In the climate following the Royal Commission into Banking, the entire financial services industry has come under sharp scrutiny.
And so it should. With Commissioner Hayne’s report divulging that there’s a population of the financial planning sector that has been providing advice that’s not solely for client benefit, it’s important that consumers do look closely at all financial advice they receive.
While the media has an agenda in its coverage, perhaps a clearer indication of the effects of the Royal Commission can be observed from the broader community’s reactions.
Understanding consumer sentiment
A survey undertaken by the Profession of Independent Financial Advisers (PIFA)¹ directly in the wake of the Royal Commission has uncovered that, despite recent events, consumer demand for financial advice is still growing—but with a strong focus now on sourcing objective, independent advisers.
Canvassing 75,000 people between the ages of 44 and 55 years old, it’s a significant survey.
While the results demonstrated that there’s still a long way to go until the financial planning profession can position itself as trustworthy, it shows that the recent events have made consumers more conscious of where their advice is coming from.
• 57% of people surveyed said they aren’t currently receiving financial advice
• 62% of people surveyed said that they could see the value in receiving financial advice
• 73% of those surveyed thought that it was very important for an adviser to be truly independent
• 86% of respondents stated that they favoured a transparent fee regime
The most telling result was that 84% of respondents said they would be more likely to build a long-term relationship with a financial adviser if they could trust that the advice they were receiving was 100% independent and unbiased.
A public appetite for change
Following the findings of this survey PIFA president, Daniel Brammall, stated: “Australians understand and value the benefit of financial advice from genuinely independent professionals which can be paid for via transparent fees.”²
What this tells us is that the public can see the value in this type of advice. They understand that they’ve been taken advantage of for too long. Consumers want clear, straightforward advice, from a source they trust. They want honest pricing with no hidden fees, no catches, and no kickbacks.
But while they can see the value in independent advice—there’s still a hesitancy to act on it.
This shows that on the whole, it’s up to financial advisers to demonstrate how the changes being made are serving our clients’ best interests. It’s up to us to prove our value to our clients.
Some of the resulting actions from the Royal Commission will address this. Recommendation 2.2 – Disclosure of lack of independence of financial advisers will be a key contributor³. It will act as a big red stamp of independence, and it’s up to the consumer to determine if they want to pursue a relationship with their advisor or not.
For advisers with long-term clients, who have built relationships and demonstrated their integrity, rebuilding that trust won’t be an issue. Their clients can see the value that this advice brings.
It’s this level of trust and support that needs to be adopted and championed by the industry as a whole.
Demonstrating the value of truly independent financial advice
The value of independent advice can’t be understated.
True, objective financial advice allows you to manage your wealth in a way that gives you peace of mind that you are the only one set to profit from it. That your financial adviser is putting your needs above their own.
You know that you’re getting real value for money. Truly independent advisors aren’t paid by commissions, so you know that you’re only paying for the service you receive. There won’t be any surprises when it comes to fees, either. You can take comfort that what you’ve agreed upon is what you pay.
The trust that gained with your adviser is deeper, as the structure of the firm doesn’t leave its clients second-guessing as to the true intention of the adviser’s advice.
They’re giving you the time and respect you deserve, and in turn, you trust that you’re getting advice that’s targeted specifically to you, not boilerplate, off-the-rack strategies.
Ultimately, the true value of independent advice is the comfort and peace of mind you get, knowing that you’ve got a professional in your corner, and that you’ll get to see your wealth managed in a way that’s suited to your needs.
For financial advisers in a post-Hayne world, demonstrating the real value of independent advice is now more important than ever.
Director, Stephan Independent Advisory
Joe Stephan graduated in 2002 with a Bachelor of Business (Fin Plan) under the tutelage of his father (Program Leader of Financial Planning at RMIT University).
You will hear Joe bandy about the idea of “pure financial advice”, which is given objectively and focused around the needs of individual and not the internal needs of the business providing advice.
Joe is realising his vision every day through his Independent Advice Firm which he owns and operates with his brother James. Joe also spends a portion of his time teaching tomorrow’s Financial Planners at various Melbourne Universities including RMIT & LA Trobe.