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Poor service and returns hit advisers

A global study reveals financial planners will have to do more to win their clients' trust.

A global study reveals financial planners will have to do more to win their clients' trust.

Financial advisers are still struggling to win back the trust of consumers three years after the global financial crisis and will have to "up their game", according to a global study by PricewaterhouseCoopers that has messages for local businesses preparing for industry reform here.

PwC's biennial Global Private Banking and Wealth Management Survey covered 275 organisations in 67 countries, including Australia.

It found only 15 per cent of chief executives who took part in the survey believed their financial advisers had attained "trusted adviser" status with clients and only 37 per cent believed clients would recommend their company to someone else.

The wealth management principal at PwC, Anthony James, saw the Australian responses and says they were consistent with this overall result. He isn't free to say how many companies took part but says Australia had "good participation".

The resulting report, Anticipating a New Age in Wealth Management, says clients at all levels on the wealth pyramid "are taking charge".

They're demanding private wealth products that are more transparent and with clearer value, it says. They want to know what value advisers add and why they should remain loyal.

Interestingly, while a few years ago an adviser might have been judged purely on performance - clients would put up with less than stellar service as long as their portfolio was increasing in value - now, a client is just as likely to leave because of poor service as poor returns.

"The private banking and wealth client of today has far higher expectations in terms of both performance and service delivery," the report says. "The sleeping giant is indeed awakening and to succeed as a truly trusted adviser, successful organisations will have to up their game in service provided and value added."


The head of financial advice, member communication and engagement at Mercer and a former chief executive of the Financial Planning Association,

Jo-Anne Bloch, says the report rings true for Australia.

"We provide advice right across the spectrum, not just to high-net-wealth individuals, and the points raised clearly resonate, including the fact that clients are becoming a little bit more demanding," Bloch says.

James says a number of reasons for the loss of trust are identified, including high-profile investment failures during the GFC and ongoing volatility.

It's one reason for the strong growth in do-it-yourself superannuation in Australia and flat flows into managed funds internationally, he says.

There is a silver lining to the report, though, James says, which is that chief executives are aware of this client dissatisfaction and their survey responses show they're starting to do something about it.

"One of the really interesting things in this report was the awareness of the industry of this lack of trust and one of the pleasing messages is that the industry is responding," he says. "Four out of five CEOs say improving the client focus in their client service model is their No.1 focus for the next two years."

It will be the second-highest area of operational expenditure, with investment planned in areas such as new technologies to improve communication.

The finding that investment performance is no longer the primary reason for clients leaving their wealth manager was interesting, James says.

Clients are becoming more knowledgable about investment markets and they understand that markets are volatile, so performance will vary.

What they really want to know is what the adviser is doing about managing that volatility, for instance.


Bloch's reading of this is not that clients aren't concerned about performance but that when markets are volatile, clients want more service.

In the survey, 35 per cent wanted to know more about how their adviser was controlling risk.

That might be a wise question to ask, with the report describing as an "unsettling" insight the fact the executives surveyed believed market and "event" risks would remain significant for the next two years.

The report also found that growing regulation of the financial services industry was the top business concern for executives worldwide.

For Australia, James says the banning of commissions in favour of advisers charging a fee for service, along with the requirement for clients to be asked to "opt in" for continued service, means local advisers "are going to have to communicate their value proposition more clearly".

However, the report shows it won't be enough for businesses to just comply with the new rules under the Future of Financial Advice reforms.

"Those firms who merely focus on the requirements of the regulation and forget their clients are going to struggle," James says. "Those planners who refocus on their clients, irrespective of regulatory change, are the firms that are going to win the battle."

Key points

- Financial advice clients are less trusting and more demanding.

- They'll leave because of poor service as quickly as they'll leave because of poor returns.

- Only 37 per cent of wealth management CEOs believe clients would recommend their firm.

- So 80 per cent say improving client service is their top focus for the next two years.

- It won't be enough just to comply with new industry regulations.

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