Client education is not a simple matter
At a recentFinancial Planning Association (FPA) lunch held in Sydney, the head of the Australian Consumer Association (ACA) Louise Sylvan said the benchmark level of understanding regarding financial services should not be the educated investor but rather the average person in the street.
This sounds like a rather good idea, with qualifications, because not everyone approaching financial services providers in recent years is either educated in such matters or desires to be so.
But if planners were to adopt this lowest common denominator approach, it would mean that time, and therefore costs, would climb.
It also raises the question of whether planners really want or even need to serve a market that is defined by the average person. This is not to say that low-net-worth clients or those who have chosen not to educate themselves should not receive financial advice but rather that any client who seeks advice should take some responsibility in doing so.
This is consistent with a demand driven market in which clients dictate what planners provide.
There must, however, be an increased attitude towards the opening up of the financial planning process because it would be easy to pass off any number of disreputable practices due to client ignorance.
However, Sylvan did point out that clients still blanch at the cost of financial planning with the average figure of $1,200 for a full financial plan, as calculated by the ACA, said to be too high.
Yet when these consumers were told they could avoid paying this up-front and have it taken via a trail commission, despite the fact that many felt trails jeopardised a planner’s independence, this method of payment was viewed as a satisfactory alternative.
What this says about the consumer’s understanding of financial services is not that they need it boiled down, but rather about the over-arching importance of having a financial plan in the first place.
Once the public understands this, unless they are completely blasé about their investments, then the other issues regarding financial services will quickly become points of interest.
If there is any challenge it is getting this message across and not the intricacies of the industry.
AUTHOR
Jason Spits
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