The online savings arm of Rabobank Australia also found that 39 per cent of Australians find financial planning daunting.
In addition, 22 per cent said they do not need a financial planner and can get good advice from friends and family, while 48 per cent said educational standards for advisers should be higher.
Only 14 per cent of respondents said they would speak to a financial planner or accountant to help them stick to a budget.
RaboDirect surveyed 2,500 Australians aged between 18 and 65 as part of its annual ‘Financial Health Barometer’.
Speaking to ifa, RaboDirect national manager of adviser services Bede Cronin said one of the reasons Australians are cautious towards advisers could be that they have not received financial advice before.
“From my perspective, something that could be influencing that type of perception is we do have a large number of Australians who don’t have direct experience in terms of working with a financial planner,” he said.
“Their judgement could also be largely biased by things that they hear in the public domain. Over the course of a number of years, there have been things in the news in relation to certain issues or scandals that have occurred in the industry which are by [their] nature likely to influence people’s perception.”
Mr Cronin added that with low consumer trust in planners, independent financial advice can play an important role in regaining that trust.
“Independent financial advice is crucial in terms of winning the minds of consumers, particularly in the current environment when you do see those sorts of statistics that are coming through our own research and surveys,” he said.
“The way it can help in rebuilding that trust is by building some positive stories that come out, particularly the value that you can get out of obtaining quality financial advice.”
Dave, I couldn’t agree with your comment for more. I have been saying it for years. We studied some very basis money management fundamental in business studies in year 12 and it definitely played a part in me getting into the finance industry or at the least better educating myself on basic financial management.
The solution to the Government making the entire population more financially literate and thus reduce the future burden on welfare and/or requirement to lift taxes is not “making advice more affordable” or making our profession “more trustworthy”, the answer is to include basic financial literacy in school education. Managing money, understanding debt, cash flow, budgeting, etc, etc are all basic fundamentals that if taught from prep through year 12 would significantly help. It may take a generation to show through, but gee it would make a difference! Seems to me these are more important skills which would do more good for society and families than half the junk taught in schools these days. I’m all for ‘drama’ and the like, but understanding money is as fundamental to life as is health/nutrition (also left out) and maths. Probably more useful than what is taught in ‘english’!
Or, provide a finance 101 type course which is mandatory for anyone on welfare to ensure they dont waste waht they get.
Hi Gerry, if you classify general advice and intra-fund advice as quality advice, then perhaps it has been achieved although the only real outcome is the stemming of fund outflows and an upcoming generation of aussies that think they have received financial advice. ie “You need $2 million to retire comfortable in 20 years time…you should increase your super contributions to x and take out some extra “junk” insurance” whallah!
“The FOFA reforms focus on improving the quality of financial advice and expanding the availability of more affordable forms of advice. The removal of regulatory barriers to the provision of different forms of advice will open up new markets for financial planners, helping them reach younger customers and those with less complex advice needs”.
Goal achieved?
I understand all points of view. I also deal mostly with people with the capacity to pay, but not because I want to. 15 years ago we received many queries from young families, now stuff all. It’s a generational change and I don’t think we’re adapting. Plenty of sound advice in financial magazines I guess.
…need to add in my comment to Gerry.
Our service to less affluent clients is not low cost. Our clients see the value.
Some would say it’s ‘unaffordable’ but they are the same ones who can’t see the value OR more likely who an adviser can’t explain the value. We only work with clients for whom we can add significant value to. Life is too hard if you’re working with clients who can’t see the value.
Those that see the value work with us. Some, like Dave has said, just can’t see it. They’re programmed a certain way. We all have our own idiosyncrasies…
Well said Dave.
Steve A, you can deal with and look after whomever you want, each to their own, I’m just saying I have found a segment that works for me, which allows me to deliver value for clients and do so profitably for me. Higher fees also = lower volume = compliance much easier to manage too.
In any industry, business models must adapt to changing environments and consumer needs and regulartory hurdles to prosper, or face slow down and eventual closure.
I’m keeping up and changing and adapting to still be successful in the current and future environment.
Anyone who isn’t, that’s there problem.
And anyone who doesnt value what I do, that’s their problem if they don’t want advice.
I’m in business to enhance the lives of my clients, not the entire population of Australia.
Gerry, a business coach advised me to niche and only let clients through the door who have > $2m.
We decided that we care more about helping people than money and that whilst other independent firms only look after the super wealthy (one particular new entrant to the market full of ex-bankers comes to mind); we have options and advisers who service clients who aren’t as affluent.
Find a way or quit. Stop blaming others.
Matthew…you just keep plodding along with the status quo then and see where that gets us. Over-regulated, over-priced, and elitist. If that’s the way you want it….so be it.
Agree Gerry that 90% of people baulk at paying advice fees and thought $650 was a good amount to spend, but that’s because the public don’t understand the value we offer. Most households have more in credit card debt from buying material stuff they don’t need than what advice costs. Most peoples cars will depreciate more in a year than what advice costs. Smokers spend more on smoking per year than what advice costs.
The problem isn’t our fees, the problem is we have done a terrible job as an industry educating people about the value. People CAN afford it, they just don’t see it as valuable enough to prioritise money to be spent on advice/insurance over and above other less important things they instead put their surplus cash towards. Besides, most people can/do pay advice fees from their super anyway.
I do agree that red tape means stuff takes longer and more hours = higher fees, there is certainly room to reduce compliance crap and help reduce fees somewhat, but I charge around $330 per hour so my advice will never be ‘cheap’. Nor should it be. Like the best local accountants and lawyers and Dr’s, they charge a premium, but if they are good, the laws of supply and demand allow it and they will always be busy. My fees keep going up because I can’t handle the workload I have, not because of compliance.
For those who think the average Joe can’t afford advice fees, change your business model and target those who can… That’s the beauty of capitalism. Your business can be anything it needs to be to allow you to succeed. The only roadblocks in most peoples way is their mindset.
I know that means I’m not helping those in our community who might need advice more, but I’m okay with that. I’m in business to make a profit. Helping the general public should start with a ‘finance’ class in school. Basic money skills and knowledge is as important as any other subject, afterall, money is the cause of many issues for many people.
Quit now Gerry.
There is no feeling of hope in anything you say.
Sorry Dave – didn’t realise we are only supposed to deal with clients who have $500,000 plus. Presumably we just ignore the rest and let the banks and industry funds “look after” them??
That’s great Dave, but you’re talking about people with half a million dollars. What percentage of the advisable nation have that wealth? What about young families with debt that balk at paying private health let alone paying your (down the middle) $4500 advice fee and $2000 in life insurance premiums. That’s the future of advice and sadly, IFAs might not be looking after them down the track. The local bank will be though.
“Financial Planning advice is expensive” (Comments 1 & 2), on what basis?
If you consider spending a few grand on advice that could mean you are literally hundreds of thousands of dollars better off in the future, how is that expensive?
If I spend a couple of grand on insurance advice and then get $300k paid out when I get cancer, how was the advice expensive? Am I not WAY ahead?
Thos advisers on here saying advice is expensive doen’t place enough value ion what they do and presumably focus on investments rather and insurance sales than value adding via quality strategic advice.
Advice is CHEAP versus the benefits it offers. I charge $3-6k for a financial plan and $3-10k pa. Most clients have around $500k. They are all getting a bargain when I consider what their future would look like without quality advice.
Their is no discounts on anything worth getting. If you want the benefits, you must pay the price. Goes for all walks of life, and not just money. i.e. If you want great health you must pay the price (sacrifice time, food, etc work hard, etc).
Everything worthwhile comes at a cost, one people should be happy to INVEST in their future.
Advice shouldnt be an expense, it should be viewed as an investment.
We could go back and forth with “it is” and “it isn’t” forever. I think we could all agree that the provision of advice is more expensive than it should be. Well before FoFA a survey indicated that the average person thought around $650 was the most they’d pay for advice.
Regardless of the proposed value of the advice, we won’t even get most people in the door to articulate that value if we can’t explore ways in busting the red tape. Mark my words, the industry as we know it has only single digit years left unless some major advancements are made and the red tape wound back.
Financial advice isn’t expensive, we as a profession are not very good at articulating the value yet.
So fair dinkum you lot, stop blaming other people for this, let’s start with the man/woman in the mirror.
If consumers think advice is expensive now how will that feed through to the proposed LIF structure which is essentially making insurance advisers go to fee for service?
mmmm… me thinks this will fail miserably.
[quote name=”Graham”]So Australians do not think they need financial planning . With 85% ending up needing a tax payer funded age pension I think they badly need advice .Australians are the worst savers but great consumers[/quote]
Spot on Graham. Our pension system is just way too generous. So many people don’t bother with advice and blow all their money their whole life knowing rain or shine they will get a taxpayer funded pension.
Better yet if you do have too many asset at retirement why not just spend it all on holidays or upgrading the exempt PPR to get access to the full pension!
Nothing better than a client questioning whether they should proceed with obtaining advice because their near bankrupt tradie friend told them not to haha.
I can’t help but laugh at what is happening in the industry at the moment.
You have to wonder how the survey was worded and what the respondents meant by expensive.
i also wonder if recent fallout from the vertically integrated Bank Planner issues have colored the judgement and assessment of these surveyed
The cost of advice is expensive…it’s about time the industry “experts” acknowledged that and worked on ways to reduce the cost instead of increasing them. With higher education standards and a Best Interests Duty…why are we still punching out 30 page fact funds and 50 page SOAs for basic advice?
Spot on SteveA & Neil.
Advisers are leaving this ridiculous over complianced industry in droves or trying to sell up & get out.
Good luck trying to increase fees to your clients to cover this ever growing burden. THEY WONT PAY IT nor will they entertain the nonsense of lengthy SOA’s. Every household except the very time poor and cashflow rich will be questioning your fees. Why would anyone wish this industry on their kids as a profession is beyond me.
Interesting article considering it has come from rabo direct. my god Australians are under advised and the regulator should be stopping articles like this that are essentially promoting consumers to get advice from their friends and family on financial matters. solid Rabo DIRECT. maybe look at your media comms area for some improvement.
If people think financial advice is expensive now, imagine what they will think when we have to start charging a fee for service to give insurance advice and there is no change in the premiums.
Financial Planning advice is expensive – This is the case due to the hyper compliance environment all planners have to work under. Seriously – what’s not to get ?