Research suggests that Australian consumers want to work with advisers to fix the mess left in the wake of the royal commission, writes Bondle’s Sandeep Rao.
The storm that has brewed since the royal commission inquiry began has been a spectacle of “shock and Orr”, for sure. We have seen everything from forged signatures to “fee for no advice” to client misrepresentation.
Clearly a series of controls failed – consistently and simultaneously across different organisations. Central to this mess is the lack of respect for the trust we held in the institutions and people who manage and grow our life savings. I think it is fair to summarise the saga with the phrase “incentives drive behaviour”.
The bulk of the media focus has been around the lapses in conduct and processes within financial institutions. However, I wondered what role should consumers play in fixing this problem along with their advisers?
We Australians pay special attention to the key relationships in life –- our life partner, our children, our employer. We acknowledge that there are elements of accountability from all parties involved in these relationships. So, why is it that we spend little time thinking about our money and those whom we entrust it with?
While we all hope the royal commission, ASIC and others work cohesively to redefine the corporate rules of engagement, I think we as consumers would benefit from playing a more active role in our own financial affairs.
There is hope for financial advice
To formulate an educated view on the current sentiment, we undertook an informal opinion poll of a cross section of 50 Australians. It turns out there is still a sense that financial advice is important, which bodes well for the industry.
Participants trusted their adviser and seem to have a strong bond with them. In fact, it wasn’t uncommon for the individual to believe that their adviser was honest and that “others” in the industry were perhaps the rotten ones.
Melbourne-based Aditi Daware has a young family. She and her husband continue to believe in their adviser and echo this need for honesty and trust.
“Being open and honest with your adviser makes the relationship stronger. Also, once the adviser knows that you trust them genuinely, they will assist you as much as they can,” Ms Daware said.
It was heartening to see this connection still exists, but the findings from the royal commission have provided a wake-up call for others.
There is an awareness of the need for being in control. Clients want to play a bigger role in managing the relationship and to be empowered in the decision-making process.
Michael Light, a long time Sydneysider who has had a financial adviser for over 20 years, said, “The current climate demands greater openness from our financial services providers. Consumers should be empowered to question more than ever before, and I think this can lead to more of a partnership relationship than a supplier-buyer one.”
Transparency builds trust
Financial advice is regulated because financial products are complex, as is the process of defining and achieving one's goals. Advisers are responsible for understanding our needs and the market to be able to provide guidance on building a financially secure future.
In doing so, they need to ensure full transparency in their conduct and remuneration. Perhaps there was a degree of complacency among retail customers in the way they managed the adviser relationship.
Most clients would have a detailed initial consultation, receive an advice document, investment certificate or insurance policy, followed by limited and in some instances no service. Our research indicated that clients are now keen to play a more active role in the process.
As Dominic Moore, director of 325 Consulting, said, “I think being clear on what you want as the consumer helps narrow the focus for your financial adviser. After all, there are many choices they can propose so we are also part of this process, if not more so than they are, given it’s our money to begin with.”
So, what does this mean for advice businesses?
It was evident from our quick poll that most clients trusted their partner-in-finance. We are also certain that many advisers (if not the majority) love what they do, which is to provide their clients a better financial future.
However, as the royal commission has highlighted, there is no substitute to absolute clarity and transparency in life’s critical relationships.
Every headline about an adviser being banned, or a licence being withheld, sows seeds of doubt in clients.
While there have been many sources of competitive advantages for businesses to differentiate themselves, we could be witnessing an era where advisers will use “trust” as a source of competitive advantage. In fact, trust is the one thing that we cannot acquire overnight – it is just built over time by doing the right thing at every step of the relationship.
Businesses that can deliver tangible trust metrics will clearly win over those who have shades of grey in their customer relationships.
A balanced partnership means everyone wins without a huge overhead driven by policy enforcements.
Sandeep Rao is the chief executive of client engagement software firm Bondle Australia.
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