Zero Sum
A significant number of Australians have sought and taken financial advice only to either reject it prior to striking a relationship with a planner or rejecting it after the event as unsuitable or unsatisfactory.
This is one of the intriguing pieces of information that continually pops up from brandmanagement’s various mystery shopping and polling exercises.
Once a bad financial planning experience has taken place it changes the person concerned in terms of their perception of how they value advice, and it’s unlikely that person will become an advocate for the planning process – a vital medium of new business for many advisers.
This isn’t to say Australians generally aren’t happy with their planners – the research we have conducted has shown a strong level of satisfaction among people who have a relationship with a planner.
The problem is the ‘leakage’ in the industry whereby people hit a hurdle prior to fully engaging with a planner or – once inside the tent – find the advice they receive wanting.
Our figures show that 28.7% of people currently have a planner, while 25.1% do not but have previously used a planner.
Within this 25.1% are a number of people who are unlikely to go out of their way to return to the industry in the near future.
In some ways this isn’t news – we all know anybody who has had a bad experience with what is essentially a discretionary service purchase is unlikely to buy again in the short to medium term.
This is a shame because such losses are a capital loss to the industry given this whole business is zero sum – that is if an opportunity is lost it’s unlikely to occur again for some time – not to mention the fact there is no natural well of new recurring opportunities, unlike for example, mortgages which tend to refresh every seven years and despite knowing that having a plan makes people happier.
All around Australia banks, financial planners and fund managers are spending millions of dollars on sales and marketing campaigns to encourage people to choose them or their services, yet it seems that a large chunk of people enter the process but reject it for a variety of reasons.
The reason this is of interest here at brandmanagement is because we are part way through the process of sending hundreds of real shoppers into the field to find a financial planner.
The group conducts a great deal of mystery shops and unlike most mystery shopping programs we use real shoppers – shoppers who at the end of a 10 week process are going to potentially buy the services of a financial planner or take out a mortgage.
In the past two months we sent 20 mystery shoppers into one of Australia’s best known and arguably strongest branded mortgage businesses – they were seeking to borrow on aggregate more than $6 million, but the mortgage business concerned failed to close a single deal – effectively $6 million of business walked in the door and $6 million of business walked out again, only to buy somewhere else.
In some ways it’s not fair to compare the sale and servicing of a mortgage with a financial plan – a mortgage is really a purchase, is time bound and doesn’t really require a relationship, financial planning requires all of these things.
Also if a mortgage sale fails – generally people will simply go and buy somewhere else, the interesting thing about the financial planning sales process is if a buyer has a bad sales experience or a bad service experience, they tend to end the relationship and not to buy anywhere else.
Quite how we prevent this leakage as an industry is anyone’s guess but over the remainder of this month and next we will be accumulating hundreds and hundreds of experiences of Australians as they go through the process all around Australia of trying to find a financial planner to help them map the rest of their life.
One Comment on “Zero Sum”
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Chris says:
I find your article interesting. I myself am in the financial services industry and have been for over 30 years. In my role I am unable to give personal advice due to the licensing position of the firm that I work for. So when my wife was appointed Executor of an Estate and investments needed to be invested in trust for minors, she correctly was advised by her lawyer to seek financial advice.
She was very selective and approached a well established firm and was allocated an adviser. She had to pay for an SOA for the advice provided. ($500).
Unfortunately, the advice received could not be implemented as the investments recommended did not meet the requirements of investing in trust for minors….a point identified at a later time by her lawyer….more fees. When the Licensed Dealer was approached regarding the value of the advice and then regarding a refund or partial refund for the service that was of no value there was no recognition of the position but rather a justification for the cost and time invested by the planner. What about my wife’s time investment as well as the cost?
For $500 it was easier to put the process down to experience….but there are other funds that will require reinvestment and consolidation in time and these will total approximately $1million. Would she or I go back…..you know the answer.
My concern is that this isn’t the experience that I would want others to have of our industry.