Unpalatable Truth
There is an unspoken war going on in the world of financial services. On one side is the Government and broadly speaking the mainstream press, who are convinced that anyone in the business of financial planning is by their nature dishonest. On the other side are the financial planners, who are by and large doing the best they can for their clients.
The thesis of the protagonists is this: financial planners aren’t really planners at all; what they are is sales people, secretly paid by the manufacturers of financial services products, all of which – apart from superannuation and especially industry fund superannuation – are some type of low level fraud.
This is all part of the pernicious myth that financial planning is easy to do. Essentially just stick all of your money into super and you will be fine. In fact, put your money with any very low cost service provider because after all, price is the determinant of value.
Recently at burningpants we were speaking to a prominent Australian journalist who writes about financial services, who was coming from the position that all financial planners were somehow evil and that people who were paying them were unhappy or otherwise disappointed.
Those of you who know burningpants correspondents would understand that we couldn’t let such a statement pass without mention.
We told him that after eight years of mystery shopping, thousands of surveys and numerous focus groups we had no evidence that there was any systemic pattern of unhappiness.
So since burningpants is part of the CoreData Research business, we agreed to run a survey to find out how satisfied people were with their planners in comparison with their lawyer, accountant, stockbroker or private banker. No matter what the score was, we would stand by the results.
We surveyed a little more than 2000 respondents and the scores are below.
While it’s hard to tell from this chart, the variance between accountant and financial planner was too small to be measured with significance – planners scored 6.60 and accountants 6.74 respectively.
The worst was stock brokers, with 5.12 (surely a function of the market) and then bankers with 5.78.
In broad terms this is interesting because any score between 6 and 8 for these satisfaction measures is fairly good and any score under 6 is fairly bad.
However, apparently that wasn’t a story – or not a story that was interesting enough for readers.
Instead it was to become something else, a story about the relative performance of the satisfaction of each of the financial planning firms we surveyed, in particular the big six providers, which played out like this.
As you can see, the least satisfied customers are those of AMP closely followed by CBA, when you look at this sample, and the most satisfied are MLC customers.
Broadly speaking this follows the customer satisfaction data we have been tracking for the past six years – but there are some factors that can’t be ignored that ultimately shape the outcome of the research.
For example these CBA figures are for bank planners – of which there are literally thousands and each year give us a sample of both excellent results and terrible results. This is partly because the sample is so large it will mimic the market, and the same is true for AMP.
What is not revealed in this chart is that the scores that hurt CBA were around customer involvement and communication – but that the bank scored best for trust, information and access.
Five years ago we would have said the same about AXA – but the licensee slashed its poor performers a few years ago and since then the group’s satisfaction figures have shot up.
It’s also not really fair to compare ANZ (which does reasonably well) with the other banks. ANZ has about 300 planners – it’s the most boutique of all the bank offerings and should hence behave that way.
But these findings do not do justice to the full scope of the research.
We asked numerous questions and developed a rich view of each of the financial planning practices in Australia, and the survey reveals that the industry is well understood by consumers that pay for professional advice.
Not only that, the results show that by and large, people are satisfied with their adviser, with scores ranging from the low 5′s to the high 8′s.
The truth is not always palatable, but it shouldn’t be ignored for the sake of a good story.
6 Comments on “Unpalatable Truth”
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Peter says:
There is a divide in this space and the problem is that the regulators do not understand this.
There are product salemen and then there are independent advisors.
The beaurcrats and journalists do not understand the need for salemen. Obviusly the journalists have never worked in the advertising salesrooms of their papers.
You cannot run a product manufacturer without a sales team. Product manufacturers include all insurers, banks, super funds (including industry funds)as well as managed funds.
A salesman can only be remunerated by commission based on volume of sales. For the squeemish you can use another name but it will always be related to sales.
An advisor will charge by the hour and his rate will be set at how good their advice is. If they are good then they will only be able to be afforded by those doing big deals.
The truth is that most financial planners are really salemen. The only thing wrong with this is that they do not want to admit it. As a shareholder of a bank, insurance company or product manufacturer I want the saleman to make lots of sales and I want the employer to pay them lots of money for this.
This is the way business works and we should not be apologising to anyone for this.
I am an advisor in my other capacity and do not accept commissions.
Greg F says:
Why don’t you ask that journo to do some investigation into the industry funds and the common directorships between them and companies they ‘invest’ in and outsource their services to etc. And why do funds that claim to only act for the benefit of their members give multi-million dollars sponsorships to AFL & NRL teams etc. Further, surely the tens of millions spent on their negative advertising campains would be better served in the members accounts?
Joel Ruig says:
You should have also surveyed the satisfaction of the public with journalists. I understand that it is very low. Perhaps jelousy is the motivation for the reporter for slanging off at us.
Ray Costello says:
This is true, but common to many occupations that serve the public. Reflect on how the following are portrayed: catholic priests, union officials, judges in crimial trials, prison officers.
I say this so the we don’t feel uniquely represented.
emily says:
since you said you’re going to reveal the results…where are the lawyers and private bankers on your chart?
bindi says:
I would love to spend half an hour with that journalist! Unfortunately, this is the level of creditibility the media players in general are displaying – absolute ignorance and onesided points of view.