Most people assume we seek financial planning advice to help us achieve our financial goals, but the truth may be a little “darker”.
I have often wondered why the percentage of people seeking financial planning advice remains so constant, despite scandals (like the Hayne Commission), onerous compliance requirements and a service that is costly, inefficient and slow.
Could the answer lie with “delegators”?
It seems they just need someone to blame if things go wrong and they are happy to pay for it. Many will be reaching for the phone right now as asset values fall.
Michael Kitces, Head of Planning Strategy at Buckingham Wealth Partners had a good look at this in his article “Do Clients Hire Advisors For Their Expertise, Or Simply To Pass The Buck On Blame?”
Quoting a study by Steffel, Williams, and Perrmann-Graham in Organizational Behavior And Human Decision Processes, he found delegation is driven more by a desire to avoid responsibility than obtain expertise. Flash a credible brand behind the advice and delegators will hand over their money.
Thanks to the Hayne Commission, a lot of this money was handed back.
If the proportion of delegators remains constant (which is probable), then so will the proportion of people seeking financial advice.
According to Finder’s Financial Adviser Report,16% of Australian adults in 2022, have a financial advisor. The Australian Financial Advice Landscape report, June 2021, estimated the proportion of advised Australians aged 21 and over was 11.2 and 12.2% the year before. This is pretty stable despite COVID and the Hayne Commission.
What about the rest of Australians who are not “delegators”?
Consumer segmentation research by Forrester finds the majority of consumers are not full “Delegators” or full “Do It Your Selfers”. Most are “Validators”, who retain primary responsibility for financial decisions, while still seeking an advisor’s expertise to review and “validate” a financial decision.
Where does this leave financial advice? Will advisers slug it out for their share of “Delegators” while Robo Advisers slug it out for their share of “Do It Your Selfers”. What about the largest group – the “Validators”?
This group provides a huge opportunity for “tiered advice” allowing them to access (and pay for) validation when needed. Many would be happy to pay for a “hybrid” system where AI does most of the work with an “expensive” human on tap for confirmation and validation for a modest retainer.
Apparently “Robots” like chatGPT can already pass the bar exam and there is little doubt it will find financial planning a lot easier. Finchat already uses voice to access financial planning calculations and information without the need of a laptop or keyboard.
People do like people though. Running something past an adviser can provide peace of mind and if priced appropriately could be a win for both parties.