Financial planner sentiment sours

Australian financial planners are becoming increasingly gloomy about the outlook for the industry, according to the latest research released by Wealth Insights.

The research, the result of surveys and focus groups of planners throughout July, has revealed a slump in sentiment to levels not seen since the third quarter of last year and, more disturbingly, an increasing perception among planners that conditions will get worse over the next five years.

Where current sentiment is concerned, the Wealth Insights Adviser Sentiment Index has shown planner sentiment to have remained static on 15 points for the final quarter of the last financial year after briefly surging to a pre-global financial crisis level of 38 points in February.

Significantly, when asked whether times were good or bad right now, 50 per cent of those surveyed described conditions as ‘average’, while there was a significant decline of 44 per cent to 34 per cent among those describing things as ‘good’ or ‘very good’ and a 12 per cent increase in those describing things as ‘bad’ or ‘very bad’.

Asked whether, looking at the financial planning industry as a whole, times would be good or bad over the next five years, the Wealth Insights research revealed a significant erosion in sentiment when responses were weighed against those for July last year.

The number of respondents expecting times to be ‘mostly good’ declined by 16 per cent from 52 per cent in July last year to 36 per cent this year. Those describing times as likely to be ‘both good and bad’ rose from 40 per cent a year ago to 50 per cent today.

The number of planners expecting times to be ‘mostly bad’ rose from 5 per cent to 11 per cent.

Wealth Insights managing director Vanessa McMahon said the Adviser Sentiment Index appeared to be tracking the share market – something that had become evident following the spike that occurred in February.

“There was real optimism in the minds of planners at the beginning of the year because of the strength of the markets, but that dissipated as conditions became more uncertain,” she said.

However, McMahon said the most striking element of the latest research was the increasing negativity around the five-year outlook for the industry and, in particular, the decline in optimism that had occurred since the onset of the global financial crisis.

She said she believed the increased levels of pessimism were attributable to a combination of the Government’s changes to the financial planning industry and the continuing uncertainty with respect to the outlook for the global economy.