Financial advisers are operating within a paradox. On the one hand, the industry is still reeling from the blow of the Royal Commission and the high levels of mistrust within the community towards the financial services sector. On the other hand, there’s every sign that demand for quality financial advice is growing – to the extent that some advisers may find themselves on the back foot when it comes to putting in place the necessary capabilities to deliver tailored advice solutions.
It seems that, if anything, the media coverage of the Royal Commission has only raised in people’s minds the inadequacy of their own financial knowledge when it comes to managing and growing their wealth. According to the most recent survey conducted by ASIC in August this year, 79% of participants agreed that financial advisers had expertise in financial matters that the participant did not have. Even after being exposed to the negative headlines, 75% agreed that financial advisers could recommend products that they normally could not find on their own, and 73% agreed that advisers could introduce them to good ideas they might not have thought of on their own.
So the need and desire for financial advice remains in place, but consumers still face a knowledge problem when it comes to finding an experienced adviser who they believe can genuinely help them achieve their objectives. It’s clear that the main reason people seek financial advice is to benefit from the expertise of the adviser, who they believe can provide recommendations that will improve their financial wellbeing and help them prepare for major life events. What it comes down to is not the overall perception consumers have of financial advice, which remains positive, but the way in which they discern the quality of individual advisers.
When it comes to demonstrating quality, advisers need to be able to show clearly how their advice adds tangible value to the client. Once a positive first impression is made, advisers must then follow through on their value proposition with a roadmap for success that the client can understand and that makes intuitive sense. Breaking down what are inherently complex topics can be a challenge, but it’s critical to ensuring clients are fully engaged in the process and can see for themselves how your advice is helping them build their wealth and meet their objectives. High-quality investment research can play a key role in supporting this process by giving advisers the information, visual data, and easy-to-use reporting tools they need to have deeper conversations that speak directly to their clients’ needs.
The Royal Commission has not spelled the death of financial advice, but it has made it harder for advice that can’t draw a direct link between the client’s individual needs and the investment decisions of the adviser or portfolio manager. We are entering a new age of financial advice that is seeing the role of the adviser shift from that of administrator and stock picker to someone who can deliver a holistic advice experience by showing that they have a deep understanding of their client’s position and can recommend high-quality investment products that support the client’s needs. This means having a thorough understanding of the qualitative aspects of different products, how they compare, and they can be used as part of a tailored investment solution.
The results of the ASIC survey support this, and while some of the survey findings may come as a surprise, many advisers will see this as old news. When it comes to choosing an advice provider, communication is one of the most important factors customers look for and anticipate in their interactions with advisers. Experience and reputation are obviously important, but a key differentiating factor is the way advisers talk to and engage with their clients. The ability to talk to clients in a way they can understand is just as important as an advisers reputation (38% versus 36%), while taking the time to understand their client and their goals is also one of the top attributes (32%).
What’s also interesting is that, for those respondents who had received financial advice (Group A), low cost became far less of a determining factor. For advisers who are successfully able to demonstrate the value of their advice, clients are more willing to pay because they can see how the advice they receive results in superior outcomes. That’s why it’s important to have not only high-quality investment research, but the right platform and tools that can deliver this research in a way that allows you to present complex information, including in-depth product comparisons and portfolio reports, clearly and concisely.
It’s also why we’ve continually evolved Lonsec’s iRate platform to ensure it’s more than just a place to access research, ratings and data. We give you the tools you need to get a more complete picture of your client’s portfolio, analyse and compare products across a range of qualitative factors, and demonstrate how your advice is contributing directly to their investment outcomes. For advisers looking to win the conversation game, a high-quality research provider can give them the edge they need.