Younger investors at risk of disengaging from advice: Lifeplan

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The latest Lifeplan ICFS Financial Advice Satisfaction Index suggests that some categories of investors who currently have a financial adviser are increasingly disengaged with the value of financial advice.

The latest Lifeplan ICFS Financial Advice Satisfaction Index suggests that some categories of investors who currently have a financial adviser are increasingly disengaged with the value of financial advice.

Those that are most dissatisfied include younger investors, those who have only used an adviser for a short time, and those who have invested a smaller amount.

The surveyα is undertaken every six months by Lifeplan Funds Management with the University of Adelaide, looking at investor attitudes towards their advisers. There are three main drivers that the survey tests – perception of trust and reliability of advisers; perception of the technical ability of advisers; and perception of investment performance.

Mr Matt Walsh, head of Lifeplan, said that while the latest survey, undertaken last month, took place at a time of extreme market volatility and heightened concern about the European debt crisis, advisers should be concerned that the very people who represent the future of their business are finding less value in the relationship than previous surveys have indicated.

“The client categories showing a decline in satisfaction across all criteria were those aged under 30; those with less than $50,000 to invest; and those who had been with their adviser for less than two years.

“Investors who have used an adviser for the last couple of years will have only experienced falling returns and high levels of volatility in their portfolio, which would understandably affect their view of their adviser.

“However, while advisers can’t influence market performance, they can’t just wait for markets to return to ‘normal’, and they can influence how their clients view their own technical ability and trust and reliability.

“Relationship building and maintaining ongoing communications to improve understanding has a critical part to play.

“It always comes back to the same challenge, of educating clients about what financial advisers actually do, and where the value of their advice lies,” Mr Walsh said.

The study reveals a particularly sharp drop since the last survey in April in younger investors’ levels of satisfaction with the technical ability of their financial adviser, compared to the other age brackets.

“While satisfaction levels as a whole will have been influenced by market turmoil, it can’t be the only reason for such declines because markets were also weak in April when the last survey was done and results were more positive.  This suggests that advisers could do more to recognise and respond to the concerns of younger investors, and relate to them proactively, despite their dissatisfaction with markets.

“Perceptions of trust and reliability have also declined much more for younger investors than for other age groups, and these drivers are much less correlated with market performance.

“Perceptions of trust and reliability in particular are affected by regularity of contact with someone, how open and transparent they are, and whether they do what they say they will do.  These are all things that can be managed and enhanced,” Mr Walsh said.

He added that, on the positive side, the study also found that longer-standing clients have more favourable perceptions of advisers.

“For those who have been with their advisers for more than five years, there were improvements in perceptions of trust and reliability, performance and most notably technical ability.

“This could be attributed to higher levels of financial literacy as well as a better understanding of the complexities of financial matters and the range of advice and assistance that financial planners can offer.”

Mr Walsh said the survey also showed that satisfaction levels of female investors were, on the whole, higher than male investors, a sign that women may be starting to engage more with financial advice.

“The recent study has revealed a divergence since the last survey in female and male satisfaction levels with advisers, with females happier than their male counterparts.

“Female perceptions of trust and reliability, technical ability and performance of their financial advisers have increased in the last six months while male perceptions have decreased.

“This is particularly notable in those aged under 30, where there was a higher proportion of women in the survey group than at other age brackets.

“An increase in the level of younger women investors suggests that more women are taking steps to be in control of their finances which is positive considering the discrepancy between the superannuation levels of men and women.

“Female investors’ positive perception of advisers could signal an opportunity for advisers to expand their client base,” Mr Walsh said.

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For more information please contact:

Matt Walsh – Phone: 08 8236 4706

α The Lifeplan/University of Adelaide’s International Centre for Financial Services (ICFS) Financial Advice Satisfaction Index is based on academic research that models the factors that explain a client’s willingness to recommend their financial adviser to a friend or acquaintance. The latest survey of 410 investors who use financial advisers was undertaken in October 2011, and sought feedback about the performance, trust and reliability, and technical ability of their financial adviser. Past surveys can be accessed at www.lifeplan.com.au.

 

17 November 2011