The argument surrounding financial literacy and its impact on advice has been going on for three years under the guidance of Griffith University associate professor of finance, Mark Brimble.
Every year, final-year students debate whether the financial literacy of consumers has an impact on people seeking advice and the process of giving advice.
Brimble says the important question is, “Where does the planner sit when the client fundamentally doesn’t understand some of the elements of the advice being given to them?”
He says the outcome tends to be twofold:
Some argue that it’s the role of the planner to give the clients that advice and to educate them along the way so that they can make informed decisions
The counterargument is that clients come to advisers for those services and if they become too educated then they won’t need a planner’s help
The University set up the debate to get students thinking about how they would tackle such issues when they’re in the workforce. This year students were leaning towards the first option, but last year students were in favour of the second, says Brimble. There isn’t a right answer, but there should be a middle ground depending on the consumer, he says.
“Some clients take the attitude that they are paying for professional advice and they want the adviser to do their thing and they’re not so interested in the details. While others want to be more involved in what’s going on and need a lot of information and guidance on the opportunities they have in front of them.
“In the middle of that there is a base level of knowledge... What that is, is something that will be debated, and something we need to invest a lot more time in understanding.
“There’s very little research on the impact of financial advice over time; the client’s understanding of that, the client’s understanding of risks their exposed to. Until we conduct that research, we’re just venturing an opinion, and that’s a big issue for the profession to deal with if it wants to become a profession – to build that body of knowledge around the whole advice process.”
Do you think there should be a base level of knowledge? How much should you educate your clients? Share your thoughts below.
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