Additionally, 36% of clients opted out to independently manage their finances, while 29% felt they had acquired sufficient knowledge from their advisers. Quality and value concerns prompted 17% and 14% of clients, respectively, to sever ties with their advisers.
Netwealth’s study classifies clients into three categories based on their engagement duration: “newcomers” (less than three years), “settled” (three to five years), and “loyals” (over six years). Findings highlight that perceptions of value improve over time, with newcomer's rating value at 7.2 out of 10, increasing to 7.8 for settled clients and 8.2 for loyals.
A notable aspect of the research is the discrepancy between perceived and actual financial literacy levels among clients. Despite 43% of “loyals” claiming high financial literacy, evaluations reveal only 2% possess advanced understanding. Similarly, 50% of “settled” clients overestimate their knowledge, with a mere 2% achieving high literacy scores.
This disparity persists among “newcomers,” where 57% rate their literacy as moderate, contrary to findings showing 79% lack basic financial acumen. The study underscores a significant gap between self-assessed and actual financial knowledge across all client categories.
Interestingly, these insights from Netwealth contrast the Financial Advice Association’s last Value of Advice Index. The latter highlighted that nine out of ten clients valued the benefits they received as outweighing advisory costs, with an improvement in client quality of life and financial confidence reported.
The evolving perception of value and financial literacy challenges suggests the need for advisers to integrate educational components into their services to enhance client satisfaction and retention.
With financial self-sufficiency increasingly prioritized by clients, financial advisers may need to reassess their engagement strategies and emphasize tangible benefits to ensure long-term client loyalty.
