Demand for financial advice is soaring during COVID-19

There’s been an uptick in the demand for financial advice, with research finding advisers are regaining community trust by keeping clients informed and engaged during the COVID-19 pandemic.

The demand for financial advice in Australia has dramatically increased. Research firm Investment Trends, found 2.6 million non-advised Australians are now saying they intend to seek help from a financial planner in the next two years. This has increased by 500,000 since 2019 (when it was 2.1 million) and has doubled since 2015 (when it was 1.3 million).

The research consisted of a survey of 4,501 Australian adults that concluded in July 2020. It seems that the COVID-19 pandemic has only enhanced the long-term trend, mostly due to the associated increase in economic uncertainty, volatile markets and changes in people’s personal circumstances.

“Among these potentially advisable clients, the pandemic has been a major catalyst, with 44 per cent saying the COVID-19 situation had increased their likelihood of seeking advice,” says King Loong Choi, Senior Analyst at Investment Trends.

“Potential clients overwhelmingly prefer receiving comprehensive advice over limited advice (76 per cent vs 35 per cent). But when cost is factored in, preference for limited advice markedly increases.”

The research suggests that there are opportunities to transition those who want limited advice to a holistic advice offering, since the vast majority of potential clients (61 per cent) are open to upgrading to comprehensive advice over time.

Proactive communication

Three out of four clients have been in contact with their financial planner to discuss the impact of the pandemic. In most cases, clients said their financial planner initiated the first contact.

The research found that proactive communications regarding COVID-19 contributed significantly to higher client satisfaction. Only one third of advised clients prefer face-to-face review meetings (down from 48% in 2019), while the appetite for alternative, socially distanced but regular reviews substantially increased.

“Most financial planners have proactively engaged with their clients during this period of volatile markets, and clients themselves acknowledge these efforts,” says Choi.

“As the scaled-down lockdowns persist, all planners must take the opportunity to engage more closely with their clients – through the most in-demand channels.”

Improved consumer attitudes

The Investment Trends research echoes findings from the Australian Securities Investment Commission (ASIC)s 2019 review of the industry, Financial Advice: What consumers really think. The review found that 41 per cent of Australians intended to get financial advice in the future and detected a strong overall trend towards getting professional help to create a financial plan.

“The good news for the financial planning industry is that consumers who had recently received financial advice had more positive attitudes towards financial advisers than those who had not,” said Danielle Press, ASIC Commissioner, when the report was released.

Of those polled by ASIC, 79 per cent agreed that ‘financial advisers have expertise in financial matters I do not have’. Respondents indicated that they wanted to receive advice on investments (45 per cent), retirement income planning (37 per cent), cash flow management (22 per cent), and debt management (14 per cent).

“Moreover, even limited knowledge of industry reforms such as Future of Financial Advice appears to have improved consumer attitudes towards the sector.”