we are at the stage when we need someone to do the Admin so now have to “trust” someone. We have structured our finances so not all eggs in one basket- not ideal but not totally vulnerable. You cannot move a SMSF to an Industry or Retail Fund without losing the Tax Free balances. To keep those Pensions, you are required to have an account for each Pension, equaling multiple account fees!

Ann

November 30, 2018

Absolute rubbish. Out of 300 clients that I have not one of them understands why we are all being punished because of the bad behaviour of few individuals and mainly large institutions. Getting a degree doesn't make someone honest nor give them automatic empathy or life experience.

Steve

November 30, 2018

In relation to fee conscious retirees, I trust they find their experience at Centrelink is enjoyable instead then. Last time I visited our local Centrelink office there were 5 police officers chasing an escaped prisoner around with guns. Enjoy the low fees....


 

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