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Trust in finance professionals drops

by Robin Christie | 15 May 2015

The level of trust that the Australian public holds in financial services professionals has dropped over the last few years, new research suggests.

The latest financial literacy survey from the Australia and New Zealand Banking Group (ANZ) found that only 48 per cent of respondents agreed that they would ‘trust a financial professional and accept what they recommend to me’. This was a three per cent drop on the 2011 survey’s figure of 51 per cent.

The difference was more stark among respondents who had used a financial planner in the last year. While more than half (56 per cent) of this subset of respondents said that they would trust a financial professional, this was a significant drop on the 2011 figure of 65 per cent.

While the Australian public may have become less trusting when it comes to managing their money, the report suggests that this outlook hasn’t necessarily translated into more prudent decision making.

“Trust in recommendations of financial professionals has declined since the 2011 and survey some of the ‘lessons’ about investment principles that appeared to have followed losses in the years immediately after the GFC have been lost amongst some of the population,” it states.

Diversification devalued

When it came to assessing the public’s understanding of investment principles, the report notes that some of the improvements that were noted in the 2008 and 2011 surveys have been reduced. However, it adds that – with the exception of diversification – “understanding still appears higher than in 2002 and higher amongst those with higher levels of savings and investments”.

On the diversification issue, the report notes that the number of people who considered diversification of funds across different types of investment over five years or more to be either ‘very important’ or ‘quite important’ fell to its lowest level since the survey began. This figure has dropped from 79 per cent in 2002, to 78 per cent in 2011, and now to 72 per cent.

“Both the number of people who considered it ‘of some importance’ and those who were ‘unsure’ increased,” states the report. “While there was no significant decrease amongst those with savings and investments of $20,000 or more, owners of shares and managed investments placed slightly less importance on diversification.”

Other findings included:

Awareness that a high return is likely to be associated with higher risk remained strong, at 86 per cent.
However, the number of people who could recognise an investment as ‘too good to be true’ fell to 50 per cent in 2014 from 53 per cent in 2011. Lower ability to recognise the right response was most evident in people aged under 40 and in lower income households.
67 per cent of people recognised that good investments may fluctuate in value, down from 74 percent in 2011 but above the 63 per cent response from 2002.
Online revolution

Another key finding highlighted by ANZ was that Australians are increasingly turning to digital platforms to manage their money. Almost three quarters of respondents said that they bank online (up from 63 per cent in 2011), while the use of mobile phones and tablets has almost quadrupled (rising to 53 per cent from 14 per cent in 2011).

“The growth of digital is changing the way people do their banking and make payments. Online channels are making it easier for people to access information, shop around and compare financial products,” said ANZ CEO, Mike Smith.

Online payments also appear to have increased in popularity, with growth in this area being recorded among each of the survey’s age groups. Perhaps unsurprisingly, the highest proportion of respondents who said that they used online payments was in the under 40 year-old category (88 per cent). The figure was far lower for the over 70s, at 32 per cent, but this still represented an 18 per cent increase on the 2011 survey’s figure.

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