Two-thirds of consumers don’t trust advisers

Increased scrutiny of major institutions has deflated consumer trust in advice.

28-Apr-2016

By Sarah Kendell

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Consumer confidence in the financial advice industry had plummeted to just 29 per cent off the back of a range of prominent scandals in major institutions over the past 12 months, according to new research from RaboDirect.

The group’s annual “Financial Health Barometer” report, which surveyed 10,000 consumers on their attitudes and behaviours to various factors of personal finance, revealed that while 40 per cent of consumers in 2014 said they trusted financial advice, only 29 per cent said they trusted advice in 2015.

But confidence levels were much higher among those who had an adviser, with 75 per cent saying they trusted the advice they were given, highlighting a major challenge for the industry to engage unadvised consumers, according to RaboDirect national manager of adviser services Bede Cronin.

“The drop in confidence has been driven by a number of factors, but you couldn’t say the recent issues and scandals in the industry haven’t had an effect,” Cronin said at a recent briefing reflecting on five years of the Barometer research.

Glenn Wealands, the bank’s head of research and analytics, said it behoved advisers to focus more on enunciating the value of their services among consumers who had not yet sought financial advice.

“There’s a need to build out the value story around advice and particularly to break down the costs and complexity surrounding different services,” Wealands said.

This was borne out by the fact 28 per cent of consumers thought seeking advice was only worthwhile for those who had a lot of money, up from 23 per cent in 2014.

Meanwhile, contributions to superannuation had also fallen across two of three age groups over the 12 months, with just 24 per cent of generation X respondents having made voluntary contributions to super in 2015, compared to 33 per cent in 2014.

Baby boomers also contributed to their super in considerably fewer numbers, with 21 per cent saying they had made a contribution over the year compared to 27 per cent in 2014.

“We found that gen X is focusing more on debt repayment rather than contributing to their super, while the baby boomers are being impacted by potential tax changes to super as well as the slowdown in markets,” Wealands said.

“They are getting closer to retirement and wondering if super is really their winning horse after 18 months of flat returns.”

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