Home / Education / Explaining advice not enough, consumers need to be convinced: CFS

While financial advisers remain at the heart of the issue, the role of convincing consumers about the value of advice is shared with government and the industry at large.

Educating consumers about the true value of advice is vital, but industry and the government need to start actively lobbying people to seek a form of financial advice and achieve better financial outcomes according to a new whitepaper from Colonial First State (CFS).

CFS recently released the results of a survey taken in the second half of 2023 that found more than half of Australians can’t articulate a single benefit they would receive from financial advice. And while 68 per cent of advised consumers believed they had a financial strategy in place, only 27 per cent of unadvised Australians felt the same way.

The two findings were part of a host of results that point to a stark reality when viewed from the consumer side of the financial advice equation: people need to know what advice can do for them. And while financial advisers continue to explain to their clients the value of financial advice, it won’t be enough to get everyone involved. For that, a larger, more targeted education campaign is required.

“While access to affordable advice is a key priority, Australians first need to know how advice can benefit them,” the report states. “This is an education issue that requires a coordinated effort by the industry and Government. Explaining the value of advice is not enough – consumers need to be convinced that advice will have a positive impact on their lives.”

This isn’t to say that the financial advisers aren’t directly responsible for spreading the word, the report continues. They remain at the heart of the issue, and will need to be at the forefront of public education, especially when it comes to pre and post retirement activity.

“As an industry we need to articulate how financial confidence and retirement preparedness are directly related to advice. This includes a simple explanation of the advice process, what a financial strategy is and the real-life impact this has had on those who receive advice,” the report continues.

Without advocation from advisers, government and lobby groups, more and more consumers will rely on unregistered sources for guidance on their biggest finance and investment decisions. The report notes that its findings reflect that of a 2019 ASIC report (REP627) which revealed that 31 per cent of consumers had received financial advice from friends, family or work colleagues instead of a registered financial adviser.

Exacerbating the problem is that confusion exists about exactly what financial advice services are available, the report continues.

“This risk is heightened by the use of additional terminology such as ‘comprehensive advice’, ‘limited advice’, ‘scaled advice’ and ‘retirement advice’. Consumers need a clear and simple definition of what financial advice is.”