Investment Trends 2018 Financial Advice Report

King Loong Choi

Investment Trends has released its 2018 Financial Advice Report, an in-depth survey of the appetite and use of financial advice among Australian adults.

The report, now in its eleventh year, draws on the responses of 7,639 Australian adults that was concluded in September 2018. This year’s study highlights a number of important trends:

1. The Royal Commission has profoundly impacted perceptions of the financial planning industry

Everyday Australians have been paying attention to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The latest research from Investment Trends shows that two-thirds of Australians are aware of the inquiry, including a quarter who say they have been keeping a close eye on the proceedings.

“So far, the general sentiment has not been positive,” said King Loong Choi, Senior Analyst at Investment Trends. “More than 40% of Australians do not believe that the financial services and banking industry has met its obligations to everyday Australians, while half reject the notion that the industry has been treated unfairly in the media,” added Choi.

2. Trust in financial planners and banks are at all-time lows

Each year, we ask Australians to rate their level of trust (from a scale of 0 to 10) in 11 different professions and financial services sectors, ranging from accountants to super funds to their friends/family. Unsurprisingly, Australians trust their friends/family the most (average score of 7.0) while politicians sit at the other end of the spectrum (3.0).

But in the last 12 months, trust levels have fallen most severely for banks and financial planners to below five out of 10, and into the “distrusted” range. Banks fell from a trust rating of 5.5 to 4.8, while financial planners fell from 5.1 to 4.8.

“The trust impact of the Royal Commission is real, and the financial advice industry must take proactive measures to rebuild trust among the wider population,” said Choi. “One of the most important steps involves lifting transparency in every single aspect of the advice process.”

The majority of Australians who use a financial planner are satisfied with the service they receive, but they are now vastly less willing to recommend it

Even within the context of the Royal Commission’s hearings, the satisfaction levels of Australians who use a financial planner only fell from 81% to 74%. While this is relatively good news for the planning industry, the willingness of these same Australians to recommend their financial planner, as measured by the Net Promoter Score, fell precipitously into negative territory.

3. Despite headwinds, there is significant demand for advice nationwide

Though confidence in the advice industry has been dented, there is a strong and growing demand for advice among Australians. In the next two years, an estimated 2.1 million adults intend to turn to a financial planner for advice, up from 1.6 million in 2017.

“For Australians, the top barriers to seeking financial advice involves not having the time to find an adviser, perceptions of high fees and perceptions of insufficient wealth,” said Choi. “It is therefore vital that advice providers demonstrate the value of advice to potential clients in the context of their time and money. Potential clients must be convinced they need financial advice now, not later in life, and that the fees justify the service.”

“Raising Australians’ understanding of the value of advice is vital since many Australians only seek and receive advice when they approach retirement, when in reality they need advice earlier in the accumulation phase,” explained Choi.

About the report

The results are drawn from the Investment Trends 2018 Financial Advice Report, released to Investment Trends’ clients in September. This report was based on a survey of 7,639 Australian adults, conducted in September 2018.

Key highlights:

• The Royal Commission has profoundly impacted perceptions of the financial planning industry
• Trust in financial planners and banks are at all-time lows
• The majority of Australians who use a financial planner are satisfied with the service they receive, but they are now vastly less willing to recommend it
• Despite headwinds, there is significant demand for advice nationwide