Advice / Advisers / Industry

Have we entered a ‘new normal’ for trust in financial advice?

We’re waiting with bated breath to learn what the next CoreData Trust in Financial Services survey tells us about how financial advice is faring in the eyes of the Australian public.

Keen readers of New Model Adviser, and those who’ve seen presentations by CoreData in a range of forums over the past couple of years, will recall that trust in financial advice took something of a kicking when the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry got stuck into the industry in public hearings during April 2018. The hearings lasted less than two weeks – the industry was saved a full fortnight of discomfort by Anzac Day – but the effects of those hearings have been long lasting.

Right after the royal commission’s public hearings the advice industry trust score plunged to about 35 per cent, and it bounced around between about 35 per cent and 40 per cent up until the second quarter of this year. CoreData’s trust survey in Q2 recorded a jump in the level of trust to 50.1 per cent. And it stayed there in Q3 (49.9 per cent). 

Before Commissioner Ken Hayne and his counsels assisting turned their attention to financial advice, the industry enjoyed a reasonably healthy level of trust. CoreData’s trust survey in the first quarter of 2018 put the figure at about 60 per cent. That is, 60 per cent of people surveyed said they rated their trust in financial advice as a six or higher on a scale from zero to 10, where zero meant no trust at all and 10 meant total trust. Not a stunning result (in our most recent survey the trust score for accounting, for example, is 64 per cent), but OK.

In fact, trust in a range of industries – accounting, superannuation, banking, mortgage broking and life insurance – all saw increases in trust scores. Whatever was going on in Q2, financial advice was also a beneficiary.

This quarter we’ll find out if a trust level of 50 per cent is indeed a new baseline for the industry or whether it has fallen back. One thing we’ve seen in other work we’ve done during 2020 is a change in the public’s perception about the need for financial advice.

As the COVID-19 pandemic took hold, particularly in the second quarter of 2020, trust in financial advice took a step up. The value of advice is being more widely recognised as more and more Australian households and individuals find themselves under financial stress as a result of job loss or lost income.

It’s possible that an increase in perceived need for financial advice has translated into a better trust score. In consumers’ minds, trust is often linked to value. If they perceive value in a service – if they think it is a service worth paying for, and one they can see a clear benefit in – they can more easily trust an interaction with it.

And we also noticed that when a consumer learns about the new education, professional and ethical standards advisers are now subject to, their stated likelihood to seek advice increases.

To the extent that the royal commission hearings were a landmark event for the industry, and its hearings set the tone of public discussion about the industry and its practitioners, then higher standards may be viewed as evidence of positive change beginning to emerge.

Of course, an uptick in trust in advice might actually be due to all or none of these factors, or to something else entirely. But let’s not look a gift horse in the mouth. Let’s be relieved that trust in the industry has improved, and let’s keep our fingers crossed the improvement is sustained – this quarter, into 2021, and beyond.

The Q4 survey is out there. Stay tuned.

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