Excel… Sell!

The Australian media is a schizophrenic beast. In just one week, we have heard predictions that a shortage of housing supply will underpin demand; that Australia’s heading for a US-style property crash; that unemployment is on the rise and the economy is heading for recession; and that the contraction in GDP in the June quarter was actually overstated.

The outcome of all this is one very confused consumer, which ultimately perpetuates the uncertainty in the market, fuelling the volatility we have witnessed over the past few months and expect to witness for the foreseeable future.

The barrage of (mis?)information is a concern when you consider the fact that two in five Australians rely on the general media when making financial decisions (41.4%) and almost one third look to finance industry newspapers and magazines (31.4%).

Is it any wonder then that investor confidence fell 15.7 points to -21.7 this quarter, the lowest we’ve seen since Q1, 2009 during the GFC?

Tracking Investor Confidence Q1 2005 – Q3 2011

The below cartoon demonstrates fairly nicely the devastating impact that market whispers and doomsayer-driven panic can have on the financial markets.

Don’t get me wrong, the media plays an important role in informing the public about the state of the nation, improving financial literacy and education and exposing malpractice. We also know and understand that bad news sells, and that publishing houses, just like corporations, are in the business of making money.

So is the constant focus on the macabre, the hundreds of column inches devoted to the doomsayers week after week, more the fault of the nation’s perverse obsession with death, destruction and chaos? Do we only have ourselves to blame?

Financial advisers play a key role in helping people make sense of the ‘white noise’ in the stock markets.

While perceived financial insecurity is on the rise this quarter, people with dedicated financial advisers are more likely to feel financially secure (52.0%) than those without a dedicated adviser (33.3%), and are more confident in dealing with their greatest financial concerns (55.7% vs. 45.1%) – clear evidence of the value of advice.

Furthermore, according to CoreData’s Financial Planner Affection research, although the proportion of people seeking out a new advice relationship has declined year-on-year (21.2% vs. 27.3%), of those who are likely to engage a dedicated adviser at some stage in the future, just under half intend to start the relationship within one year (46.4%).

This suggests that people are no longer delaying their decision about advice take-up to the extent that they were in 2010, when only one third were looking to engage within the next 12 months (34.9%).

While the market volatility will likely continue for some time, and the media will continue to give greater air play to the bears over the bulls, advisers that work on getting their value proposition right will continue to increase their share of wallet and get new clients through the door.