PERCEPTIONS OF THE VALUE OF FINANCIAL PLANNING ADVICE. Report 2: Phases Two and Three - Perception of Value and Service Style - July 2016

Transcription

1 FUNDING OUR FUTURE: PERCEPTIONS OF THE VALUE OF FINANCIAL PLANNING ADVICE Report 2: Phases Two and Three - Perception of Value and Service Style - July 1 This research was supported under Australian Research Council's Linkage Projects funding scheme (project number LP002)

2 EXECUTIVE SUMMARY This report provides insight into the second and third phase of the research Introduction project Funding our Future: Perceptions of the Value of Financial Planning Advice, supported by a grant from the Australian Research Council (ARC) in partnership with the Financial Services Council and conducted by a team of researchers based at the University of Adelaide, University of Western Australia and University of Technology, Sydney. The results of phase one, consisting of a series of in-depth interviews with financial planners, clients and individuals not currently seeking financial planning advice, are outlined in an earlier report. Phase one was conducted to provide an analysis of the dimensions of perceived value of financial planning advice. This also included an analysis of situational factors that may affect how a client views the financial planning service provided. The research presented here builds on phase one by conducting online surveys of current clients (phase two), and individuals not currently clients of financial planners (phase three). The findings are presented in line with the primary aims of (a) developing a measure to capture the value dimensions identified in interviews, (b) understanding the importance of various value dimensions for relevant outcome measures, (c) determining any differences that might exist between clients and non-clients, and (d) developing relevant recommendations for the financial planning industry. All views expressed in the report are that of the university researchers and not of the Financial Services Council or any other third party. Key Findings The respondents see value in seeing a financial planner. Clients in the sample agree more strongly with the benefits they receive from the service as compared to the related costs. Nearly 0% of respondents agree that paying fees to have their financial planner is worth it. % of respondents report that they trust their financial planner, with 1% stating that they are satisfied with their financial planner. The emotional costs of facing one s financial weaknesses is positively linked to outcomes such as trust, satisfaction and willingness to refer the planner. Respondents recognize their planners as adopting various service styles, with approximately 0% of respondents happy with the style their financial planner adopts. Reasons noted by non-clients for not seeking financial advice range from losing capital, no longer needed a planner and related costs for those who had previously used a planner to a lack of need and perceived value, inability to afford a planner and lack of trust for those who had not previously engaged a financial planner. Non-clients responding to the survey perceived a notable monetary cost if they were to use the services of a financial planner, while appearing to miss a view of the potential benefits. On average, clients in the sample respond more favorably in regards to their peace of mind as well as their satisfaction with the financial decision they made and with the financial aspects of their life. i

3 CONTENTS i Executive Summary ii Contents 1 Background 1 General background 1 Research aims and background 2 Research Design 2 Survey collection Sample profile clients Sample profile non-clients Key Findings: Client Survey Perceptions of value of financial advice Impact of value perceptions Situational factors 1 Financial planner service styles 1 Client types and characteristics 1 Key Findings: Non-Client Survey 1 Why they don t seek financial advice 1 Perceptions of value of financial advice Situational factors Financial planner service styles 2 Conclusion 2 Managerial implications 2 Appendices ii

4 BACKGROUND General background Personal planning for retirement has taken on an important role in Australia, with a shift from defined benefit (government pension) to defined contribution superannuation plans. It is now each individual s responsibility for retirement savings. In addition, tax planning has become more complex and insurance products have proliferated. Understanding how to manage one s finances is not easy for many people. This can be a result of a multitude of factors, including a lack of time, a disinterest in finance, inability to understand financial matters, or even a lack of trust in the financial planning industry. For example, nearly 0% of individuals responding to a financial literacy survey in 0 either could not be bothered reading superannuation statements or, if they tried, thought they were too difficult to understand. Still, few seek the services of a professional financial planner, despite research suggesting the financial benefits of doing so. Research aims and background Central to the utilisation of any service is the individual s perceptions of its value. The majority of consumers are not able to fully comprehend the financial value of various financial strategies, which means that they have to rely on their perceptions of the service they are likely receive (including all positive and negative aspects) when making a decision about whether to engage a financial planner or to continue an ongoing service relationship. As part of this study, we establish a comprehensive understanding and measurement of value perceptions of financial planning advice and determine how, why, and for whom such perceptions form and evolve. As the Federal Government now depends on its citizens to largely take responsibility themselves, this study undertakes an extensive evaluation of value perceptions, in depth through a series of in-depth interviews (reported in an earlier report) as well as through surveys of current clients as well as clients not currently seeking financial planning advice. Based on the results reported here, specific recommendations are developed for the financial services industry, to ensure that (1) the financial services sector can encourage and provide a value-add service to facilitate retirement and future savings, and (2) better market their services to a diverse range of consumers. 1

5 RESEARCH DESIGN Client Survey Based on the insights gained in phase one of this study, the research team developed a measure of perceived value of financial planning advice (refer to the box on the right for details). This measure was integrated into an online survey, together with measures of relevant outcomes (e.g. peace of mind, satisfaction with the financial planner), situational variables (e.g. financial literacy) and demographics. The survey was distributed with the help of an online panel provider to individuals in Australia currently engaging a financial planner. The profile of the respondents who completed the survey is provided on the next page. Non-Client Survey The client survey was adapted to individuals not currently engaging a financial planner. For example, items measuring the perceived value of financial planning advice were rephrased to focus respondents on a hypothetical situation of them seeing a financial planner (e.g. If I had a financial planner, I would spend less time on dealing with my finances.) Furthermore, questions were added to identify individuals who had previously used a financial planner and those who have not had any experience with the financial planning sector. In total, 00 responses were collected from non-clients, including individuals who had previously engaged a financial planner and 2 without such experience. Development of a scale to measure the Value of Financial Planning Advice Based on the interviews conducted in phase one, a series of measurement items are developed representing what we refer to as value dimensions. 1 academic colleagues evaluated the items that were developed, a process commonly used in marketing research. The academics were asked to indicate the extent to which the items were representative of the definition; measured on a seven-point scale. The 1 items deemed most suitable by the academic experts were integrated into a survey completed by individuals currently engaging a financial planner. Through an iterative process of exploratory factor analysis and reliability analysis, the scale was reduced to nine dimensions: o o Four benefit dimensions reflect the positive aspects of the service a client may experience when using the services of a financial planner. These benefits include expertise, education, motivation and convenience value. Five cost dimensions reflect the negative aspects of the service a client may experience alongside the benefits. These include monetary costs but also, time and effort, emotional stress of having to deal with one s financial situation, emotional stress with respect to the planner and lifestyle changes. While the interview series suggested that clients perceive benefits relating to the support they receive, the relationship they develop with the planner and the planner s reputation, our analysis indicates that these benefits are very close statistically to the remaining benefit dimensions. Support, relationship and reputation benefits were thus not examined in phases two and three. 2

6 RESEARCH DESIGN Sample profile: client survey Demographic snapshot Male Single Divorced Budget 2% % % 0% Respondents Female Defacto/married Widowed No budget % % % 0% % Age groups Highest education completed 1% 2% % % Less than high school High school TAFE qualification Tertiary qualification (university or equivalent) Time to retirement Number of dependents in household Already retired.% Less than a year to retirement.% % % 1% 2% No dependents 1-2 dependents - dependents More than a year to retirement % or more dependents

7 < RESEARCH DESIGN Sample profile: non-client survey Demographic snapshot Male Single Divorced Budget 1% 1% 1% 0% Respondents Female Defacto/married Widowed No budget 00 1%.% % 0% 0 % Age groups 2 Highest education completed 2 Less than high school % 2% % High school TAFE qualification % Tertiary qualification (university or equivalent) Time to retirement Already retired % Number of dependents in household % Less than a year to retirement % 0% 1% No dependents 1-2 dependents More than a year to retirement % 1% - dependents or more dependents

8 KEY FINDINGS: CLIENT SURVEY Perceptions of the value of financial advice The customers of financial planners that were surveyed in phase two of this study certainly see value seeing a financial planner, with a mean response of. on a scale of 1-. This is also reflected in the results regarding the individual benefit dimensions of value. The expertise of financial planners emerged as the aspect of the service clients perceived most positively, with a mean response of. on a scale of 1-. Respondents also experienced the convenience of having a financial planner (.), as well as the benefits of being motivated (.) and educated (.0) by the financial planner. Examining mean scores for cost dimensions, lower levels of agreement emerge. For example, respondents perceived there to be some emotional cost of confronting their financial situation (mean response of.) as well as a monetary cost of using the services of financial planners (.2), with reflecting a neutral response. In regards to other identified costs, such as lifestyle change, time and effort costs, as well as emotional costs of dealing with their planner, on average clients tended to disagree with the statements relating to such costs (the mean response lies below the neutral score of ). Value dimensons - benefits Value dimensons - costs Expertise. Emotional costs (financial situation). Convenience. Monetary costs.2 Lifestyle change. Motivation. Time and effort costs. Education.0 Emotional costs (financial planner) Overall value I see value in seeing a financial planner. Paying fees to have my financial planner is worth it.1 1 2

9 KEY FINDINGS: CLIENT SURVEY Disagreement/agreement (%) with perceived benefits of financial planning My financial planner is reputable My financial planner is skilled in what she/he does My financial planner is well respected My financial planner has a good reputation It is reassuring to know that I can contact my financial planner if I need to My financial planner is well qualified My financial planner provides me with his/her opinion when I need it My financial planner understands my needs My financial planner is an expert in financial planning My financial planner saves me time in managing my financial affairs I see value in seeing a financial planner My financial planner saves me effort My financial planner educates me on my financial strategy My financial planner educates me about regulations that may affect my financial situation My financial planner supports me My financial planner can relate to me My financial planner motivates me to take action with regards to my finances My planner and I have a professional relationship My financial planner motivates me to follow my financial goals My financial planner educates me about financial matters I learn a lot about my investment options when talking to my financial planner Having a financial planner means that I spend less time on dealing with my finances My financial planner motivates me to plan my financial future % 0% % % % % % % % % % % % % % % 2% 1% 1% 1% 0% % % My financial planner educates me about financial markets 1 2 2% I learn a lot about financial markets when talking to my financial planner 2 1 % Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree When examining the percentage of individuals agreeing with the individual statements on which the value dimensions are based, a large percentage of clients surveyed agreed that they obtained value in numerous domains from their financial planner: Indeed, % to 0% of respondents agreed with all but two items measuring perceived benefits. Two items did not reflect this trend; only % of clients agreed that they learned a lot about financial markets from talking to their financial planner, whilst 2% agreed that they were educated about financial markets by their financial planner. This means that although many clients believe they are educated about financial strategy (%) and financial matters (1%), less respondents perceived that they were learning about financial markets. Importantly, however, % of respondents see value in seeing a financial planner. Of the 1% that do not see value, this group is more heavily weighted to younger respondents with a higher percentage of respondents under 0 than the total sample population.

10 KEY FINDINGS: CLIENT SURVEY Disagreement/agreement (%) with perceived costs of financial planning Paying fees to have my financial planner is worth it % My financial planner makes me face my financial situation 1 1 2% My financial planner s service is expensive % My financial planner exposes my financial limitations to me 2 1 % My financial planner s service is highly priced 2 1 % Dealing with my financial planner means I can t deny my financial weaknesses anymore % My financial planner charges too much % I spend a lot of time organising paperwork in the financial planning process 2 2% Having a financial plan means I make sacrifices to my lifestyle % Since I have been seeing my financial planner, my lifestyle has become more moderate % To achieve my financial goals I make major sacrifices to my lifestyle % Dealing with my financial planner is confronting to me % I spend a lot of time filling out forms in the financial planning process % Dealing with my financial planner takes me a lot of time 1 1 % Dealing with my financial planner is a stressful experience % I get stressed about seeing my financial planner % Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree In contrast, fewer respondents agreed that they experienced the various potential costs related to seeing a financial planner. The highest level of agreement can be seen for items such as their financial planner s service being expensive (%), as well as that their financial planner makes them face their financial situation (2%) and exposes their financial limitations (%). Indeed, only 1% agreed that they get stressed about seeing their planner, with 2% of respondents agreeing that they spent a lot of time filling out forms in the financial planning process. Importantly, % agreed that paying fees to use the services of their financial planner is worth it, which means that despite some perceived negative service dimensions, ranging from monetary costs to emotional stress as well as time and effort, the value/benefits they obtain make these costs acceptable.

11 KEY FINDINGS: CLIENT SURVEY Satisfaction, trust, peace of mind and word of mouth All outcome dimensions (see chart below) demonstrate positive responses from the clients surveyed. As can be seen, the highest scoring outcomes are trust of financial planner (mean response agreement. out of ), closely followed by satisfaction with financial planner and word of mouth intentions (both.), as well as satisfaction with the financial decisions that have been made (.). Outcome dimensions (mean responses) where 1 is strongly disagree and is strongly agree I feel I can trust my financial planner Satisfaction with financial planner Word of mouth Satisfaction with financial decisions.... Peace of mind Satisfaction with life (financial) The financial planning industry can be trusted

12 KEY FINDINGS: CLIENT SURVEY Indeed, 1% agree that they are satisfied with their financial planner and % feel that they can trust their financial planner. 0% agree that they would recommend their financial planner to others, and % are happy with and feel good about the financial decisions made. Interestingly, despite high levels of trust with their planner, only % agree that the financial planning industry can be trusted. This may reflect media sentiment that implies the industry cannot be trusted, however, importantly it shows that those who are personally involved with a financial planner do trust their service provider, indicating that the sector may benefit from promoting itself as comprised of real, trustworthy individuals rather than as an industry. Similarly, with only % of people agreeing that their financial life is close to ideal, and only 2% agreeing that they don t need to worry about their finances, it shows that despite satisfaction with the services of their financial planner, some financial concerns remain. Disagreement/agreement (%) with outcomes I feel that I can trust my financial planner % I am satisfied with my financial planner % I would recommend my financial planner to others % I am happy with the financial decisions made % I feel good about the financial decisions made % I would recommend my financial planner to someone who seeks my advice % I would say positive things about my financial planner to other people % Choices relating to my finances have been wise % I can sleep well at night knowing that my finances are taken care of % I am satisfied with the financial aspect of my life 2 2 % I have peace of mind when it comes to my finances % I feel secure financially 2 % The financial conditions of my life are excellent 2 2 % The financial planning industry can be trusted 1 % In most ways the financial part of my life is close to ideal % I don t need to worry about my finances % Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree

13 KEY FINDINGS: CLIENT SURVEY Impact of value perceptions on outcomes Regression analysis was utilised to examine the association between individual value dimensions and relevant outcomes. Results indicate that the perceived benefits have a positive relationship with outcome dimensions, with expertise showing the strongest positive effect across most outcome variables. For example, an increase of the perceived expertise value of financial planners by 1 score in mean response on a scale of 1- was associated with an increase of satisfaction with financial planner by 0.2 score in mean response. In comparison, a 1 score increase in the motivation value resulted in an increase of satisfaction with financial planner by merely 0. score in mean response. The results also imply that most of the cost value perceptions adversely affect clients perception of outcomes. An increase in the perceived emotional costs of dealing with a financial planner, lifestyle change and monetary costs is associated with a decrease in outcome values. Strikingly, emotional costs of dealing with one s financial situation is positively related with outcomes. That means, the planner s role of exposing financial weaknesses to the clients and making them face their financial weaknesses, which we might view as a cost to the client, is deemed a valuable service component by clients. The impact of time and effect costs on outcome value is negligible on average. Satisfaction with financial planner Satisfaction with financial life Satisfaction with financial decision Peace of mind Trust in financial planner Word of mouth Benefit dimensions Expertise 0.2*** 0.*** 0.*** 0.*** 0.*** Convenience 0.11*** 0.1** 0.*** 0.1** 0.1*** 0.** Education 0.1*** 0.*** Relationship 0.2*** 0.0*** 0.2*** Motivation 0.** 0.0** 0.2*** 0.1*** Cost dimensions Emotional costs (financial planner) -0.*** -0.*** -0.2*** -0.*** -0.1*** -0.0*** Emotional costs (financial situation) 0.*** 0.*** 0.2*** 0.1*** 0.1*** 0.*** Lifestyle change -0.*** -0.0** -0.1*** Monetary costs -0.1*** -0.00** -0.1*** -0.*** Time and effort costs 0.02**

14 KEY FINDINGS: CLIENT SURVEY Situational factors Respondents also reported on a number of factors reflecting their perception of the situation in which they made their evaluations of the financial planner s service. These factors were examined to gain insight into how respondents felt about their financial situation and the financial planning process. Examining risk tolerance, % of respondents agreed that for them, safety is more important than return on investment. The results also show that many respondents perceive themselves to have a high level of participation in the process (%), with less respondents indicating that they perceive themselves to spend a lot of time sharing information about their needs and opinions with their financial planner (2%). It is interesting to note that risk tolerance did not differ between age groups. The economy in Australia as a whole over the next months.2%.% 2.2% %.1% The general economic situation in Australia over the last 2.% 1.% months 1%.% 1.% a lot better a little better stay the same a little worse a lot worse Influence of participation and risk factors In terms of investing, safety is more important than returns % I am very involved in deciding how the financial planning services offered by my planner should be provided to me % I have a high level of participation in the financial planning process % When I think of the word risk, the term loss comes to mind immediately % Recently my financial situation has changed significantly % I spend a lot of time sharing information about my needs and opinions with the financial planner 1 2 2% I am more comfortable putting my money in a bank account than in other investments 2 1 2% My financial situation is very complex 1 2 % Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree 0% say their opinion of their financial planner is not changed by the media

15 KEY FINDINGS: CLIENT SURVEY Have you used different financial planning organisations before your current one? Influence factors Customer participation Risk tolerance.. % % No Yes Recently my financial situation has changed significantly My financial situation is very complex Financial literacy was derived by a series of questions from which the respondents cumulative scores were measured. As can be seen, 1.2% of clients scored a financial literacy score of (correctly answering out of questions). Nearly 0% of clients scored over, suggesting that the clients of financial planners have at least a working understanding of financial matters. Older respondents scored higher in financial literacy on average. In terms of financial planning needs, older respondents were more interested in superannuation and less interested in insurance and debt reduction but overall, retirement/superannuation was the primary financial planning need identified by all respondents. Financial literacy score Financial planning needs 2.% 1.%.% 1.% 2.% 2.%.2% % Retirement/superannuation Savings for long term goals Tax Shares Self-managed superannuation fund Insurance Estate planning Savings for short term goals Budgeting Debt reduction Negative gearing Other.2%.%.%.2%.%.%.%.%.%.% 1.% 2.0%

16 KEY FINDINGS: CLIENT SURVEY Financial planner service styles Current service style of financial planner 1% 1% 1% % 0% STYLE A: My planner manages my financial matters entirely on my behalf. She/he lets me know when my participation or approval is required but otherwise takes charge and implements the strategies. STYLE B: My planner mostly manages financial matters with some input from me. She/he provides options and his/her advice may guide my thinking, but the final decision about financial strategies is mine. STYLE C: My planner actively involves me in the managing of my financial matters. My financial planner and I communicate frequently and we make decisions together. STYLE D: My planner is directive in his/her recommendations and strives to keep me on track to meet my goals. I make the final decision by choosing to concur, reject or ask for alternatives. STYLE E: My planner addresses specific concerns or decisions I may have. I am the one to contact my financial planner rather than the other way around, as I am self-reliant and prefer to have control over my own financial matters. During phase one, the research results indicated five general styles through which financial planners delivered their services to clients. These styles are confirmed in the survey data. While 0% of respondents recognise their planners as adopting a mentoring-type style (Style B), the breadth of different styles adopted by financial planners to best serve their clients is important to recognise, with % recognising a partner style (Style C), 1% a delegate style (Style A) and 1% each a coach (Style D) or validator style (Style E). When given the option of identifying whether they would prefer a different style of financial planning, approximately 0% of respondents are happy with the style their financial planner adopts. For those preferring an alternate style, approximately one third (2%) would prefer a partner-style approach (Style C), followed by mentoring and coaching styles (Styles B and D, % respectively). 1

17 KEY FINDINGS: CLIENT SURVEY Financial planner service styles: Client types and characteristics To better understand financial planner service styles and the kinds of clients associated with planners exhibiting a particular style, a measurement tool was developed (refer to Appendix A) and provided to 02 clients of financial planners. The exploratory results demonstrate that while customer demographics (apart from education) are not key to discriminating respondents across the different styles, several personal and situational factors as well as perceived outcomes are. That means that the clients of financial planners exhibiting a particular style (e.g. delegate) share the common characteristics outlined in the below table. CLIENT TYPE Delegates Mentors Partners Coaches Validators CHARACTERISTICS Weakest sense of ownership over their financial portfolio Mostly rely on their financial planner Low financial literacy Moderate engagement with planner Financial situation perceived to be least complicated Avoid financial risks the most Moderate engagement with planner Low education (Tertiary) Low financial literacy Second highest amount of investments lodged with the planners Financial situation perceived to be less complicated Tend to avoid financial risks Strongest relationship with planner Strongest engagement with planner Most increase in customer capability and empowerment Most inclined to recommend based on their emotional experience with the planner, rather than merely the financial outcome of the portfolio Most adventurous, least likely to avoid financial risks Perceive their financial situation to be most complex, and experience a peace of mind from engaging their financial planner. Relatively strong relationship with planner Relatively strong engagement with planner Strongly increase in customer capability and empowerment More adventurous, less likely to avoid financial risks Strongest sense of ownership, taking the most responsibility for their own finances Weakest relationship with planner Lowest engagement with planner Highly educated (Tertiary) High financial literacy, least difficulty in understanding financial matters Largest amount of investments lodged with the planners. Perceive their financial situation to be the least complex; most self-reliant 1

18 KEY FINDINGS: NON-CLIENT SURVEY Why people don t seek financial advice The non-client survey provides insight into why respondents have either stopped using the services KEY FINDINGS: NON-CLIENT SURVEY of a financial planner or have never sought financial advice. Respondents who had previously used a financial planner The reasons provided for the termination of this service include being given bad advice and losing capital, being no longer needed due to having finances under control, and services being too expensive for the skills provided. Many of these respondents appeared to have had negative experiences: had [an] interview with one who pushed the bank and his agenda on us, not what was in our best interests. Their advice cost me $0,000 in lost revenue... he was incredibly rude when I asked him to give me a few months before [purchasing] his recommended insurance products - never spoke to him again couldn t tell me anything that wasn t common knowledge, made a [few] pretty graphs, I can make them too However, other respondents indicated that they would contemplate returning to a financial planner when their financial situation changes. Respondents who had NOT previously used a financial planner A variety of reasons were provided why respondents do not seek financial advice. Many identified no need for a planner (e.g. I don t need one. I can find out information via the web no need to pay for info freely available ), for example because they were capable of managing their finances themselves ( I believe I have the confidence to conduct my own financial affairs ). Numerous responses indicated that they did not feel they could afford a financial planner, or that they do not need a financial planner at this point in time; due to lack of investment potential or age ( I don t have any money so no need for financial planner not old enough ). A notable number of responses implied directly or indirectly that they lacked trust financial planners or the industry. For example: I'm not a fan of a third party getting involved in my financial affairs and Personal experience has led me to believe they are not the best for advice, they are also not regulated and Too expensive, plus their advice is not always unbiased. 1

19 KEY FINDINGS: NON-CLIENT SURVEY Perceptions of the value of financial advice KEY FINDINGS: NON-CLIENT SURVEY As expected, individuals not currently utilising the services of a financial planner have neutral to low perceptions of value. Mirroring the results of the client sample, the benefits that can be derived due to the expertise of financial planners gained the highest mean response (. on a scale of 1-), with the remaining benefit dimensions showing a neutral response of. The respondents perceived that they would face a notable monetary cost if they were to use the services of financial planners (mean response of.). Indeed, on average, non-clients have a higher perception of monetary costs compared to current clients (mean of.2). The difference in value perceptions between clients and non-clients emerges very clearly in the broad statement, particularly I see value in a financial planner (non-client.; client.). This finding indicates the need to more clearly communicate the value of financial planning advice to non-clients. Interestingly, in closer examination of those who see value in a financial planner but do not use their services, there is a strong gender influence with 2.% of non-client respondents who responded positively being female. Value dimensons - benefits Value dimensons - costs Expertise. Monetary costs. Motivation.2 Emotional costs (financial situation).2 Time and effort costs.2 Convenience.1 Emotional costs (financial planner). Education.1 Lifestyle change. Overall value I see value in seeing a financial planner. If I had a financial planner, paying fees for my financial planner would be worth it

20 KEY FINDINGS: NON-CLIENT SURVEY Disagreement/agreement (%) with perceived benefits of financial planning My financial planner would provide me with his/her opinion My financial planner would educate me about regulations that may affect my financial situation My financial planner would educate me on my financial strategy % 2% 1% I would contact my financial planner if I need to 2 1 0% Financial planners are experts in financial planning % Financial planners are skilled in what they do 2 1 % My financial planner would educate me about financial matters % I would have a professional relationship with my financial planner I'd learn a lot about my investment options when talking to my financial planner My financial planner would educate me about financial markets % % 2% My financial planner would motivate me to plan my financial future 1 1% My financial planner would understand my needs 2 2 1% Financial planners are well qualified 2 1 1% My financial planner would save me time in managing my financial affairs My financial planner would motivate me to take action with regards to my finances My financial planner would motivate me to follow my financial goals % 0% % My financial planner would save me effort 1 % My financial planner would support me 1 2 % My financial planner could relate to me 2 % I'd learn a lot about financial markets when talking to my financial planner % I would spend less time on dealing with my finances % Financial planners are reputable 2 2% I see value in seeing a financial planner % Financial planning organisations have a good reputation % Financial planners are well respected % Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree Non-clients responded in neutral terms to questions relating to the value of financial planning advice, with a third of respondents or more selecting neither agree nor disagree to items relating to the value of financial planners. This indicates that many do not hold strong opinions about financial planners, or that they have not given much consideration to using the services of financial planners. However, more than 0% of respondents agreed that if they had a financial planner they understand that they would receive education in regards to regulations that would affect their financial matters (2%), as well as about financial strategy (1%) and more generally financial matters (%). Furthermore, % respondents agree that financial planners are experts in their field. However, only 2% of the respondents not currently engaging a financial planner broadly agreed that there is value in using the services of a financial planner, compared to % of current clients. 1

21 KEY FINDINGS: NON-CLIENT SURVEY More than one third of respondents responded in a neutral manner to questions relating to perceived costs, with the exception of the monetary costs of financial planning services (% held neutral opinions). Indeed, -% of respondents agreed that the service of financial planners is highly priced, that financial planners charge too much and that the service of financial planners is expensive, compared to %, % and % of current clients respectively. The negative perception in regards to fees is particularly notable as broad agreement lies between 1% and 2% for all other cost dimensions. Disagreement/agreement (%) with perceived costs of financial planning The service of financial planners is expensive % The service of financial planners is highly priced 2 2 % Financial planners charge too much 2 % If I had a financial planner, my financial planner would expose my financial limitations to me % If I had a financial planner, I would spend a lot of time filling out forms in the financial planning process 0 2 2% If I had a financial planner, my financial planner would make me face my financial situation 2 2 0% If I had a financial planner, dealing with financial planner would be confronting to me 1 % If I had a financial planner, dealing with my financial planner would be a stressful experience 1 % If I had a financial planner, dealing with my financial planner would take me a lot of time 1 % I would get stressed about seeing a financial planner % If I had a financial planner, I could not deny my financial weaknesses anymore 1 % If I had a financial planner, I would spend a lot of time organising paperwork in the financial planning process 1 1 0% If I had a financial planner, I would make sacrifices to my lifestyle 1 1 % If I had a financial planner, I would make major sacrifices to my lifestyle to achieve my financial goals 1 1 % If I had a financial planner, my lifestyle would become more moderate 1 1% If I had a financial planner, paying fees for my financial planner would be worth it % Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree 1

22 KEY FINDINGS: NON-CLIENT SURVEY Satisfaction, trust, peace of mind and word of mouth The same outcome variables were measured for non-clients, with the overall mean response for each variable reported in the chart below. As can be seen here, only satisfaction with financial decisions made was found to get a positive response, with a mean score of. (on a scale of 1-). All other outcome variables were found to fall just below the midway point. Outcomes Satisfaction with financial decisions made. Peace of mind. Satisfaction with financial life Trust of financial planning industry.. Trust of financial planners. 1 2 A comparison of results derived from the client and the non-client samples indicates that, on average, clients respond more favorably in regards to key outcome measures, such as their peace of mind, as well as their satisfaction with the financial decisions made and with the financial aspect of their lives. Non-clients responded neutrally to their trust of financial planners and the financial planning industry compared to clients, who responded positively in theses measures. Comparison of outcomes I feel that I can trust my financial planner.. Satisfaction with financial decisions made.. Peace of mind Satisfaction with financial life The financial planning industry can be trusted Clients Non-clients 1

23 KEY FINDINGS: NON-CLIENT SURVEY What we see from the figure below is a high proportion of neutral responses to many of the items, with between 2% and % of respondents selecting neither agree nor disagree to the items measuring the outcomes. Interestingly, % of people surveyed who do not use a financial planner are happy with the financial decisions they have made, although only % broadly agreed that the financial part of their life was close to ideal. The areas with the lowest level of agreement relate to the level of trust for the industry. Also interesting is that despite not using financial planning services, only 2% agreed that they don t need to worry about their finances. Disagreement/agreement (%) with outcomes I am happy with the financial decisions made 2 % I feel good about the financial decisions made 1 2% Choices relating to my finances have been wise 0% I have peace of mind when it comes to my finances 1 % I am satisfied with the financial aspect of my life 1 % I can sleep well at night knowing that my finances are taken care of 2% I feel secure financially % I don t need to worry about my finances 1 2 2% The financial conditions of my life are excellent 1 1 2% In most ways the financial part of my life is close to ideal 1 1 % I feel that I can trust financial planners % The financial planning industry can be trusted 1 2 1% Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree

24 KEY FINDINGS: NON-CLIENT SURVEY Situational factors Perceived economic climate The economy in Australia as a whole over the next months 2.% 1.%.% %.% The general economic situation in Australia over the last months 0.%.%.% 2% 1.% a lot better a little better stay the same a little worse a lot worse Influence of participation and risk tolerance If I sought financial advice, I would be very involved in deciding how the financial planning services should be provided to me % If I sought financial advice, I would have a high level of participation in the financial planning process % In terms of investing, safety is more important than returns % When I think of the word risk, the term loss comes to mind immediately % I am more comfortable putting my money in a bank account than in other investments % If I sought financial advice, I would spend a lot of time sharing information about my needs and opinions with the financial planner 1 2 % Recently my financial situation has changed significantly % My financial situation is very complex 1 1 1% Strongly disagree (1) 2 neither agree nor disagree () Strongly agree () Column on far right represents the percentage of broad (overall) agreement i.e. somewhat agree, agree and strongly agree

25 KEY FINDINGS: NON-CLIENT SURVEY An analysis of responses to statements about financial planning provides some interesting insights. For example, a large number of non-clients perceived that if they had a financial planner, they would have high levels of involvement in decision-making (broad agreement of 0%) and participation in the financial planning process (%). The non-client sample is generally characterised by individuals with a less complex yet somewhat stable financial situation, with only 2% indicating that their financial situation has changed recently (clients 2%) and 1% agreeing that their financial situation is very complex (clients %). Have you previously seen a financial planner? Influence factors Risk tolerance.1 2% No Yes Recently my financial situation has changed significantly. 1% My financial situation is very complex The results show that 0.% of non-clients scored a financial literacy score of (compared to 1.2% of current clients), which indicates a high level of financial literacy. Nearly 0% of non-clients (0% of clients) scored over, suggesting that the majority of non-clients of financial planners in this sample have at least a working understanding of financial matters. Financial literacy score 0.% 2.% 1%.%.% % % 1.% Financial planning needs Retirement/superannuation Tax Savings for long term goals Shares Other Insurance Debt reduction Budgeting Savings for short term goals Estate planning Self-managed superannuation fund Negative gearing 1.%.%.0%.%.%.%.%.%.%.2%.%.%

26 KEY FINDINGS: NON-CLIENT SURVEY Financial planner service styles Expected service style of financial planner % 2% 1% STYLE A: I would expect my planner to manage my financial matters entirely on my behalf. She/he would let me know when my participation or approval is required but otherwise would take charge and implement the strategies. STYLE B: I would expect my planner to mostly manage financial matters with some input from me. She/he would provide options and his/her advice may guide my thinking, but the final decision about financial strategies would be mine. STYLE C: I would expect my planner to actively involve me in the managing of my financial matters. My financial planner and I would communicate frequently and we would make decisions together. % 2% STYLE D: I would expect my planner to be directive in his/her recommendations and to strive to keep me on track to meet my goals. I would make the final decision by choosing to concur, reject or ask for alternatives. STYLE E: I would expect my planner to address specific concerns or decisions I may have. I'd be the one to contact my financial planner rather than the other way around, as I am self-reliant and would prefer to have control over my own financial matters. The largest proportion of respondents would expect their financial planner to follow the Validator Style (Style E = 2%), should they get a financial planner. This is the option where the client retains the greatest amount of control in the financial planning process, seeking input from the planner primarily to validate their own plans and ideas. A similar number of respondents (2%) prefer a Partner Style (Style C), in which communication was frequent between parties and decisions are made together as a team. Indeed, while % of current clients report a delegate or mentor style, and thus less involvement on the client side, only % of respondents without a current planner would expect such service provision styles.

27 MANAGERIAL IMPLICATIONS CURRENT CLIENTS Management will be, or should be, aware that client perceptions of value are integral in client retention and new client referral. The Key Findings have many implications, including: Investing in the expertise and technical skills of financial planners may produce attributes which are the most highly valued by clients. Encouraging planners to get their clients to face their financial weaknesses and the realities of their financial position is another strategy that will enhance clients perception of value. Clients tolerance to fee structures may be higher than generally expected, as nearly 0% of respondents felt paying fees to have my financial planner is worth it. This could indicate that adjustments to fees (up or down) may have minimal impact on perceptions of value. Conducting regular (at least annual) surveys of meaningful samples of clients is an important management tool in assessing satisfaction levels and trends and the need for any strategy adjustment. Emphasising the most important planner attributes in ongoing client newsletters and communications and being open about asking for referrals could prove rewarding. POTENTIAL CLIENTS Marketing efforts should be directed towards alleviating negative perceptions about the expense of financial advice and reinforcing the positive perceptions of expert advice. As potential clients are unlikely to grasp the multitude of value dimensions prior to, or in the early stages of, seeking advice, it may prove fruitful to communicate the portfolio of benefits reported by current clients Service Styles No single, best style exists. All five styles should be leveraged to support different types of customers. As capabilities, interests and circumstances of clients change, ongoing assessments of client needs will ensure alignment between client preferences and financial planner service style. The styles typology and related measurement tool can be utilized to understand client perceptions and preferences of their planner s style. Moreover, it can provide a basis for training. Understanding each client s personal situation, including financial literacy and attitude towards taking responsibility for their finances, are important in determining the most suitable service style. 2

28 APPENDICES A1. Benefit dimensions CONSTRUCT ITEMS Expertise Value My financial planner is an expert in financial planning My financial planner is well qualified My financial planner is skilled in what she/he does Education Value My financial planner educates me about financial markets I learn a lot about financial markets when talking to my financial planner My financial planner educates me about regulations that may affect my financial situation My financial planner educates me about financial matters I learn a lot about my investment options when talking to my financial planner My financial planner educates me on my financial strategy Motivation Value My financial planner motivates me to take action with regards to my finances My financial planner motivates me to follow my financial goals My financial planner motivates me to plan my financial future Relationship Value My planner and I have a professional relationship My financial planner can relate to me My financial planner understands my needs Convenience Value My financial planner saves me time in managing my financial affairs My financial planner saves me effort Having a financial planner means that I spend less time on dealing with my finances Support Value My financial planner supports me It is reassuring to know that I can contact my financial planner if I need to My financial planner provides me with his/her opinion when I need it Reputation Value The organisation my financial planner works for has a good reputation My financial planner is well respected My financial planner is reputable Overall Value item I see value in seeing a financial planner 2