FINANCIAL ADVICE CASE STUDY

Financial Advice Case Study



Financial Advice Case Study

Project overview

The aim of the mystery shopping project was to produce a snapshot of the quality of advice currently given to consumers, to identify key issues through qualitative research and to establish a benchmark by which future reforms could be assessed. We successfully recruited 11 “mystery shoppers”. They were asked to present their own circumstances to up to 4 financial advisers and to request financial advice. The shoppers were also asked to complete comprehensive questionnaires prepared by Consumer AUS.

The shoppers approached institutions, Australia-wide financial planning chains and standalone adviser firms. To ensure an even market coverage Consumer AUS supplied the shoppers with the names of firms to contact (randomly selected in the case of standalone firms). In total 33 advisers were mystery shopped and, of these, 18 advisers were asked to provide investment advice and 15 were asked to provide “pre-retirement planning” advice. Eventually 17 advisers provided plans. 16 of these were written plans and a further 1 consisted of documents related to the verbal advice the adviser gave (which was documented in the shopper questionnaire).

A three-member expert panel reviewed the 17 plans. Copies of the financial plans (with firm and adviser details blanked out), related documents and summaries prepared by Consumer AUS were assessed by the expert panel in September. The expert panel was asked to assess the quality of the advice and information given to shoppers.

Shopping output:

17

Plans reviewed by the expert panel (10 investment plans, 7 pre-retirement plans)

4

Plans not received in time to be reviewed by the expert panel (4 investment)

4

Verbal advice only (4 pre-retirement)

8

Shopper did not persevere or did not get advice (4 investment, 4 pre-retirement)

33 advisers in total

The adviser score-card

The expert panel rated each plan as good, disappointing or rejected

Good plans gave clear, relevant and specific advice that was supported by relevant analysis and reasons for the recommendations. Implementing the advice was likely to be in the shopper's best interests.

Disappointing plans were, in the opinion of the panel, “very disappointing, underwhelming plans that should have been a lot better”. Disappointing plans lacked good analysis, or there were no or few reasons given for the recommendations. In some cases, although the analysis was good, the advice or costs were unclear or the recommended strategy seemed unnecessarily costly. These plans were “fixable” but the panel would not recommend them without modification or clarification.

Rejected plans contained little relevant analysis and advice, or lacked essential information, or were plans that contained advice that would not be in the shopper's best interests.

1.1 Only 3 out of 17 plans were rated as “good”

3 out of 17 financial plans were rated as good.

6 plans received a panel rating of “disappointing”.

8 plans received a rejected rating.

1.2 Investment plans were disappointing

Of the 17 plans assessed by the expert panel, 7 addressed a clear need for investment advice for significant lump sums that had already been accumulated and a further 3 had both this and other issues to ...