Demand for advice from financial planners is at a record high: Investment Trends

King Loong Choi

Key highlights from the Investment Trends 2017 Financial Advice Report:

• The demand for advice from financial planners is at a record high
• Financial planners face challenges in expanding their client base, but are taking steps in the right direction
• Alternative delivery channels are key to converting the advice opportunity

In its tenth year, the 2017 Investment Trends Financial Advice Report provides an in-depth study of the appetite and use of financial advice among Australian adults. The latest edition is based on a survey of 9,552 Australian adults, conducted in July 2017. This year’s study highlights a number of important trends:

The demand for advice from financial planners is at a record high

The latest Investment Trends research estimates that 3 million Australians intend to turn to a financial planner for advice in the next two years. This figure is up from 2.6 million in 2016, and double the number observed in 2013.

“A growing number of individuals with unmet advice needs is fuelling growth in demand for financial advice,” said King Loong Choi, Senior Analyst at Investment Trends. “Right now, half of Australian adults say there are areas where they would like to be receiving financial advice but currently aren’t, and this proportion has been on the rise since 2014.”

“The top unmet advice needs of everyday Australians centre around retirement planning and budgeting,” added Choi. “Significant opportunities exist for planners and advice providers that can effectively meet these needs.”

Financial planners face challenges in expanding their client base, but are taking steps in the right direction

Despite the growing demand for advice, the financial planning industry has been unsuccessful in arresting the decline in client numbers over the past decade. There are currently 2.2 million active planners clients nationwide, down 25% from 3 million in 2007.

“Client retention remains a key issue, with planners typically losing three clients for every two they gain,” said Choi.

More positively, financial planners have taken steps to address client retention by servicing their existing clients better. Client satisfaction levels have improved to an all-time high in 2017, with 55% of planner clients rating their overall satisfaction with their planner as ‘very satisfied’, up significantly from 45% in 2016.

“Keeping clients well informed on their progress towards achieving their goals is key to enhancing perceptions of value and, in turn, improving client retention further,” explained Choi.

Alternative delivery channels are key to converting the advice opportunity

There is a substantial difference between the amount that Australians are willing to pay for advice ($750, on average) and planners’ estimated cost of delivering advice ($2,500, on average).

“Planners themselves, and the providers that support them, play a key role in bridging this advice cost gap,” said Choi. “The majority of potential planner clients are open to a range of cost-saving options, ranging from filling in an online fact-find prior to initial consultation to non face-to-face review meetings”.

“In fact, over nine in ten potential planner clients are open to conducting review meetings with someone other than their planner if it meant a reduction in fees,” added Choi.