Perception vs Reality

Despite what we’re led to believe, when it comes to financial services consumer perception and reality are often two very different things.

Storm Financial is a case in point. Storm clients perceived the advice business to be stable, profitable and trustworthy, right up until the point of collapse.

In reality, Storm’s founders were facing insurmountable debt due to an investment strategy that seemingly relied on a rising market.

It’s a clever business that is able to convince the wider market that it is top of the pops, even when the reality is rather different.

Industry funds have built their value proposition on two key foundations – lower fees and better returns.  

The Compare the Pair campaign, along with frequent advertising using former governor of the Reserve Bank, Bernie Fraser throughout the financial crisis, has shaped consumer perception that industry funds do indeed provide lower fees and better returns.

In fact a consumer study of thousands of Australians carried out by Coredata-brandmanagement late last year revealed industry funds are rated highest across all three metrics measured in the study: fees and charges, investment returns and quality of member service.

But in the advice space, there is less to sound the trumpet about.

A recent shadow shop of Industry Funds Financial Planning (IFFP) revealed the financial advice provided by IFFP advisers leaves a bit to be desired. 

By IFFP, the study refers to the stand-alone branded IFFP business (not advisers who are licensed through IFFP but work within specific super funds).

The experiences of shoppers who met with IFFP representatives were compared with those who met with advisers representing both IFA and banking channel businesses, and IFFP advisers rated below the competition in five out of seven categories measured in the study.

In fact the group trailed behind IFAs as a group in all seven categories.

While IFFP advisers appeared to cover the basics well, and rated reasonably in their roles as advisers, they showed limited ability to service those whose requirements were beyond the norm and were somewhat restricted in their advice offering.

They also demonstrated a limited follow-up procedure, as if the group is happy for would-be clients to take it or leave it.

Perception is important. But for an advice business true success is measured on the ability to acquire clients, and that will only happen if the reality is a positive experience for those consumers that walk through the door.

*Data sourced from the 2009 Industry Funds Financial Planning Shadow Shop