Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Advisers, banks winning back consumer trust: ASX report
While the Australian Stock Exchange (ASX) and the Australian Securities and Investments Commission (ASIC) remain the most trusted financial organisations in the country, banks and financial advisers are clawing back into favour after consumer confidence troughed in the wake of the Hayne royal commission.
The ASX released its 2023 Australian Investor study, Tuesday morning, which surveyed over 5,000 adults – both investors and non-investors. The study was completed in conjunction with researcher Investment Trends.
Among the key findings was a stark movement in the trust Australians place in financial services market pillars, with the public rewarding efforts to reshape the banking and financial advice industry after the royal commission uncovered widespread levels of misconduct, headlined by the infamous fees-for-no-service scandals that engulfed the major institutions.
Financial advisers have increased their trust score from 4.98 out of ten in 2020 to 5.3 in 2023, while banks have seen theirs go up from 4.85 to 5.39.
The ASX and ASIC sit on top of the trust ladder, but each saw a reduction in public confidence since 2020. After the high-profile failure of its effort to replace the ageing CHESS back-office system with blockchain technology, the ASX’s score slid from 6.04 to 5.98. ASIC also recorded a score of 5.98, yet fell considerably from its 2020 score of 6.1.
The swing back towards advisers and banks has been hard won. Since the 2018 royal commission, institutional providers have either retreated from wealth management entirely or slimmed down their operations to include only practices that can operate profitably without relying on egregious vertical integration.
New education and ethics standards have taken root in the advice sector, while grandfathered commissions have been eliminated and a raft of regulations, including design and distribution obligations that force advisers and providers to align products with purchaser needs, have been introduced.
The pandemic era also reiterated the need for financial advice among consumers at a time when advice was becoming harder to find due to the number of advisers leaving the industry.
Also notable in the survey was that online stockbrokers experienced the biggest increase in trust between 2020 and 2023, up 0.9 points from 4.54 to 5.44.
Trust levels towards accountants and super funds remained steady at 5.87 and 5.76, respectively.
