Branding failure driving advice trust deficit

Advisers are failing to shed light on the value they provide clients


By Daniel Paperny

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The trust deficit in financial advice stemmed from a persistent failure by industry participants to highlight their positive impact and demonstrate their value to clients, according to Sequential managing partner Adrian Johnstone.

In an interview with financialobserver, Johnstone said the preoccupation with a few rogue operators in the advice sector had contributed to eroding the fabric of the relationship between advisers and their clients across the industry.

A rigid focus on financial products and statements of advice also meant advisers were failing to account for the enriching impact they could potentially have on clients’ financial futures and that needed to be addressed to help reframe the conversation, he added.

“Collectively as an industry, we’re just kicking our own goals and we’re making it easy for people to criticise the industry by not talking about the good bit,” he said.

“Everyone talks about negative claims experience, no one talks about the billions of dollars a year paid in claims; everyone talks about rogue advisers, but no one talks about the massive amount of positive outcomes for advice clients.”

He said the conversation around the relevance of financial advice to Australian consumers had become “tokenistic” as a result and the incorporation of objectives-based advice raised further questions surrounding the nature of advice clients were receiving in the past.

“While we should talk about goals, you can see we are in a situation where you can simplify it [so that] people’s goals vary based on their circumstances [and] the reality is from an advice industry perspective and from a product perspective, it’s circumstances that you have to deal with,” he said.

“I think by making it goals-based, to some extent you move more effort and by extension more risk to the consumer, which is therefore making it more difficult for them to make the investment decision.”

Recent technological developments in the industry, such as the growing proliferation of automated investment solutions, were not necessarily the answer and there needed to be a greater focus on tailoring advice to an individual’s circumstances, he said.

“I think the advice industry is maturing well into being people-centric and the more they do, the more they will move away from products that contain certain threshold-limiting contributions,” he said.

“Digitally driven advice for me continues to be a very difficult product to monetise … it can act as a useful data gathering tool, but I struggle to see any of the mass penetration needed to make it a profitable product.”

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