So anyone can be a financial advisor?

Those ads really disturb me – “Just call us”, they say, “and we’ll help you set up your own business as an investment adviser”.  Apparently, with sufficient maturity, and enough money to buy the franchise, anyone can be an investment adviser.  That worries me - but maybe it’s just a consumer thing, and you guys in adviser-land are completely comfortable with this? 

Perhaps it’s true.  The fact that I do have enough money to buy the franchise – and am smart enough to do so – means that I’ll be able to provide investment advice to others.  Of course, some training would be needed – especially in how to sell whatever particular investments my particular company is pushing. 

The information sheet for one I looked at actually said….

“A financial planning background is not essential, but experience in accounting, banking or an associated field is an advantage”. 

Does being able to balance my chequebook count?

For some years now, I’ve been talking about the clear failure of the financial advisory sector to establish itself as a credible trusted source – a ‘must have’ service for anyone serious about doing the right thing, investment-wise.  Of course there are great financial advisers out there…. but even you (or perhaps especially you) must admit that some of your colleagues do you a disservice.

Need evidence?  How about this?

Did you know that fewer than one in five New Zealand adults uses a financial planner or investment adviser.  Even if we exclude the poor, the young and those of lower socio-economic status, the levels are not particularly great….

• Just 30% of those in high income households use advisers;
• Just 29% of those in households where the main income earner is in a managerial or professional role (ie. upper socio) use advisers.

The majority of us – even the richer, more upmarket of us - just get on with doing our best without the help of the ‘professionals’.  Sure we’ll take advice wherever we find it – from friends, family members, newspaper columns and the like….. but trust a professional with our money?  The most common answer I get – from thousands of consumers - is ‘not on your nelly’!

Given the way that we skite about our investment successes (especially the rising value of our real estate), you’d think that word would have spread from those already converted to the financial planning fold.  Surely the minority who are taking professional advice are getting better outcomes, feeling more secure, and have greater expectations for the future for their investments than the rest of us.

Well, that’s the problem really – the answer is yes they do, but not enough that you’d notice.

As other professions will attest, the power of word of mouth is immeasurable.  Having made the decision to change dentists, see a medical specialist, engage a personal trainer, a plumber or a new business accountant – the consumer will first shop around, not by investigating their options rationally, but by asking their friends and colleagues.  Hardly a day goes by in our office without someone asking for the name of a good something or other – the one they can trust because they’ve been recommended by someone who uses them.

Until we have financial planning clients out there trumpeting their successes, and therefore your successes, the industry will continue to be plagued by what can only be described as a lack of consumer confidence – and ads that invite just anyone to become a franchisee with their very own investment planning company simply exacerbate the unease the ordinary folk feel about who financial planners are, and what they really offer.

Debra Hall

Debra Hall is Research Director of Research Solutions Ltd, and has been researching consumer views on investment and insurance products for over 12 years.  The views expressed in this column are her personal opinions, based on personal experience and data from surveys owned by Research Solutions, or used with permission of the clients involved.