DIY investors reject advice, says ASX study

The main reason some Australian investors do not use financial advice is because they prefer “to be in control” and are not convinced that advice adds value, recent research from the ASX has shown.

According to the 2017 ASX Australian Investor Study report, which looked at the behaviour and attitudes of 4,000 Australian investors, around 60 per cent of all investors use some form of professional financial advice.

For those not using advice, 90 per cent said it is because they “prefer to be in control”, while 56 per cent said they were “not convinced advice adds value”. Close to 40 per cent said advice was “too expensive” while around 30 per cent said their “investment is too small to need advice”.

Of concern for the advice industry are the perceptions of a lack of value, high costs and investments being too small to need advice, the report said.

“Many investors simply do not see the value in seeking professional financial advice. The industry needs to reconsider the way in which it interacts with investors to demonstrate its relevance as a partner in an investor’s journey,” the report said.

The report also flagged issues with investor portfolio diversification.

A lack of financial education and engagement between investors and the advice sector means many Australian investors are not diversified, the research suggested.

Forty-six per cent of retail investors claimed they were diversified, but the same investors only held 2.7 asset classes in their portfolios on average.

Meanwhile, 40 per cent of investors identified as not being diversified – holding 1.6 assets on average – while 15 per cent were 'unsure', the research said.

Only one in three retail investors said they understood the risk/return trade off, and even fewer understand diversification, the report found.

"The financial advice industry needs to consider new approaches to help investors better understand and navigate their investment journey.”

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