Advice is about relationships, not legislation
It will come as no surprise to advisers that a survey of consumers shows that they value their personal relationship more highly than legislative requirements and qualifications.
Friday, July 3rd 2015, 7:01AM 
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The survey was done in March for the Ministry of Business, Innovation and Employment by Colmar Brunton.
It shows that consumers do little research on the qualifications, or registration status, of their financial adviser, but they have a high level of trust in the financial adviser they consult.
"This is derived from three elements of the relationship: being recommended a financial adviser by someone they know, developing a personal connection and relationship with the adviser, and the reputation and size of the investment company, bank, or insurance company for whom the adviser works (or is affiliated).
"Consumers value the personal relationship they have with their adviser. This has more weight to them than the legislative requirements imposed on financial advisers. Consumers also feel that there is little reason to doubt the authenticity of their own financial adviser, certainly in the absence of any current concerns about them."
The report says there are two reasons people seek advice is to save them time and give them confidence in their investments.
Those who don't seek advice feel comfortable with the "informal and general information they receive from other sources" and sometimes feel they don't have enough money to see an adviser.
One of the more worrying signs of the impact of regulation is that it appears to be dumbing down the advice given to clients.
Since the introduction of the FAA some investment advice clients "noticed a move away from personalised advice to more generalised/transactional advice from their financial adviser. These investment advice clients feel the impact of the FAA has been to restrict their access to personalised financial advice."
The survey showed that consumers know little about the elements of the FAA that are designed to proctect consumers. It then went to tell consumers about these protections then ask further questions about them.
The following insights highlight the key themes from the research.
- Consumers most value access to the expertise and time saving elements that financial advice offers.
- Financial advice also gives consumers greater confidence as they feel their investment decisions are better informed.
- Consumers have strong relationships with their own financial advisers. This builds a high level of trust with their adviser, even if this does not extend to the sector as a whole.
- Consumers who do not obtain professional financial advice can feel that advisers are mainly interested in clients with larger funds to invest. As these consumers have not developed a personal relationship with an adviser, they also feel that other sources of advice (e.g. family and friends) are more likely to have their best interests at heart.
- Once informed about the elements of the Acts, some consumers feel these give them greater confidence in the financial services sector. Others feel the Acts have yet to be ‘tested’ (e.g. by a global financial crisis).
- The elements of the legislation that provide the most confidence for consumers are more closely related to their personal relationship with their adviser (the need for financial advisers to disclose commission and fees, and the existence of a number of disputes schemes).
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