Consumer concerns ahead of Tuesday’s budget.

New consumer research findings ahead of the Federal Budget reveal that building up savings is the current top financial priority for Australians.

The research conducted for Australia’s leading specialist insurer TAL shows that saving is the top priority for all key demographic groups, with 100% of those aged 18-24 listing this as a current financial priority.

However, the next top current financial priority is spending money for leisure, even for those who are not working and those aged 50-69.

High on the list are saving for holidays and saving for retirement across all demographics, but pleasingly financial protection via life insurance is also high on the list, especially for generations Y and X (64% each).

TAL Group CEO Jim Minto said the findings show that while saving is the top priority, Australians are also adopting a “live for the moment” attitude by aiming to increase leisure spending and holidays above any other tangible financial outlays.

“These results from our ongoing research into consumer financial behaviour suggest people acknowledge the reality of needing to create greater personal independency by identifying saving and financial protection in the top five of 12 priorities. While doing this, they are clearly dreaming of and planning for the things they want to do while not working,” he said.

“In a way people are escaping from the perceived grind of financial pressure of everyday life, but I am pleased life insurance as a form of protection is high on the agenda of priorities because it means people understand how important it is.”

While building up savings is the top priority at 96%, 81% of people say the second priority is increasing funds available for activities such as dining out, theatre/cinema and other recreational spending. This is followed by saving for a holiday at 78%, saving for retirement (76%) and life insurance for financial protection (58%).

The poll was conducted among 1,266 Australians and it asked people to rate a number of financial goals as either ‘very important’, ‘quite important’ or ‘not at all important’ across 12 categories including buying a car, a home, new technology, retaining/reskilling, looking after dependents, children’s education and investment property.

Mr Minto continued: “While domestic budget pressures and those of the wider economy are clearly playing on people’s minds, Aussies have good times on the immediate horizon which is a good sign for the nation.”

Other key findings

• Improving the financial protection of family through life insurance is a top priority for 64% of Gen X and Gen Y, however Baby Boomers lag behind at just 46%.
• Younger generations rated fundamental requirements such as a job, car and home as higher priorities than older people, but saving for a holiday was almost equally represented as a top financial priority for Gen X (76%), Gen Y (80%) and Baby Boomers (78%).
• Retirement planning was also a key financial priority for the key generations: Baby Boomers (84%), Gen X (84%) and Gen Y (61%).

Table 1: The financial priorities of Australians (% rating as very or quite important)

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Probably the most contentious issue in the financial services industry is the issue of clients moving advisers, or moving to different product suppliers.  Advisers and suppliers alike disparagingly refer to competitors as “twisters” and “churners”, with the overt insinuation that they have behaved unethically for moving a consumer to new products or relationships.

Interestingly, one rarely hears the industry talking about the customer motivation for moving firms or products though.

It is simplistic to assume that customers move only because they obtained a slightly cheaper price elsewhere.  It may be true that trimming a minor percentage in costs is a motivator for some, though it would not be true to suggest that this is the primary reason customers move in the main.  If we accept that financial advice and financial products are considered complex, time-consuming, and a downright drag for most consumers, then it follows that they are not likely to go through all the hassle of switching everything to save a few dollars a month.

So rather than vent about “twisters and churners” the question that any customer-centric professional services firm should be concentrating upon is:

“What makes our customers say goodbye?”

If I am permitted to be a little cynical for a moment, it is worth noting that replacement business is only called churning or twisting when it is going away from you. That is, when you are losing a client it is appropriate to label the competitor as unethical; yet; when it is coming to you and your firm is picking up the client from your competitor that is not twisting it seems.  A slight hypocrisy that seems to be conveniently ignored most of the time.

Inevitably when there is little organic growth in the industry competition for existing industry customers lifts in intensity, and there are advisers and firms alike who deliberately set out to take existing customers away from other industry participants as a menas of growing their own business.  I would wager that this tactic exists in most business sectors most of the time, so it hardly seems aberrant behavior.  Of course, it DOESN’T seem to exist as an acceptable business tactic in the “Professions”.

Perhaps the financial services sector’s general behavior in this respect is evidence that financial advice not truly a profession at all as yet.

Of course as we all know, one of the defining hallmarks of a profession is this simple concept of “putting the customers interests first”.  So let’s do that.  Let’s look at a superb piece of data that tells us what actually motivates customers to decide that despite the complexity and hassle factors, they are going to move firms and products.

Despite the fact that this research is focused upon financial planning clients, there are lessons for all financial advisers here.  The primary lesson is price is not suggested as a key reason for leaving an advisory firm.

Let’s be brutally clear here; the 2 standout reasons why clients move is because they lose trust in the advisory firm and they wanted more personal advice.  Clearly there is a backlash effect at work as well, in that when performance suffers then  clients become dissatisfied.  Well, that seems fair enough and we have to cop that one on the chin as that would be the same in any industry: if product or service does not perform satisfactorily then clients will become dissatisfied and leave.

For all that though, there is little doubt that maintaining trust and delivering personalized advice are the two key battleground issues for retaining clients.

This is where financial advisers have to win their own war for client support.

http://financialadvisercoach.com/

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The latest Lifeplan ICFS Financial Advice Satisfaction Index* has shown clients of financial advisers have become significantly less happy with the technical ability of their adviser over the past six months.
 
The latest in a series of surveys of financial advisers’ clients, undertaken in April, sought feedback about the performance; trust and reliability; and technical ability of their financial adviser.
 
Since the previous survey in October 2012, perceptions of financial advisers’ technical ability have dropped by 4 per cent, while the other two drivers – performance, and trust and reliability ­– have both improved, up 11.6 per cent and 5 per cent respectively.  The strong perceptions of performance helped pull the overall Index up by 3.1 per cent. 
 
Matt Walsh, head of Lifeplan, said one of the most likely reasons for the drop in perceived technical ability is the ongoing regulatory change affecting the financial planning sector, and overall loss of confidence in, and confusion about, the changes being made.
 
“Clients have been exposed to the significant changes taking place in financial planning, such as the impact of FOFA requirements including fee-for-service, which can easily be misinterpreted as critical of financial planners.
 
“There are two probable causes.  Firstly, clients could well be thinking ‘there must be an issue if the government is creating regulation to fix it’.
 
“Secondly, the effort of responding to the changes has distracted advisers from the very thing they’d prefer to be doing – working with their clients and giving quality advice.”
 
Mr Walsh said many clients could still be unfairly blaming their adviser because they have missed out on recent market gains or waited too long.
 
“The movements in the Lifeplan Index over time indicate client communication is a critical aspect of the relationship.
 
“There needs to be more individual contact to give advisers the opportunity to explain how they are dealing with the many issues around, and show they have the skills and knowledge to manage them.
 
“Education and information programs for clients will also enhance relationships and show the adviser has the technical knowledge required, and also helps reinforce the image of trust,” Mr Walsh said.
 
He pointed out that those who have had an adviser for only a short time are more likely to have a positive perception of their adviser’s technical ability than those who have had an adviser for a significant period of time.
 
“This is probably because advisers have spent more time with new clients than those they have had for some time.
 
“The perception of technical ability among those who have only had an adviser for two years or less has improved since the last survey, and it is those who have had an adviser for 10 years or more who have displayed a decline in their perception of their advisers’ technical ability.
 
“It would make sense for advisers to consider ways to remove themselves from the ongoing noise and distraction around legislation and market movements, and ensure they are maintaining a healthy range of advice strategies that are not dependent on market performance or superannuation alone, with a focus on communicating this to clients,” Mr Walsh said.

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Leisure spending is top financial priority for festive Aussies

Australians are prioritising spending on holidays and leisure over other longer term financial goals according to a nationwide poll from TAL. 

The research has found that the festive spirit of Australians was not dampened by any predictions of economic uncertainty in 2013, with almost three quarters of Australians (74%) rating spending on leisure as their current financial priority.  

Spending on holidays and saving for retirement were rated as the next most important financial priorities with 71% of people rating these goals as either ‘very’ or ‘quite’ important.  

The poll was conducted among 1200 Australians and asked people to rate a number of financial goals as either ‘very important’, ‘quite important’ or ‘not at all important’. 

TAL Managing Director Jim Minto said: “Most pleasingly, just over half (55%) of all people surveyed said that ensuring their life insurance provided adequate financial protection was an important financial priority at the moment. 

“These findings from our life insurance barometer project provide some interesting insights into the mood of the nation. Despite a pessimistic outlook for the economy in 2013, Australians will still celebrate the festive season with the customary focus on leisure spending. 

“But the fact that the majority of people have as a priority protecting their own and their family’s wellbeing in the event they could no longer work is a gratifying finding. Although underinsurance is still a big problem, many consumers are actively reassessing their needs to ensure they avoid the devastation an unexpected loss of income can cause through illness, accident or death.” 

Other key findings: 

• Gen X, or those aged between 35 and 49 years, were most likely to rate reviewing their life insurance as a financial priority (63% stated that this is very or quite important)
• The burden of paying for the care of dependents fell on 25 to 34 year olds with this age group most likely to consider this quite or very important (55%)
• Increasing leisure spend was most important amongst those aged under 25 years (87% rated this as very or quite important)

 Mr Minto added: “The New Year is often a time when people reign in their spending and take stock of their financial situation. With underinsurance at such high levels* we would encourage people to consider whether they have enough life insurance in case they couldn’t work again.”

Financial priorities of Australians as identified by TAL

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