Potential clients say no to advice

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CoreData’s 2012 Financial Planning Shadow Shop has revealed a decline in the intention of potential clients to seek financial advice.

From August to November 2012, shadow shop participants aged between 40 and 60 shopped across 16 of the industry’s major dealer groups. They were actively seeking advice or looking to switch from their current adviser.

Intentions of clients to commit and proceed to a second meeting weakened slightly over the past year. The Intention category of CoreDatas ACQUIRE Index, which shows whether would-be clients were prepared to use or recommend financial planner services, fell from 55.2 in 2011 to 52.

There was also an overall decline in the ability of financial planners to acquire new customers, with the ACQUIRE score falling from 70.1 to 67.8.

The investigation revealed a heightened focus on the value of the planner’s service.

“The findings suggest it is really important that planners are able to demonstrate the quantifiable or tangible benefits of seeking advice, given the cost to would-be clients,” said head of advice wealth and super at CoreData, Kristen Turnbull.

“Often it is the intangible benefits – such as peace of mind and certainty – that are most valued by those clients who have a dedicated financial planner, however in the current environment prospects are heavily focused on how much the service costs and what they get in return.”

The number one expectation potential clients had for a financial adviser was honesty and transparency, highlighted by 72.5% of would-be clients. This was followed by 51.8% who cited value for money.

Ability to enthuse was the second biggest driver, followed by the ability to influence, recommendations suited to client needs and the ability to build relationships.

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  • Pat on 21/01/2013 1:56:50 PM

    @Ben. It seems you can't understand quanta and proportions. Let's try again. You say there are 15,000+ advisers - let's call that 15,000. This number is 100% of the adviser population. 20% of which is 3,000. This is the set of independent or independently owned. Of the 3,000, there is a subset of 20 (twenty) who are independent. 2,980 are simply independently owned.

  • Matt on 21/01/2013 12:27:17 PM

    @Ben you stand corrected. Visit http://www.aiofp.net.au/about-aiofp/our-history/ to see evidence that up to 20% are independently owned. I agree with you that the word "independent" is being throw around like there is no tomorrow.

    There's proof of this above, @Alan considers himself independent but ASIC under s.923(a) of the Corps Act mightn't.

    I agree that being independent doesn't automatically mean my advice is any better, but it eliminates conflicts of interest that there is endless proof are dragging financial advisers name through the mud; so there's a much high probability that my advice is better than a lot of other advisers.

    There are a lot of great advisers stuck in the environment owned by product providers. We're sharing our knowledge through an Advice Academy this year to help advisers make the transition to independence, before they grow tired of being told what advice to give or the perception from consumers that their advice may be tainted.

  • Matt on 21/01/2013 12:16:52 PM

    @Pat - thanks Pat, I was beginning to think I was speaking a language from another planet.

  • Ben on 21/01/2013 11:08:01 AM

    @Pat - Like I said, read my initial comments, I said advisers not practices so obviously it is hard to understand for some. And also Matt states there are less than 20, this is not a percentage. He then says 20% of advisers are independently owned. If anyone is being confusing it is him. My initial comments were fairly simple, there are not that many independent or independently owned advisers around. I stand corrected if ther are 3000+ out there.

  • Pat on 21/01/2013 10:54:03 AM

    @Ben. It may help your understanding to read Matt's comment. He said, in simple terms:

    1 in 5 are independent or indepentently owned.
    20 are independent
    the difference between 20 and 20% constitute the indepenendently owned.

    It isn't too hard to understand.

  • Ben on 21/01/2013 10:38:36 AM

    @Matthew Ross - According to the FPA there are 15,000+ advisers in Australia. You say there are less than 20 independent or independently owned, of which you are one. So by my calculations that is less than 1%. 20% would mean there are over 3000 advisers who are independent or independently owned? Read my comments again - quote 'There are very few that are totally independent'. Nothing confusing about that. This is the problem, people throwing the word 'independent' around like there is no tomorrow. Just because someone is independently owned doesn't mean they are independent! Congratulations to you if you are truly "Independent", but that does not mean your advice is automatically any better than anyone elses.

  • Matthew Ross on 18/01/2013 11:00:58 PM

    @Ben, your message is very confusing. You're right in saying there aren't many independents around, there are less than 20, I'm one of them. Around 80% of advisers (the vast majority as you put it) are aligned to product providers. The other 19.97% or so are independently owned.

    Those of us here on planet Earth who can do math calculate that 20% is 1 in 5.

    Just so we are crystal clear, my comment was an insult on the industry, I am part of the 20% that is part of the profession.

  • Alan on 18/01/2013 9:38:09 PM

    My licensee is not owned by any institution or other entity so I consider myself totally independent. My advice is generic and the particular "product" we may use fills the needs of the individual or business, not the other way around. I would hate to be owned by a bank, superfund or any other institution.

  • MG on 18/01/2013 7:33:17 PM

    Matt don't kid yourself about the independent and independently owned advisers - you are either a good adviser or a bad one. You are either doing the right thing by your clients or you're not.Clients are not dumb -they'll eventually see through the smoke and miirors - and FOFA is going to help them to a certain extent.

  • AB on 18/01/2013 5:34:24 PM

    Listen you lot. The Corporations Act Section 923A(5) clearly sets out that NO ONE can call themselves or refer to themselves as "Independant" in relation to financial product advice.
    You can be "Independantly Owned" but make sure that is actually true!
    As the term 'Financial Adviser" is not legislated in the Corp Act, ANYONE who ISN'T a qualified Financial Planner can use the term.
    I have people referring to their real estate agent as their "financial adviser".
    Any wonder the public is confused.
    The general public has no chance of even knowing where to start to go to get good advice while the term independant is thrown around so freely by "financial advisers". The poor old punters end up suffering from the scams.
    Isn't all this legislation there to protect the punters?
    Try and invest $5000 into a managed fund and look at all the legislation.
    Want to borrow 110% and buy an investment property - no fact find/Needs Analysis - no SOA.
    Roll on the Real Estate Review and lets get national licensing in for investment in direct property and PLEASE bring it in under AFSL, don't create a separate body like has been done with ACL.

  • Adam P on 18/01/2013 5:26:08 PM

    I agree with the over burden of compliance and costs that is deterring clients.
    the solution is to allow Accountants almost free reign with limited AFSL's and bugger all compliance and costs.
    At the same time allowing online and intra fund advice to also flourish again with almost zero AFSL compliance.
    Yet full financial advisers are getting belted with ever increasing compliance - of which results in ever increasing costs and Soa's etc that the client simply dont add any value too but cost a lot of money to produce.
    where is the level plating field ASIC ??

  • Craig HAWKINS on 18/01/2013 3:30:39 PM

    Well said Ben . . . couldn't agree more

  • Ben on 18/01/2013 12:44:48 PM

    Matt - 1 in 5 advisers are independent or independently owned???? What planet are you on? There are very few that are totally independent. The vast majority will be affiliated with a large dealer group (ie: count, genysis etc). You are kidding yourself if you truly believe there are that many independent advisers out there. This is the whole reason for fee-for-service. You pay for the advice not the product so it shouldn't matter who you work for, as long as the advice is appropriate and you are offering a quality service. I am not 'independent' but I can guarantee my advice is appropriate for my client 100% of the time and I do not put them in a product that is not suitable for them or their needs. Your comments border on insulting for the industry.

  • Matt on 18/01/2013 12:24:54 PM

    Kathleen, I think it's more appropriate to conclude that CoreData’s 2012 Financial Planning Shadow Shop has revealed a decline in the intention of potential clients to seek financial advice FROM 16 of the industry’s major dealer groups.

    How many of the 16 major dealer groups has the major focus on pushing products and collecting FUM?

    This is a promising result for 'independent" and "independently-owned" financial advisers. Consumers can smell a sales pitch - they're still going to keep their peepers out for a good adviser. It's just that only 1 in 5 advisers at the moment is independent or independently owned...

  • Let's get real on 18/01/2013 11:56:45 AM

    Simple. Consumers are sick of the red tape and hence the unavoidable costs associated with getting advice. They are seeking other options.....DIY, friends or spruikers

  • Geoff on 18/01/2013 10:07:10 AM

    You would not need to do a survey to gauge the trend. Simply watch industry fund advertisements on TV for a while and surf their websites and you will soon become a skeptic. Not to mention the GFC and past media reports !

  • Lyn H on 18/01/2013 10:02:01 AM

    Why have you not linked into what legislation says. Financial advice cannot be given to anyone other than a Financial Adviser. There are several points in peoples lives when they need to seek the services of a financial adviser. Anyone qualifying for part age pension will be advised by the FIS officer that they need financial advice. Anyone seeking a divorce and superannuation assets are involved they will need a financial adviser. Anyone going into aged care facility with assets greater than $109K will be told they need financial advice. Any government grants that are available include the need for financial advice. Traditional advice centres - Accountants are regularly referring to advisers because they cannot give financial advice. Bank managers are in the same predicament. Strategic financial planning cannot happen where financial product is involved without a financial planner. Personal risk can now be bought off the shelf at the customers risk or they can seek advice from a financial planner. Even the fine print from the wholesale provider warns the customer to seek financial advice.
    Financial Planners change lives. Well documented in legislation.
    So how are planners failing to attract clients. I believe it is just the need to have financial advice varies, engaging clients, understanding needs and valuing the service is what advisers do best. This survey is skewed to an individual seeking personal strategic life planning and perhaps this is just one area that causes clients to seek advice, it is not the only area.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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