Overconfidence driving clients to break up with their adviser: Report

According to Netwealth’s annual Advisable Australian report, nearly a third (29 per cent) of clients that had recently left their financial adviser did so because they felt they had learnt all they could from that adviser.

While there are a number of reasons why clients leave their adviser, including the cost (43 per cent), wanting to manage their finances themselves (36 per cent), feeling like their finances aren’t large or complex enough (23 per cent) and not receiving value from their adviser (17 per cent), this feeling of financial confidence appears to be largely unwarranted.

For example, the report – which is yet to be released – found that around 41 per cent of all clients self-rated their financial literacy as high; however, the reality is that only around 2 per cent scored in the “high” range on a standard financial literacy test.

This disparity is most pronounced in “settled” clients – those who have been receiving advice for three to five years – with half (50 per cent) rating themselves as having a high level of financial literacy while the results showed quite the opposite, with 50 per cent actually scoring in the low category.

However, speaking on a webinar about the findings, group strategy director of The Lab, Jonny Hanratty, suggested that this clear knowledge gap presents an opportunity for advisers to highlight their value to clients.

“For advisers, the key is offering tailored educational support at each stage. Really trying to foster independence early on, then deepening insights over time so clients stay confident, engaged and in control,” Hanratty said.

“You’re helping show them how much they, perhaps, don’t know whilst also providing value and building your authority as the provider of that knowledge.”

Based on the findings, Hanratty explained that 62 per cent of newcomers – clients who have been receiving advice for less than two years – want to be “empowered with fresh knowledge and expand their financial horizons, while nearly 60 per cent of settled clients value having their thinking challenged”.

Meanwhile, he said loyal clients who have been with their adviser for more than six years indicated that they still want “very close financial coaching on complex topics” and are generally more open to engaging with educational material that enhances their understanding of said topics.

Hanratty added: “I think the more they learn, the more they realise they don’t know.”