Key findings of the Investment Trends 2015 Financial Advice Report

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Key Findings:

  • King Loong Cho

    King Loong Cho

    Australians are even more concerned about their financial situation, fuelling their appetite for financial advice

  • Opportunity for disruption of the traditional financial advice market is high
  • 400,000 members intend to turn to a representative from their super fund for advice in the next two years

The August 2015 Financial Advice Report, released to Investment Trends clients in October, is an in-depth study of Australian adults’ usage and appetite for financial advice. The study is based on a survey of 10,367 Australian adults, concluded in late 2015. This year’s study highlights a number of interesting trends:

Australians are even more concerned about their financial situation, fuelling their appetite for financial advice

Australian adults understand and appreciate the value of advice. Australians’ demand for financial advice has grown over the last 12 months, with 8.7 million Australian adults saying they have unmet advice needs, up from 8.5 million. This is partly driven by Australians becoming increasingly concerned about their finances.

“Australians’ concerns with their financial situation worsened in 2015, notably with the impact of rising prices and not being able to afford extras like holidays,” said Investment Trends Senior Analyst King Loong Choi. “This is fuelling the latent demand for financial advice among many Australians.”

An even greater number of Australians intend to turn to financial planners for their advice needs than in 2014. 2.5 million Australian adults say they intend to seek advice from a financial planner in the next 2 years, up from 1.9 million in 2014, an increase of 32%. While not all will act on their intention, the relative change from last year indicates more are seeking advice right now.

“Although the demand for financial advice is growing, there are still a number of barriers holding back the take-up of advice,” said Choi. “Notably, many feel they have insufficient wealth to justify the cost of advice despite seeing the value in seeking advice.”

Opportunity for disruption of the traditional financial advice market is high

Australians are willing to pay more for financial advice than a year ago. However, this still falls short of the cost of delivering this advice, with planners typically estimating this to be four times the amount Australians are willing to pay.

“Many understand that receiving financial advice can help improve their financial wellbeing, and our research shows that those who use a planner typically feel financially better off,” said Choi. “However, the way advice is currently delivered may not be aligned with how many Australians would prefer this to be delivered.”

“This creates an opportunity for advice providers to innovate and develop new advice models that reduce the cost of delivering advice and align fees closer to clients’ expectations while retaining margins.”

When cost is factored in, there are four times as many Australians who would prefer to receive lower-cost scaled advice than higher-cost face to face comprehensive advice. Furthermore, the digital channel can be leveraged with two in three Australians open to conducting parts of the advice process online.

400,000 members intend to turn to a representative from their super fund for advice in the next two years

There are over 2 million Australians who say one of the largest concerns in relation to their finances is not knowing where to get sound, affordable advice.

Super funds are well placed to use their scale and technology to provide their members with access to lower-cost advice models, which, in turn, can help to lift member satisfaction and improve retention levels.

Investment Trends modelling shows 400,000 members intend to turn to a representative from their super fund for advice in the next two years.

“By raising members’ awareness of these advice offerings and helping them overcome their barriers to seeking financial advice, super funds can help members fulfil their advice needs,” said Choi.

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