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  Advisers want more time for client face-to-face and less time spent on admin: Perpetual

  60% of Australian financial advisers want to spend more time with their clients

• 31% say maximising time with clients is the one thing that has most impact on the success of their practice
• Advisers who spend more time with clients are far more likely to be growing their business rapidly

Financial advisers spend more time on administration and compliance than they do talking to clients face-to-face, research conducted by Perpetual has found.

Perpetual’s research covered 200 financial advisers and assessed how advisers use their time. The results suggested:

• Advisers spend more than 30 hours per week on client business, yet only 9 hours a week face-to-face with clients.
• More than 60% of advisers want to spend more face time with their clients.
• Paradoxically, client-related admin and compliance commitments restricted their ability to actually catch up with clients.

Perpetual’s Senior Manager Client Insights and Analytics, Gary Lembit, said: “Advisers know the value of face time with clients, yet feel their ability to meet face to face is compromised by the administrative and compliance effort required to manage their client’s affairs.”

According to Perpetual, resolving this contradiction is crucial – largely because clients really value adviser interaction.

Confidence is key

“Clients are now more driven to understand the thinking behind investment and strategic decisions,” Mr Lembit said.

• More than 50% of clients said meeting with their adviser gave them more confidence.
• 80% of advisers believe time spent face-to-face gives clients more confidence in the advice they provided.

“This suggests the need for face time between advisers and clients will remain as strong in the future as it is today.

“We need to work with advisers, clients and the industry to ensure admin and regulation don’t limit the time advisers spend in conversation with clients. That is high quality time and makes advisers more effective at meeting client needs,” Mr Lembit said.

So where does the time go?

Advisers spend up to 10 hours each week preparing client SOAs and on other client related admin. Six hours is spent on the phone or emailing clients, and four hours is spent preparing for client meetings and reviews.

The average adviser sees 7.5 clients on average per week. Crucially, there is a link between client contact and growth – advisers in rapidly growing practices are managing to see an average of 14 clients per week.

“The research clearly shows the key to success for advisers is having a strong client focused approach, and structuring their business around that is vital,” Mr Lembit said.

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Andrea Slattery

The profile of self managed super fund (SMSF) investors is dramatically evolving, which means SMSF professionals need to quickly adapt their advice models to meet the different needs of this growing sector of investors, according to the findings of a new study from Macquarie Bank and the SMSF Professionals’ Association of Australia (SPAA).

“This is something we at SPAA have always known, but this research breaks another anecdotal misconception,” SPAA CEO Andrea Slattery says.

The Active Management Report revealed that 46 per cent of recent[i] SMSF investors are under the age of 30 and one in five are females who still live at home with one or more parents. Macquarie and SPAA say this strongly indicates that SMSFs are being considered and set up by people with a very different profile to traditional SMSF investors.

Macquarie Bank’s Analytics Insights Manager, Gary Lembit, says the younger generation in particular is becoming more engaged and with SMSFs often involving family members, SMSF management is very much a family affair.

“As we are aware, high property prices are making it a real challenge for young Australians to enter the housing market and this is one of the main reasons why adult children are staying at home for longer. It is also encouraging them to think about where else to invest their money so they are building their wealth for the future, and of course, retirement,” Mr Lembit says.

“Actively managing an SMSF for many investors means engaging other family members and involving them not only in the decision-making, but also in the ongoing monitoring, reviewing and planning of the SMSF. It is therefore important for SMSF professionals to involve family members in the advice process.”

The study revealed some interesting differences between current and intending SMSF and non-SMSF investors. Current and intending SMSF investors tend to be more purposeful in their financial behaviour and are constantly striving to benefit their families financially in the long-term. Compared to non-SMSF investors, both current and intending SMSF investors are more likely to save as much as they can, with two in three intending investors saying they save as much as possible. Recent investors (60 per cent) and intending investors (63 per cent) are also highly likely to seek out ways to earn more, with intending investors particularly likely to work multiple jobs (31 per cent). Meanwhile, established investors are more likely to invest spare cash, which is further evidence of active money management. SMSF investors, in particular intending investors (nearly one in four), also say they ‘love experts’ more than non-SMSF investors.

Mrs Slattery says these findings confirm that SMSF investors take an active role in managing their investments from day-to-day and an active role in their savings and future retirement plans.

“Having made the decision to set up an SMSF to have more control and choice over their investments, it is not surprising that SMSF investors are highly engaged and informed,” Mrs Slattery says.

“But what is not surprising is this engagement is manifested both in a tendency to actively monitor the performance of their portfolios and to take positive actions to enhance that performance. As a result, they have greater advice needs than other investors and a higher propensity to seek out and value advice. The encouraging news for SMSF professionals is that SMSF investors love experts so there is a real opportunity for them to demonstrate the value they can add, in the knowledge that their clients will be very open to receiving their advice. This is the message we have been putting to the market and this research supports it.

In addition to having revealed that SMSF investors have a hunger for interaction with the experts, the study also confirmed SMSF investors are far more likely to discuss investing and wealth with their family than non-SMSFs. Intending investors are particularly active in discussing their finances, including day-to-day financial management (55 per cent) and financial worries (63 per cent). Only 30 per cent of recent investors say they frequently discuss financial worries. Meanwhile, established investors are more likely to talk about topics like charitable giving (41 per cent) and organ donation (37 per cent), indicating an interest in planning for the future that extends beyond their finances.

Just as they are active in their conversations regarding their wealth, SMSF investors have remained active in their investments. In recent years, SMSF investors have allocated more of their investments towards direct equities, while direct property has continued to grow in importance as an asset class[ii].

“What this study shows is that SMSF investors share some common traits which allow SMSF professionals to proactively engage this inquisitive and collaborative group. But there are also some noticeable differences at each stage of the SMSF lifecycle, which means that if SMSF professionals can demonstrate that they understand the distinct needs of SMSF investors then they can build higher quality client relationships and better service the demands of this increasingly important sector,” Mr Lembit says.

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While the report, called The SMSF Generations Report, reveals SMSFs are popular with every generation of Australians, it has highlighted that there is no such thing as a typical SMSF investor. There are significant differences in the attitudes, investment priorities and lifestyle aspirations of each age group.

With SMSFs already the largest and fastest growing sector of the Australian superannuation industry, the report emphasises that advisers need to take into account these generational differences when delivering advice to help better meet the needs of investors.

Macquarie Banking and Financial Services Group Analytics Research Manager, Gary Lembit, said that investors across the generations recognise the value of advice when managing their SMSFs, but that advisers should tailor their approach according to life stage to have the greatest impact.

“It is clear that one of the main reasons investors opt for an SMSF is to have greater control and choice over their investments. However, this does not mean they want to be entirely self-directed,” Mr Lembit said.

“As the insights in this report show, SMSF investors across the generations recognise the role financial advisers have to play in providing valuable guidance on their investments. However, through better understanding their clients’ state of mind, advisers can adapt their advice models and learn to communicate in a way that better meets their needs, while articulating the value they can add.”

Despite investors sharing the common reasons for choosing an SMSF, more control and choice over their investments, there is a significant difference between how receptive each generation is to receiving financial advice.

Generation Y, not surprisingly, is generally highly confident about many aspects of their lives, but when it comes to long-term investment decisions, they are less confident than other generations. They are very receptive to advice, but do not seek it, meaning it is important for advisers to develop ways to proactively communicate with this group and help them understand the value of advice.

Generation X is a lot more sceptical about financial advice, but being extremely time poor, they are willing to pay for advice in certain situations, particularly if it helps save time.

The Baby Boomers are increasingly seeking advice, perhaps because of the higher amount in their funds and being closest to retirement, while the Silent Generation (those in retirement) is by far the most likely generation to seek advice.

Andrea Slattery, CEO of SPAA, said that as the number of investors using SMSFs grows, the industry needs to respond by focusing more on what they can do to best service this distinct group.

“We have found time and time again that investors who use SMSFs are the most engaged people in superannuation. They want to make sure their funds perform well and are interested in understanding what is involved to help make this happen,” Ms Slattery said.

“This includes accessing financial advice, which these investors show a continuing appetite for, but as this report has shown, the advice industry can make their role even more effective by tailoring their approach to the stage of life the investor is in. We think that through reporting insights like these we can continue to support the advice industry in its aim of demonstrating its value to investors and helping investors make the most out of their retirement savings through their SMSF.”

In addition to highlighting the differing attitudes towards advice, the report provides a snapshot of the SMSF asset allocation preferences among the generations. As a general trend, cash/near cash holdings and direct shares in SMSFs have increased in recent years, while managed fund holdings have decreased.

“We have always known that the cash holdings in SMSFs as at 30 June each year is not a true indication of the cash that is held throughout the year. This report highlights what trustees really do when they have control and flexibility and how they choose their assets to hold, including cash/near cash assets.”

Generation Y has lower cash balances and a higher proportion of their portfolios in equities than others, and a greater focus on achieving capital growth. They have been the most active during the past 12 months in changing the asset allocation of their funds.

Reflecting the ‘Great Australian Dream’, Generation X has 30 per cent of their SMSF capital in direct property, but with relatively illiquid portfolios, is less likely to have substantially changed their SMSF’s asset allocation in the past year.

The Baby Boomers have recently taken a more defensive stance towards their SMSF asset allocation. While still largely focused on capital growth, half have sought out franked dividends as a source of regular income. They still have among the highest allocations to direct equities, second only to the Silent Generation. Surprisingly, despite ongoing market volatility and the flight to safety among some investors, the Silent Generation have actually increased their SMSF allocation to direct equities in the past six years.

Summarising the key learning from the report, Mr Lembit said: “The overall message is clear: by tailoring advice to the different investment styles and decision-making processes of each generation, advisers can build stronger and more fruitful client relationships.”

25 July 2012

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