Superfund members’ lack of willingness to seek financial advice likely stems from an “information asymmetry” between clients and providers, according to research firm CoreData.
In an article on the researcher’s website, CoreData Consulting director Jason Andriessen said a majority of super fund members are unwilling to pay financial advice, with those who are willing to pay typically believing it shouldn’t cost them more than $250.
“It’s likely that, after recent mainstream advice scandals, Australians are cautious because they don’t have enough information to differentiate between high-quality advice and poor advice,” Mr Andriessen said.
Mr Andriessen drew parallels between this and the research of Nobel prize-winning economist George Akerlof on car sales.
“The premise of Akerlof’s paper is that most buyers can’t differentiate between a mechanically great car and a lemon. But the person selling the car knows,” Mr Andriessen said.
“Owing to this information asymmetry, potential buyers of used cars will be cautious and only offer low prices that reflect the poor quality they fear – and that’s what’s happening with financial advice.”
According to Mr Andriessen, clients will be more likely to seek financial advice once this “information asymmetry” is removed.
“The idea is to bring your service offer to life before requiring customers to pay. This may be achieved by providing digital content in the form of client testimonials, simulators, calculators or webinars. Or maybe information about the benefits of advice can be provided face-to-face in a workplace seminar or workshop,” he said.
“In the same way, the initial financial planning interview should be much more than a discovery exercise. Instead, advisers should display the value of their advice by generously exploring scenarios, making the most of preliminary, strategic conversations.”
Clients are more likely to be willing to pay for financial advice once they better understand its value, Mr Andriessen said.
“Members may tell you they’re only willing to pay $250 for advice, but the experience of profitable, large-scale advice firms is that clients are willing to pay 10 or 20 times that amount for professional advice, once they understand the benefits,” he said.
“All you have to do is remove the information asymmetry.”
ASIC has slammed super funds for employing communication strategies that may have confused or misled members about their product’s performance.
Stephen Jones has reiterated his commitment to ensuring Australians have access to affordable financial advice following a meeting with Michelle Levy....
A recent survey suggested many share the same sentiment.
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