Who Needs A Financial Adviser?
- Millennials looking to save for their first home;
- Young couples about to start a family and looking for strategies to reduce debt and protect their wealth; and
- Baby boomers preparing for retirement and seeking options on how to best structure their assets.
Simply, all Australians need good quality advice, no matter what stage of their life. But if this is the case, then why is it that only 14% of all Australians currently seek financial advice? A recent study by Adviserratings has highlighted that 86% of Australians do not have a relationship with a financial adviser. These figures are astonishing and illustrate a clear disconnect between everyday Australians and the financial advice industry.
One reason for such a large portion of Australians not seeking financial advice may simply be that they do not think they need advice – which really means that they don’t understand what a financial adviser does or how they can help them. Another reason may be that they just don’t trust financial advisers – and given recent history, who can blame them? The Royal Commission into the banking and financial services industry has portrayed an industry based on greed and dishonesty, and it is little surprise that many Australians no longer trust financial advisers. But I think the feeling of distrust and disconnect started well before the Royal Commission.
September 2018 marks 10 years since the Global Financial Crisis (GFC), an event that had a major impact on everyday Australians and how they now view the financial services industry. The collapse of Australian financial institutions like Storm Financial exposed how the greed of a few destroyed the lives of many. Financial advisers putting their interests in front of their clients has been a hot topic of discussion since the GFC. The financial advice industry was initially built on product sales and if someone wanted to buy an investment product or take out some insurance cover – you had to speak to a financial adviser who would then recommend a product. The advisers were paid by the investment products and not by the client, creating an environment where it was profitable to sell as many products as possible.
The industry has come a long way over the past 10 years and laws have been put in place to remove the incentive of unethical behaviour. There are no longer commissions paid from investment products and financial advisers are remunerated based on a client’s strategy and complexity, not for selling products. The reality is that the majority of financial advisers were already acting in their clients’ best interests and are passionate about helping them achieve their goals. It was this small number of rogue advisers (that have now left the industry) who have put doubt in the minds of the very people who need advice and will benefit from the value that an adviser can provide.
A good financial adviser has many roles for their clients. They have the privilege of knowing their clients on a very personal level and help them work out what they truly want, then map out how to get there. They educate them on complex areas and provide guidance and flexible strategies that their clients can clearly understand. Most importantly, they will be transparent about the fees they charge. A good financial adviser will demonstrate that the future is for those who plan for it.