Among the 1,762 respondents in a new survey released by the FMA reveal nearly half (44%) manage their finances themselves and nearly half (46%) have never used a financial adviser.
Two of the major concerns held by consumers show there is confusion around the value offering of advisers and also in how to find the right adviser, with a quarter of respondents saying they don’t know how to find or choose a professional adviser and the same number worried the person they did use might try to sell them something that might not be right for them or necessary.
Only 16% say they’re happy with their financial position and so they haven’t even sought help or advice.
Comments from respondents indicated a lack of trust in the remuneration structure around advice and included:
“Concerned they would direct me to organisations that would benefit them rather than me.”
“I am happy to pay for advice, but I don’t know what is reasonable, and I don’t know who is good.”
The Professional Advisers Association
’s (PAA) CEO Rod Severn
told NZ Adviser
the way advisers can tap into the remaining half of the market is through clear disclosure and communication with first time advice seekers.
“It’s disappointing, but it doesn’t surprise me,” says Severn of the survey statistics. “But when the consumers are educated about it, they know what to expect and there’ll be a lot less confusion about the value of advice.
“It’s about disclosure and communication - it’s got very little to do with commissions.”
Severn doesn’t think the commission based profession needs to change to alleviate consumer concern about how advisers are paid for their service but rather it’s about how that service is presented to the client.
“Particularly if it’s someone new who hasn’t undergone that advice process, it’s probably a little bit hard to understand the value that’s behind it,” he says. “But when they do understand that, it’s a no-brainer.”
“The quality advice has to be driven to the client’s specific needs and requirements and their personal circumstances and when it’s clearly evidenced that that’s what’s been done then you’ve got the beginnings of a good relationship between the adviser and the client. I think then those concerns about being sold product that doesn’t benefit (them) would go away.”
The PAA is launching into a new initiative early next year to help advisers tap into nearly 50% of the market not using an adviser.
“One of the things we’re looking at to help is to start up a brand new public facing website” says Severn, which will be packed with financial information.
“It’s designed purely to drive the awareness and value of advice and how to find advisers.”
The Commission for Financial Capability questioned people who were already trying to improve their financial circumstances by using the Commission’s www.sorted.org.nz website.
David Boyle of the Commission said, “There are times in life when it is really important to seek advice to help get ahead financially, but many people seem reluctant to do this.
“We would like to see better transparency around some of the issues that have been raised about the way advisers are paid, bias to particular products or providers, and incentives to sell products. It’s clear that investors have fears about the way some financial products are being sold and transparency will help to build up trust and lead to better outcomes for the public.”
Otage director Glenda Walters
told NZ Adviser
they have an open disclosure conversation with the client from the start about where they earn their commission and once the consumer understands and has experienced the benefits of financial advice, they no longer have the concerns described in the survey by those who yet to use an adviser.
She says location can play a role too and Dunedin’s strong adviser market has helped with consumer awareness.
“There are some well established firms here that have been in operation for a long time - so a lot of people know what an adviser does.”
“(Using an adviser) takes the stress out of it - you’re going to an independent person to see what your options are and that person is going to explain all the options to you rather than going to a bank where you’re going to have a yes or no answer.”
Liam Mason, director of regulation at the FMA, said: “These survey results show that people do feel there are real barriers to accessing the financial advice or support they would like and they are not certain their interests are being put first when it comes to the type of service they are receiving.
“The concerns coming through these surveys confirm the issues that have been raised in the review of the legislation surrounding financial advice. We encourage the public and all sections of the industry to get involved in the review and make their own submissions on the options that have been proposed to improve the current regulations.”