Demand for financial advice doubled in the last five years: Investment Trends 2020 Financial Advice Report

King Loong Choi

Investment Trends has released its 2020 Financial Advice Report, an in-depth survey of the appetite and use of financial advice among Australians.

Key highlights:

• The COVID-19 lockdown has spurred greater engagement between financial planners and their clients
• Demand for financial advice has doubled in the last five years
• Australians consider their super fund a viable source of advice, but welcome a broader range of topics

The COVID-19 lockdown has spurred greater engagement between financial planners and their clients

Financial planners have endeavoured to keep their clients informed and engaged amidst the COVID-19 pandemic. The latest research shows that three in four clients have been in contact with their financial planner to discuss the impact of the pandemic. In most cases, clients say their financial planner initiated first contact (49%) while among the rest, the client reached out first (24%).

“Most financial planners have proactively engaged with their clients during this period of volatile markets, and clients themselves acknowledge these efforts,” said King Loong Choi, Senior Analyst at investment Trends.

Proactive communications regarding COVID-19 contribute significantly to higher client satisfaction. For instance, clients who had to initiate first contact typically rated their overall satisfaction with their planner less favourably than planners who were proactive (composite score of 56% vs 73%).

“As the lockdowns persist, all planners must take the opportunity to engage more closely with their clients – through the most in-demand channels. In light of the lockdowns, just a third of advised clients still insist on receiving face-to-face review meetings (down from 48% in 2019), while appetite for alternative, socially distanced regular reviews has substantially increased,” said Choi.

Demand for financial advice has doubled in the last five years

The demand for financial advice has surged, with 2.6 million non-advised Australians intending to seek help from a financial planner in the next two years. This figure is up significantly from 2.1 million in 2019, and double the levels observed in 2015 (1.3 million).

“Against a backdrop of economic uncertainty and volatile markets, a record number of non-advised Australians realise they need professional financial advice. Among these potential advised clients, the pandemic has been a major catalyst, with 44% saying the COVID-19 situation had increased their likelihood of seeking advice,” said Choi.

“Potential clients overwhelmingly prefer receiving comprehensive advice over limited advice (76% cite this vs 35%). But when cost is factored in, preference for limited advice markedly increases,” said Choi.

“Still, there are opportunities to transition those who want limited advice to a holistic advice offering, since the vast majority of potential clients (61%) are open to upgrading to comprehensive advice over time.”

Australians consider their super fund a viable source of advice, but welcome a broader range of topics

There is strong awareness, uptake and interest to access financial advice services offered by super funds. Nationwide, one in six Australians say they currently use intra-fund advice services offered by their main super fund. Among those who don’t, 37% would like to do so.

“Many members rely on their super fund for help across a range of intra-fund topics, most often seeking advice around voluntary super contributions, switching investment options and retirement planning,” said Choi.

“Yet, there is enormous demand for topics outside the current scope of intra-fund advice, particularly among younger super fund members (77% of those under 35 would like to receive this vs 70% for the broader population). The key areas of interest include investments outside super, tax strategies and budgeting assistance.”

“Further, advice via super funds can lead to planner referrals, with 55% of members open to being transferred to a planner. Older members favour a super fund-based planner, while their younger counterparts are more inclined to seek out an independent planner,” added Choi.

About the report

The Investment Trends 2020 Financial Advice Report is based on a survey of 4,501 Australian adults, concluded in July 2020.