According to the results of the FPA's latest Money and Life Tracker, nearly half (41%) of survey participants believed that only they could be trusted with their finances.
The FPA said this indicated Australians' persistent "DIY mentality" when it comes to personal finance. Reflecting this, just 9% of participants said that having a financial plan in place would have helped them financially over the 18 months since the beginning of the pandemic.
While we could attribute these sentiments to a general appetite for self-determination, as the FPA suggested, it's worth asking whether there's something else at work here. After all, wouldn't one expect that interest in financial advice would increase during and after the biggest financial crisis since the GFC?
To find out why the understanding of the value of advice remains so low in Australia, we decided to reach out to advisers in our community.
According to Story Wealth CEO Anne Graham, part of the reason is that "Australians like to do things themselves and unfortunately not everyone is able to navigate the complexity of the financial landscape successfully."
She continues: "Overconfidence is an issue for a lot of people. Financial planning benefits can be immediate but can also compound over time, so good advice taken early can have terrific long term benefits.
"On the flip-side, there could be many opportunities overlooked by do-it-yourself consumers because they don’t have the experience and expertise, and the impact of that won’t be known for years or even decades."
Anne adds that this potential consumer overconfidence has been compounded by the impact that "years of negative media headlines, the Royal Commission hearings and endless legislative change" has had on financial advice (and how people perceive it).
"It’s understandable that consumers are influenced by these messages and focus on the negativity rather than the positive outcomes experienced by clients," she says. "However, there seems to be a shift in tone about advice and as more positive stories are told and experiences shared the message will reach more people."
Another issue Anne highlights is that, on the whole, advisers don't tend to be very good at "explaining the value they add to clients."
"It’s challenging to quantify the feeling of security a client has when working with an adviser who truly understands them," she says. "Putting a value on the increased understanding of their financial world and increased confidence is difficult for a client to articulate.
"To add to that, many people are reluctant to discuss their financial position with friends or family so the value advisers had can be a tightly held secret. Financial advice is a mystery to people who haven’t seen an adviser and they often don’t understand that an adviser does more than pick a super fund or the next hot stock."
Echoing Anne's thoughts, Prominent Financial Services director Christine Swanson says that "the media has done a pretty good job at highlighting any issues in advice, and the Royal Commission put the industry in the spotlight once again."
"In most situations the media reports bad news," Christine says, "and we never see any reports of the thousands of people that live comfortable lives free from financial stress due to great advice – perception is our own reality and only those who take the time to meet with a trusted financial adviser will understand the true value."
Finally, Prosper Advisory director Josh Pennell suggests that there has been too much focus on advice as it pertains to investing.
"A lot of Australians aren’t aware of the breadth and depth of advice that a financial advisor can provide to them," he explains.
"They don’t realise the numerous areas of their life that can benefit from a discussion and many of these benefits are not strictly financial. They also often think it is only about investing money, but a huge amount of the value comes from strategic advice. The return on investment someone can get from quality financial advice is likely the best investment they will ever make."
We'd like to hear more from our community regarding the value of advice and how consumer understanding can be improved. If you'd like to give us your thoughts on the topic, you can do so here.
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here
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