Trust and integrity should be at the core of quality financial advice – it’s needed to drive good client outcomes and results, writes Financial Advice NZ’s Katrina Shanks.
Almost 18 months have passed since our first research report, Trust in Advice, showed just how trusted and highly valued financial advice and advisers are for Kiwis.
The timing of the survey (July 2020) was also crucial, as our country and the world were just starting to come to terms with a whole new level of uncertainty. In many ways, the report confirmed the tangible and intangible benefits that quality advice delivers consumers – and the importance of receiving expert guidance in times of need.
In 2021, we checked in again on advised New Zealanders, to measure the impact of financial advice in their life, compared to those who don’t receive it. The result is our research report Better Behaviours, presenting the findings of the latest independent and comprehensive survey into the value of financial advice.
If the focus of our previous report was how trusted advisers are, this time we took it one step further, looking at how quality advice can help encourage positive money behaviours.
We asked people about their financial plans, if they had made any changes recently, and if they felt those changes would make a long-term difference to their financial wellbeing. And we’re pleased to say the results confirmed, once again, our belief that quality advice leads to a long-term increase in people’s financial health, wealth, and wellbeing.
So, I’d like to talk through some of the most interesting findings around insurance, advice, and financial health.
When comparing responses from advised and unadvised Kiwis, our new report shows that financial advice enables people to live more fulfilling lives and achieve better financial security, mental health, family life, and even physical health.
Importantly, financial advice brings long-lasting change. Not only does it provide solutions, but it also helps people build their own financial muscles. More than two thirds of advised Kiwis said that, thanks to quality advice, they have a better understanding of the risks of their financial plan, how to achieve financial goals, and how to stick to a financial plan.
In other words, quality advice is providing them with the tools to think about their money in a different way
Financial advisers help Kiwis form positive insurance behaviours…
Peace of mind, confidence in decision-making, a different perspective on things, freedom from financial worries and stresses – these are all recurring themes in our research. It’s a testament to just how valuable receiving professional advice can be, especially in unsettled times like these.
Wealth creation and wealth protection are two sides of the same coin, and the shared goal is financial wellbeing.
Recent data shows that Covid-19 has prompted more New Zealand households to seek financial protection through life insurance, income protection, trauma cover and health insurance. It’s great to see people thinking about their personal and financial wellbeing – many of whom with the help of their advisers.
Our research shows that advised Kiwis are more likely to take out cover, including:
- Life insurance (59% vs 31%)
- Health insurance (55% vs 28%)
- Trauma insurance (37% vs 14%)
- Income protection (34% vs 10%)
- Total and personal disability insurance (31% vs 10%)
It’s a testament to the great job that our financial advisers are doing every day, helping people understand the value of insurance in their lives. And there’s more to the financial advice relationship than assisting people with their insurance application.
There’s more to the financial advice relationship than assisting people with their insurance…
Over time, financial advisers help Kiwis form positive insurance behaviours – like reviewing their personal risk management needs more regularly, and taking proactive steps to close the gaps.
For example, advised New Zealanders are more likely than their unadvised peers to have reviewed their cover as a consequence of life events such as:
- First-home purchase (78% vs 60%)
- Marriage (78% vs 39%)
- Divorce (86% vs 49%)
- New baby (80% vs 43%)
- Serious illness (79% vs 36%)
- Serious injury (75% vs 38%)
- Unexpectedly lost employment (71% vs 37%)
Once again, this is further evidence that quality advice is not just about recommending products, but rather presenting clients with evolving solutions to their ever-changing needs.
Value of advice
At Financial Advice NZ, we firmly believe that quality advice can change lives. And our mission is to help more and more New Zealanders benefit from it. So as part of our ‘Better Behaviours’ survey, we asked unadvised Kiwis why they didn’t seek financial advice.
What we found is that, despite the clear value advice gives to everyday Kiwis, New Zealanders are only likely to seek advice in unusual circumstances – like receiving a windfall (32%), experiencing financial distress (19%), or health issues (18%).
We also asked unadvised Kiwis why they didn’t think they needed a financial adviser.
Interestingly, 30% of unadvised respondents said they couldn’t envision a circumstance where they would actively seek advice. Also, most unadvised Kiwis cited the confidence in their own abilities as the main reason why they don’t work with an adviser.
This goes to show that the value of advice is still largely misunderstood, and so are its tangible and intangible benefits.
That’s why we need to promote financial advice as a proactive, rather than reactive, component of financial management. And to do so, we’ll continue our public advocacy efforts, while also providing advisers with tools and support to grow.