Damning statistics confirm scorn for financial advisers
Stark new data shows the extent to which the distrust for financial advisers has deepened since the beginning of the royal commission.
Mentioned: ANZ Group Holdings Ltd (ANZ), National Australia Bank Ltd (NAB), Westpac Banking Corp (WBC)
Australians' mistrust of financial advisers is now statistically proven.
Exhaustive media coverage of the banking royal commission – including at times excruciating testimony and Kenneth Hayne’s scathing interim report – has long suggested advisers were on the nose.
But hard data has emerged to support that view, showing that trust in financial planners and banks is at a record low, according to the 2018 Financial Advice Report from Investment Trends.
The report surveyed more than 7500 Australian adults, and found that more than 40 per cent of respondents believe the financial services industry had failed to meet its obligations.
More than two-thirds of respondents are aware of the inquiry, and one-quarter have been keeping "a close eye" on proceedings, says King Loong Choi, senior analyst at the research firm, Investment Trends.
The Investment Trends report asks Australians to rate their level of trust – on a scale from zero to 10 – in 11 different professions and financial services sectors. These sub-categories range from accountants to super funds, to their friends and family.
"Unsurprisingly, Australians trust their friends/family the most, with an average score of seven, while politicians sit at the other end of the spectrum on just three,” says Choi.
"But in the last 12 months, trust levels have fallen most severely for banks and financial planners to below five out of 10, and into the 'distrusted’ range.”
In the last 12 months, trust levels have fallen most severely for banks and financial planners
Banks fell to a trust rating of 4.8, from 5.5, while financial planners fell to 4.8 from 5.1.
"The trust impact of the royal commission is real, and the financial advice industry must take proactive measures to rebuild trust among the wider population," Choi says.
Morningstar Australia managing director, Jamie Wickham, acknowledged the royal commission during his opening address at last month's Morningstar Individual Investor Conference 2018.
He noted that rebuilding trust – which can take years – was a key challenge for advisers today.
Wickham also highlighted the difference in perspective for investors now versus 12 months ago, when he last spoke at the conference.
Just as he said last year there was "never a better time to be an investor" – given the wide range of financial products, downward pressure on fees and technological advances – "this year I have changed my tune," Wickham said.
He said the quality of advice was more crucial than ever, particularly in light of returning market volatility, higher company valuations, rising interest rates, falling house prices, geopolitical tensions and ongoing changes in superannuation rules.
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Glenn Freeman is senior editor at Morningstar Australia.
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