Confidence mixed as challenges remain
The secret to providing a product or a service that is successful is that it is at its core relevant to the needs and desires of its target market. To do this, companies need to continuously look at their clients to identify relevant trends.
The financial services industry is no different. Recently, the Financial Standards Planning Board, the global body that regulates the Certified Financial Planner professional standard, asked for a global survey to be conducted to see what clients expect from their advisers in the current economic environment.
Mixed confidence levels
The first statement made by the survey was: I am confident that I will achieve my financial life goals. Respondents were asked to strongly agree or to strongly disagree with the statement.
What is interesting is that South African respondents ranked highly in this question. Thirty eight percent of South Africans say that they are confident that they will achieve their goals; and while 38% may seem low, we ranked second in this question behind Brazil where 65% of the population showed a similar confidence.
The next statement was: I am successful in sticking with my financial strategies. Again, respondents were asked to either strongly agree or disagree with the statement. And again, South African respondents ranked highly with 27% of the respondents showing confidence in their discipline.
What do you value most?
This is where the survey delves deeper into the values of respondents and what drives them. When asked what they were saving money for, South African respondents said that being free of financial debt, owning their own home, and being able to support the people that they love were the three biggest reasons to save.
While these are very good reasons to save, there is a significant issue that cannot be overlooked. When you approach a person and ask them what their biggest asset is, they will tell you that it is their house and then their motor vehicles. One cannot argue that these are significant tangible assets, but a person’s ability to earn an income is an intangible asset but is the most important asset in a person’s life.
With this in mind, it is concerning that saving towards a comfortable retirement, whereby they would get some form of an annuitized payout, does not feature in the top three values on people’s minds.
Considering options
In order to save effectively, one often enlists the services of a financial planner. But what considerations are foremost in the public’s mind when enlisting these services? Top of the minds of South Africans is trustworthiness; other issues such as the level of advice offered and the reputation of the financial adviser are also concerns.
These are pertinent issues, and are not unrelated to the barriers of entry that people experience when trying to engage with a financial adviser. These barriers range from not knowing who to trust to the inability to afford a financial product, not knowing where or how to begin budgeting, and not being able to afford the fees or costs associated with the product.
The truth of the matter
It is frightening to see that there are significant barriers of entry when the country is working towards financial inclusion for all of its citizens. David Kop CFP, Head of Advocacy and Consumer Affairs at the Financial Planning Institute, says that these barriers of entry is a perfect example of why there is currently such an appetite for a fee based model of advice in South Africa.
“In order for a person to trust you, they need to know you. They need to know that you have their best interests at heart and that you will be supplying them with an appropriate product to suit their needs at an appropriate price,” says Kop.
At the beginning, there was significant uncertainty as to whether clients would be prepared to pay fees. However, over the past year, a number of advisers who currently use a fee based model have shown that clients are not averse to paying fees as long as they know what the fees are and that they are receiving a product or service which is relative to the fees that they are paying.
Editor’s Thoughts:
The main thing to remember is that trust is gained over time. No person can implicitly trust someone unless you have been involved with the family over generations. A fee based model may be a step to fast track trust by creating clarity, but is the public truly finically savvy enough to know what they are paying for? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
Comments