The move from Viridian and CFS to provide personal advice in a scaled manner highlights a growing willingness within the industry to fix its own problems in lieu of waiting for the government.
Private markets are worth around $14 trillion globally, ASIC believes. It’s not sure, and that uncertainty hints at the wider problem – private markets, and their effect on public ones, is still largely a mystery.
Advice benefits becoming clearer to the masses
As inflation and interest rates rise, more Australians are turning to professional financial planners for advice in a bid to offset the uncertainty and anxiety created by higher living costs.
The recently released Schroders Global Investor Study 2022 found that 36 per cent of people in Australia (and 39 per cent globally) who classed themselves as expert or advanced in financial investment knowledge said they are more likely to speak with a financial adviser as interest rates rise. Meanwhile, 21 per cent of Australians with intermediate knowledge, and 40 per cent of people with beginner knowledge, indicated they were now more interested in consulting with a financial adviser to battle rising inflation.
Sam Hallinan, CEO at Schroders Australia, said Australian investors are feeling significant anxiety around their investment strategy, which highlights an important role for financial experts to help alleviate some of that discomfort.
“The link between mental health and financial health is an increasing focus for many, with 64 per cent of Australians believing the performance of their investments has a direct impact on their mental wellbeing (higher than the global average of 58 per cent).
“Given that more Australians believe that investment performance is linked to mental wellbeing compared to the global average, the stakes are high. This, more than anything else, highlights the importance of professional financial advice for financial and mental well-being,” Hallinan said.
“Fortunately, there is help out there for these anxious investors, with even those who consider themselves knowledgeable investors turning to financial advisers to help them navigate the uncertainty.”
Shane Langham, a senior private wealth adviser with Sequoia Financial Group, says clients are more comfortable with the benefit of knowledge, or at least knowing where they can find that knowledge in difficult financial situations. That helps to make them less anxious overall, more balanced and better able to make rational financial decisions without emotions getting in the way.
“Having a game plan in place, before the fact, really does help to keep that balance even when things go the wrong way and as we all know this happens a lot in life,” Langham tells The Inside Adviser.
“When you can talk to someone in plain English and ask any questions you want to know the answer to so you can make up your own mind, this makes a lot of difference to how comfortable you are.”
Link between advice and security
Several other surveys have found that feelings of trust, confidence, and security matter a great deal to investors. A 2021 Vanguard survey of US retirement plan participants receiving financial advice found that 45 per cent of the perceived value of advice is associated with the emotional benefits of the relationship. The other 55 per cent is tied to the functional aspects, including portfolio value and financial value.
“Vanguard research found that advice provides meaningful portfolio, financial, and emotional value to participants, with the emotional component accounting for nearly half of total perceived value. Participants cite feeling more confident, more in control of their finances, and more at ease having an expert they can trust among the most important reasons for enrolling in an advice service offered in their retirement plan,” the Vanguard survey concludes. That Vanguard study was conducted from May through June 2021, when many participants were experiencing the impact of the global pandemic.
The negative effects of financial issues on people’s wellbeing and relationships with friends or family was illustrated during the COVID-19 pandemic, when it was widely reported that many Australians experienced heightened stress and anxiety, particularly around issues of financial wellbeing, mental health and family relationships. Yet well over 50 per cent of Australians still do not seek financial advice despite the benefits it apparently brings to their overall wellbeing.
According to the ‘The True Value of Advice’ research paper by IOOF (2020), financial advice improves the financial wellbeing of people who receive it. Moreover, better financial wellbeing flows onto better overall wellbeing, including improved mental and physical health and healthier relationships.
A separate report by Fidelity based on an extensive survey of 2,228 Australians (2019) found that 85 per cent of Australians receiving advice believe it has given them greater peace of mind financially and 86.2 per cent believed they have greater control over their financial situation. Furthermore, one in two people with an advice relationship say their mental health had benefited.
