Barriers To Purchase
The best available numbers suggest there are about 6.3 million Australians who fall broadly into the category of mass affluent – and who by a large stand to benefit from using a financial planner.
At the time of writing, the best available research we could get, including the work we have done on our own 40,000 plus database of Australians, indicate that just shy of a third of the market , 28.7% to be specific, actually have a planner relationship.
There are two interesting things about the 70+% who don’t have a relationship with an adviser – the first is that a large chunk of them, about 25%, note to having had a relationship with a planner yet three out of four of this group pointed to having had an indifferent or negative experience.
For the just under 50% of mass affluent Australians who appear to be unadvised – about three million people give or take a few - they face some relatively significant hurdles to becoming advice customers.
In a pure marketing sense, the traditional barriers to purchase are: Physical – i.e. we can’t get to the product; Financial – i.e. the product costs too much money and; Psychological – i.e. I don’t understand the product or face an emotional barrier to buying it.
The physical barriers to purchase are pretty low, financial service businesses operate on the online, via phone and have a lot of central locations.
The big barriers it seems are financial and psychological.
The reality of financial barriers stems from the fact a lot of customers don’t believe they have enough money to warrant seeing a financial planner, describing their needs as simple and straight forward and not requiring of advice.
The psychological barriers to getting financial advice come from one core idea – potential customers don’t understand how they would get or measure value from a planner?
It seems the biggest barrier to getting or reaching out for a financial adviser is the uninitiated simply don’t understand what success might look like.
In one of the latest pieces of research we have been doing on Australians and their relationships with financial planners – where we have sought to understand the literacy levels, interest in and relationship with financial planners – we found a group of highly satisfied, very happy financial planner customers.
There were a couple of elements of the relationship with the planner which were highly correlated with satisfaction and trust.
The first is frequency of contact – individuals that saw or spoke to their planner more than once a quarter were much more likely to be happy than those who didn’t.
The second thing that was highly correlated with satisfaction and a planner relationship was the person they were planning for was in small business or consulting.
The picture of the perfectly happy financial planning client was the micro or small business man who was in relatively constant contact with their planner who was able to describe in an open forum all the good things that their planner did, how they added value to their life and how much they trusted them.
Daniel Toohey says:
Great article – so often the industry assumes that demand exceeds supply and planner shortages without really evaluating the demand side. Keen to chat further Andrew.
Andrew Inwood says:
Hi Bomber,
Mass affluent and emerging affluent are used here to describe the growing high end of the middle class – largely driven by asset price inflation, a sustained benign market place and enforced saving through superannuation.
We use it to refer to individuals with between $75,000 and $1,000,000 of liquid assets but another good indicator – used by other people is households of $80,000 or better.
Our research by the way shows the behaviours really start to shift once the liquid asset pool reaches over $3 million – so what we call those with between $1 and $ million – am not sure yet.
Its worth noting that the mass affluent and the middle class are similar but different. Middle class is kind of a social divide referring to white collar workers where as many of the mass affluent come from the trades ( plumbers, electricians, bricklayers et etc.
Its also Specifically worth noting is that we don’t count the principal place of residence, like the Reserve Bank of Australia we consider that something you consumer – not store value in and despite the proliferation of products which try to make it a liquid asset – it isn’t or should be available for spending – Andrew.
Bomber says:
what is the definition of “mass affluent”??