As the number of Australians who are concerned about their financial situation grows, the advice industry should take the lead in repairing the financial services industry’s tattered reputation.
Australia slipped into recession in the second quarter as the economy continues to grapple with the impacts of COVID-19, and Australians are feeling the brunt. Data from GlobalData’s COVID-19 Tracker Consumer Survey shows that 55.6% of Australians were “quite concerned” or “extremely concerned” about their financial situation at the beginning of July.
Another 26.5% were “slightly concerned,” leaving a mere 17.8% who voiced no concerns. This is a pattern seen in all major markets affected by COVID-19 disruption around the world.
As financial worries are mounting, sound financial advice is more important than ever. However, trust in the financial advice industry remains low, with more people turning to other channels to seek investment advice. In Australia, only 11.2% of people would seek out a financial adviser if they were to make an investment. In comparison, 57.4% would choose a traditional bank and 9.2% a digital-only bank. While the exact numbers differ by market, the trend is the same around the world.
Traditionally, economic turbulence or financial market upheaval had a negative impact on loyalty, trust, and churn rates in the advice industry. For example, our post-global financial crisis surveying found that distrust ranked particularly highly towards financial advisers in the aftermath of the crisis, with 52% of Australians indicating that they did not trust advisers. For comparison, 31% distrusted credit unions and 39% distrusted banks. In markets hit hard by the crisis and its recession these numbers were even higher.
However, this does not have to be the case. As more consumers are concerned about their finances, financial advisers should aspire to help people secure economic stability while providing assurance and affordable advice. Offering consultations at reduced rates now has the potential to generate significant goodwill, repair lost trust, and result in a profitable long-term relationship further down the line.
Many of those who are worried about their current financial situation – in markets far more affected than even Australia – fall into an adviser’s prime target group. 62% of Australians with a household income of more than A$100,000 ($70,000) are quite or extremely worried about their current financial situation, while only 47% of those with a household income of less than A$50,000 ($35,000) raised the same concerns. Reaching out to and providing support to this worried affluent segment now is likely to pay off in the future, preventing churn in the client base and showing value to prospects at a key moment of truth.
Financial advice is set to be the key in restoring reputation to the sector and bringing profit along with it.