No Dice

Will the Government’s efforts to increase consumer confidence in financial planning have the desired outcome? At this point, it seems doubtful.

While the Future of Financial Advice reforms are not yet well understood by the man on the street, CoreData’s latest Investor Sentiment Index (ISI) for Q2 suggests the reforms will do little to increase the take-up of advice.

When asked whether they’d be more or less likely to engage the services of a financial adviser as a result of each of the reforms, the average score was neutral – between 5 and 6 out of 10 – indicating the reforms would have little influence on the decision-making of those who do not currently seek advice.

If the proposed reforms become legislation, will you be more or less likely to engage the services of a financial planner/adviser? (Average Rating, 0-10 scale)

The ISI, which canvasses views on current issues in addition to providing quarterly tracking of consumer sentiment towards investing and super, surveyed 816 Australian investors.

Of these, 468 respondents (57.4%) do not currently receive financial advice.

Not surprisingly given the high profile industry fund campaign against commissions, those reforms relating to the banning of conflicted payments were the most likely to be of influence.

The ban on upfront and trailing commissions on insurance products held within super and the ban on  sales and volume based product sales were the most likely to encourage respondents without a planner to engage a financial adviser, followed by the restriction of the term Financial Planner/Adviser and its inclusion in the Corporations Act.

More than two in five respondents indicated that following these reforms they would be more likely to engage the services of a financial adviser/planner (based on those who gave a rating of 7-10 on a scale of 0-10).

If the proposed reforms become legislation, will you be more or less likely to engage the services of a financial planner/adviser?

Only one in three respondents (34.3%) who currently do not receive financial advice would be more likely to do so following the two year opt-in requirement and even fewer as a result of the introduction of ‘scaled advice’ (31.8%).

In fact, more than 16.0% of respondents would in fact be less likely to engage a planner on the back of these reforms.

Looking at the overall impact of the reforms and taking into account those who are neutral or less likely to engage a planner, it appears that the reforms will do little to encourage advice usage.

*CoreData’s Q2 Investor Sentiment Index is available for purchase. For more information please contact CoreData on 02 9376 9600.