Good financial advisers keep clients realistic

Financial advisers can be crucial to keeping their clients engaged in their superannuation and from over-reacting to market gyrations, according to Bendigo Bank senior manager technical and research Julie McKay.

Addressing a Melbourne conference today, McKay pointed to customer satisfaction with financial advisers being owed to "how their adviser kept them on track and stopped them from over-reacting to market gyrations".

"You might not be happy with a declining superannuation balance but you might make informed and less emotional decisions if you believe you are still broadly on track to meet your goals," she said.

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However, McKay said customers had a very different view of what constitutes advice to that held by the lawyers and regulators.

"Customers have a very different view of advice," she said.

"It ranges from what the regulations call factual information or general advice; basically a FAQ about a particular - and usually immediate - topic or concern such as life insurance and also covers prognostication; basically forecasting when markets will turn good or bad.

"Advice is like a free option; when an investor misses a market turn or opportunity the easiest person to blame is their financial adviser," McKay said.

"To be blunt, on the whole clients were also aware that many advisers were simply selling their employer's products," she said.

"Why would you pay for the privilege of being sold to - even if the product is useful?"

McKay claimed a customer's expectations about advice matched a basic pyramid approach to finances:

  • You need a platform made up of budget discipline and insurance to protect the family's principal income stream. 
  • Then you can focus on saving for essentials such as a home, children's education and a sustainable retirement. 
  • Finally you can add aspiration targets such as a more comfortable retirement and bequests for the next generation. 



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