Download Lifeplan ICFS Financial Advice Satisfaction Index

Lifeplan ICFS
Financial Advice Satisfaction Index
April 2014
About the Lifeplan
ICFS Financial Advice
Satisfaction Index
The Lifeplan ICFS Financial Advice Satisfaction Index (FASI) is a tool for financial advisers
that want to improve their levels of client service. It is based on academic research that
models the factors that explain a client’s willingness to recommend their financial adviser to
a friend or acquaintance.
The three attributes that have the greatest impact on advocacy include:
1. The trustworthiness of the financial planner
2. The client’s perception of how their investments have performed
3. The financial adviser’s technical ability
The research also analyses how investors’ age, levels of investment and length of their
relationship with their adviser impacts these attributes.
The research is sponsored by Lifeplan Funds Management a part of the
Australian Unity Group.
It is conducted every six months by the University of Adelaide’s International Centre
for Financial Services.
INTERNATIONAL CENTRE FOR FINANCIAL SERVICES
Project sponsored by International Centre for Financial Services (ICFS)
University of Adelaide
For Lifeplan
Lifeplan (ICFS) Financial Advice Satisfaction Index
Lifeplan
Financial Advice
Satisfaction Index
April 2014
This survey of 403
respondents, conducted
during the last weeks of
March 2014 pushed the
Lifeplan Satisfaction Index
to its highest levels since its
inception
This survey of 403 respondents, conducted during the last weeks of March 2014 pushed
the Lifeplan Satisfaction Index to its highest levels since its inception, with each of the
three drivers (the perception of performance, trust and reliability, technical abilities),
measured in this index, at their highest levels since 2007.
The index showed an increase in the satisfaction investors have with their financial
advisors, which has increased to 74.5 (see figure 1) from October 2013.
The survey saw an increase of 3% and 2.6% over the October 2013 and April 2013
surveys respectively. The largest increase amongst the three drivers of advocacy was for
the perception of performance which increased by 4.13% (over the last survey).
The other drivers – the perception of trust and reliability increased by 2.2% and for the
perception of technical abilities of the advisors increased by 2.9%.
The domestic equity market index, the ASX200, continued to show gains over the last
year of 8% (the index increased by 1.7% over the survey period), although it has not
reached the 2007 levels.
Graph 1
Financial Advice Satisfaction Index (FASI) (scaled by 0.10)
FASI
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Supporting research
The following six graphs show the relationship between the index, and each
of its drivers, and the equity markets (ASX 200 is used as a proxy of the equity
market).
Graph 2
The Financial Advice Satisfaction Index (scaled by 0.10) and the ASX 200
Although, the capital
markets (both domestic and
US) have yet to achieve their
pre-GFC levels, the FASI and
its three drivers are at record
levels. The authors argue
that, in increasingly complex
and dynamic capital markets,
this indicates value-added
services are being provided
by financial advisors
ASX 200
FASI
Graph 3
Drivers of Advocacy, the FASI (scaled by 0.10) and the ASX 200
The largest increase amongst
the three drivers of advocacy
was for the perception of
performance
FASI
ASX 200
Graph 4
Perception of Trust and Reliability, the FASI (scaled by 0.10) and the ASX 200
ASX 200
FASI
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Appendix 1: Relationship between Investment Levels and Drivers of Advocacy
Graph 5
Perception of Performance, FASI (scaled by 0.10) and the ASX 200
ASX 200
FASI
Graph 6
Perception of Technical Abilities, FASI (scaled by 0.10) and the ASX 200
ASX 200
FASI
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Highlights of the
survey
Female investors continue
to show a higher level of
perceptions regarding their
advisors than male investors
The authors note that much has changed in the domestic and global landscape since
the last survey. This period marked a new business-friendly domestic government, a
strong recovery in the domestic equity and housing markets, a strong recovery of the
US economy and capital markets, banking sector recovery in the Euro economies, and
general investment confidence.
Although, the capital markets (both domestic and US) have yet to achieve their
pre-GFC levels, the FASI and its three drivers are at record levels. The authors argue
that, in increasingly complex and dynamic capital markets, this indicates value-added
services are being provided by financial advisors.
Other highlights of this survey include:
Investors in the 30-44 age
bracket show the strongest
increase in all three drivers
of perception
This survey shows a sharp
increase in the levels of
advocacy by those investors
with the shortest duration of
taking advice (less than
2 years)
¡¡ Female investors continue to show a higher level of perceptions regarding their
advisors than male investors. However, the results show that male investors showed a
very strong increase in all three drivers of perception.
¡¡ Investors in the 30-44 age bracket show the strongest increase in all three drivers of
perception and now have the same or higher levels or perception as investors in the
45-60 age bracket.
¡¡ The results remain unchanged with regards to the 60+ group. However, we note a
sharp downturn in the levels of perception of all three drivers for the under 30s.
The 30-44 age bracket held a significantly lower perception of their advisors of
technical abilities, trust and reliability compared with the 60+ cohort.
¡¡ However, both groups rank their own financial literacy at almost the same level - high.
The authors note that the younger age bracket invests significantly lower wealth and
has been engaged in a significantly shorter advisory period. When the 30-44s are
compared with the 45-60s, the younger cohort holds significantly favourable views
regarding the advisor’s role in advising on their investments, even though the younger
group invests a much smaller amount.
¡¡ Analysis of the duration of taking advice, especially with the same advisor, provides
slightly contrasting results to past surveys. In accordance with previous surveys longer
duration of advice and advice with the same advisor does result in higher levels of
perceptions for trust and reliability and for the technical abilities of the advisor.
¡¡ However, this survey shows a sharp increase in the levels of advocacy by those
investors with the shortest duration of taking advice (less than 2 years).
Investigation into the differences compared with the other groups with longer
duration of advice (two to five years and five to 10 years) reveal the obvious - those
with shorter duration of advice are younger and have lower levels of wealth invested
- but also shows that they attribute themselves with similar levels of financial literacy.
There is significant difference in the levels of perception regarding trust and reliability
and technical abilities of their advisors. However, there was no significant difference
in terms of the perceptions of performance. The group with the shortest duration of
advice also rate themselves at the same level as those with longer duration of advice.
¡¡ Investors with higher levels of wealth are significantly older, have larger investments,
higher levels of financial literacy, have been taking advice the longest (their current
advisory relationship is also the longest amongst survey respondents). This survey
parallels previous surveys in this regard.
¡¡ Investors in the Under-30 age group seemed least satisfied with the quality of
advice they are receiving. They are least satisfied by the technical abilities of their
advisors and the performance of their portfolio which is perceived to be because
of the financial advice they are receiving. Interestingly, this group of investors also
categorize their financial literacy as high. Therefore advisors need to have higher levels
of technical abilities to satisfy these individuals. Under-30’s categorise themselves
as having high levels of financial literacy and amongst all the age groups are least
satisfied with the quality of advice they are receiving.
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Investors have a higher
perception of their advisors
if fees and charges are
detailed explicitly, though
they were not as concerned
about the amount of fees
paid, if they felt that the fees
were appropriate for the
services received
Investors ranked their
advisors highly in terms of
trustworthiness and their
technical abilities if their
advisors displayed high
financial literacy.
Analysis of service and advisory factors were explored to understand the impact they
have on drivers of advocacy. There were several factors that were important across all
investor age groups.
Investors:
¡¡ value the advisors ability to establish an effective investment plan including advisors
recommendations for quality funds/fund managers,
¡¡ have a higher perception of their advisors if fees and charges are detailed explicitly,
though they were not as concerned about the amount of fees paid, if they felt that
the fees were appropriate for the services received,
¡¡ ranked their advisors highly in terms of trustworthiness and their technical abilities
if their advisors displayed high financial literacy. Advisors with high financial literacy
were perceived to be able to devise suitable financial plans,
¡¡ desire greater financial risk management. Investors who were very satisfied with their
financial advisor had an overarching feeling of being financially secure.
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Appendix 1:
Historical Relationship between Demographic Variables and Drivers
of Advocacy
Chart 1A
Relationship between Gender and Drivers of Advocacy
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Chart 1B
Relationship between Age and Drivers of Advocacy
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Chart 1C
Relationship between Duration of Advice and Drivers of Advocacy
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Chart 1D
Relationship between Duration of Advice with
Same Advisor and Drivers of Advocacy
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Lifeplan (ICFS) Financial Advice Satisfaction Index
Chart 1E
Relationship between Investment Levels and Drivers of Advocacy
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