ASIC has released the full findings of ‘shadow shopping’ research which examined financial advice given to people to help them plan for retirement.
The purpose of Report 279 Shadow shopping study of financial advice (REP 279) was to investigate the quality of retirement advice provided and people’s experience of obtaining financial advice.
ASIC’s research found that:
- over a third of the advice examples were poor (39%)
- there were only two examples of good quality advice (3%)
- the majority of advice examples reviewed (58%) were adequate.
ASIC Commissioner Peter Kell said, ‘The results of ASIC’s shadow shopping research demonstrate that there is scope for significant improvement in the provision of good quality retirement advice in Australia. Our research found there are several areas where the financial advice industry needs to lift its game.
‘Advisers are important gatekeepers who have a key role to play in helping consumers plan and manage their finances. This underlines the importance for the industry to remove conflicts of interest and improve overall professional standards to ensure that their client’s trust is not misplaced,’ he said.
Mr Kell said, ‘Financial advisers need to provide realistic and client focused communication about people’s retirement prospects including how long their money will last, even if this can on occasion be a challenging conversation.’
‘Too much poor advice provided to our shadow shoppers was overly product focused and not strategic enough to help clients develop a realistic and achievable plan for their retirement and make the most of their financial resources taking into account their circumstances and attitudes to risk,’ he said.
ASIC’s research also found that people have difficulty in assessing the quality of the financial advice they have received. Participants in the study rated their advisers and the advice they received highly, even when they received poor advice.
Mr Kell said, ‘Consumers’ difficulties in assessing advice quality are not surprising. People who thoroughly understand personal finance are less likely to need a financial planner.’
ASIC’s report points to a range of actions that are being taken to help improve the quality of advice. The recent Future of Financial Advice Reforms will play a key role in lifting standards in the industry and putting greater focus on the client. Major industry efforts to improve standards, such as through codes of conduct, can also make an important contribution to addressing some of the industry weaknesses identified by this research. In addition to this ASIC will also:
- work with the financial planning industry associations and individual firms to provide more information on the findings in the report to help them focus on areas that will improve advice quality.
- review the Getting Advice booklet and further refine MoneySmart website content to ensure that consumers are well equipped to find the right financial adviser.
Consumers can find more information of finding a financial adviser at moneysmart.gov.au.