With the current financial product industry being driven by product and personality, not value, it’s no wonder why only 20 per cent of Australians purchase financial advice, according to a new white paper produced by Certainty Financial Group.
The white paper suggested there were two reasons why more people were not accessing financial advice, with the first being that most people did not like talking about money.
“Few people are comfortable speaking openly about their finances, and to talk plainly about financial fears and desires is seen by many as rude – particularly amongst older Australians,” the white paper analysis said. “While some anticipate retirement from working life in their 60s, others are still very active well into their 70s and beyond. With our ageing population living even longer, this presents an interesting conundrum for generations of people looking for new ways of living.”
Its second reason involved affordability and the question of whether people believed they could actually afford advice meaning that advice firms needed to deliver what clients wanted and reinforce the value of advice.
The white paper argued that “pathways and connections” were stronger than products in delivering value to clients.
“Everyone wants their complex ‘stuff’ made simple, and will seek advice to alleviate complexities in all areas of their lives, not only financial ones,” the white paper said. “However, well-established organisations continue to employ incentives and systems geared to business models that are based on financial products, not valuable financial advice.”
“The common practice of badging financial products as financial advice corrupts any possible trust between consumers’ best interests and the product’s provider,” it said.
Noting that the Productivity Commission and the Australian Securities and Investments Commission (ASIC) had expressed strong concerns about systemic conflicts of interest in financial services, the white paper said “in-built financial product incentives that reward product distributors have backfired when seen through the lens of professional ‘best interest’ advice”.
“Finding genuine, valuable advice is not getting easier in a world of increasing financial product automation, proliferation, and corporate growth targets,” it said. “There is always room for innovations like robo-advice. As a tool for us to better understand our clients, it certainly has its place. But no single financial product is a ‘quick fix’, nor is it valuable advice.”
