The Role of Trust in Personal Financial Planning
Michelle Karen Cull
Student Number: 91090241
Submitted in fulfillment of requirements for the degree of Doctor of
Philosophy
2015
University of Western Sydney, Australia
School of Business
DEDICATION
This thesis is dedicated to my mother and father, my sister, my mother-in-law, my
husband Shane, and my three children; Rhys, Natalie and Brandon.
For your understanding, your patience, your support, and your love, thank you.
ACKNOWLEDGEMENTS
This thesis is the product of a long journey and the many people I met along the way
who have provided their support, assistance and encouragement.
My principal supervisor, Gabriel Donleavy, has supported and encouraged me over
many years and his wisdom has guided me throughout my journey and kept me on track.
I am thankful for his insight and understanding and his useful feedback.
The second of my supervisors, Terry Sloan, joined the panel later in my candidature and
his calm reassurance and ability to find simplicity in complexity has been invaluable to
me. In addition, I am extremely thankful for Terry’s consistent and helpful feedback and
for availing himself to respond to the ‘quick’ questions I had from time to time.
The third of my supervisors, Dorothea Bowyer, also joined the panel in the latter part of
my candidature. I am thankful for her positive attitude and fresh approach to research
and helpful suggestions along the way.
I would also like to thank Colleen Puttee and Brian Murphy for their assistance, support
and encouragement in the early stages of my research.
In addition, there have been a number of other academics whose contribution deserves
recognition. George Mikhail gave me the initial confidence I needed to pursue my
research endeavours. Jane Andrew and Michael Gaffikin provided an avenue for me to
discuss my philosophical assumptions and research ideas and I am grateful for their
support and encouragement while I developed my research proposal.
I would also like to acknowledge my colleagues at the University of Western Sydney,
past and present, for their encouragement, support and friendship over the years.
Thank you also to those who assisted in the pre-test phase of the research and to all who
participated by completing questionnaires and being part of the interview phase of the
research. This thesis would not be possible without them. Their sacrifice of time and
willingness to share their stories has been invaluable.
STATEMENT OF AUTHENTICATION
I, Michelle Cull, declare that the PhD thesis entitled “The Role of Trust in Personal
Financial Planning” is no more than 100,000 words in length, including quotes and
exclusive of tables, figures, appendices, bibliography, references and footnotes. This
thesis contains no material that has been submitted previously in whole or in part, for
the award of any academic degree at this or any other institution. Except where
otherwise indicated, this thesis is my own work.
Signature:…………………………………… Date:……………………………………
TABLE OF CONTENTS
LIST OF TABLES ........................................................................................................ viii
LIST OF FIGURES ........................................................................................................ xi
LIST OF ABBREVIATED TERMS ............................................................................ xiii
PUBLICATIONS ASSOCIATED WITH THIS THESIS ............................................. xv
ABSTRACT
.............................................................................................................. xvi
Chapter 1: INTRODUCTION.......................................................................................... 1
1.1
Introduction ............................................................................................. 1
1.2
Background ............................................................................................. 2
1.3
Research Problem .................................................................................... 2
1.4
Conceptual Framework ........................................................................... 4
1.5
Justification for the Research .................................................................. 5
1.6
Methodology ........................................................................................... 7
1.7
Outline of Report ..................................................................................... 8
1.8
Delimitations of Scope ............................................................................ 9
1.9
Key Assumptions and Definitions ........................................................ 10
1.10
Conclusion............................................................................................. 11
Chapter 2: THE CONTEXT OF THE STUDY ............................................................. 12
2.1
Introduction ........................................................................................... 12
2.2
Why financial planning? ....................................................................... 12
2.3
Policy aspects ........................................................................................ 13
2.4
Educational aspects ............................................................................... 16
2.5
Professional aspects............................................................................... 19
2.6
Ethical aspects ....................................................................................... 22
i
2.7
Stakeholders .......................................................................................... 23
2.8
Summary ............................................................................................... 23
Chapter 3: LITERATURE REVIEW............................................................................. 25
3.1
Introduction ........................................................................................... 25
3.2
Defining Trust ....................................................................................... 25
3.3
Trust in theory ....................................................................................... 27
3.4
A Multidimensional View of Trust ....................................................... 32
3.5
Antecedents of Trust ............................................................................. 33
3.6
Sources of Trust .................................................................................... 36
3.7
Trust and Ethical Behaviour.................................................................. 37
3.8
Trust in the context of financial planning ............................................. 40
3.9
Trust, Personal ‘Sales’ and Remuneration ............................................ 42
3.10
Trust and ‘soft’ skills............................................................................. 46
3.11
Summary and Conclusion ..................................................................... 50
Chapter 4: THE CONCEPTUAL FRAMEWORK........................................................ 52
4.1
Introduction ........................................................................................... 52
4.2
Social psychology ................................................................................. 53
4.2.1
Affect and cognition ..................................................................................... 53
4.2.2
Moral development ...................................................................................... 54
4.3
Sociology............................................................................................... 55
4.4
Marketing .............................................................................................. 55
4.5
Management .......................................................................................... 57
4.6
Key variables to be investigated............................................................ 57
4.6.1
Characteristics of trust ................................................................................. 59
4.6.2
Individual and demographic factors ............................................................ 59
4.6.3
Society based factors (includes generalised trust) ....................................... 60
4.6.4
Systems and institution based factors .......................................................... 60
ii
4.6.5
Process based factors ................................................................................... 60
4.7
Research questions ................................................................................ 61
4.8
Summary ............................................................................................... 62
Chapter 5: METHODOLOGY....................................................................................... 63
5.1
Introduction ........................................................................................... 63
5.2
Justification for Paradigm and Methodology ........................................ 64
5.3
Research instruments............................................................................. 66
5.4
Client Questionnaire 1 (pre-GFC) ......................................................... 68
5.4.1
Sample Selection ......................................................................................... 68
5.4.2
Survey Design.............................................................................................. 68
5.4.3
Collection Method ....................................................................................... 72
5.4.4
Methods of Data Analysis ........................................................................... 74
5.4.5
Reliability and Validity ............................................................................... 79
5.5
Client Questionnaire 2 (post-GFC) ....................................................... 79
5.5.1
Sample Selection ......................................................................................... 79
5.5.2
Survey Design.............................................................................................. 79
5.5.3
Collection Method ....................................................................................... 81
5.5.4
Methods of Data Analysis ........................................................................... 83
5.5.5
Reliability and Validity ............................................................................... 84
5.6
Financial Adviser Questionnaire ........................................................... 84
5.6.1
Sample Selection ......................................................................................... 84
5.6.2
Survey Design.............................................................................................. 86
5.6.3
Collection Method ....................................................................................... 89
5.6.4
Method of Data Analysis ............................................................................. 90
5.6.5
Reliability and Validity ............................................................................... 93
5.7
5.7.1
Interviews .............................................................................................. 93
Sample Selection ......................................................................................... 93
iii
5.7.2
Design and Structure ................................................................................... 94
5.7.3
Collection method...................................................................................... 100
5.7.4
Method of Data Analysis ........................................................................... 101
5.8
Ethics Approval and Confidentiality of Participant Information ........ 103
5.9
Summary ............................................................................................. 104
Chapter 6: RESULTS .................................................................................................. 106
6.1
Introduction ......................................................................................... 106
6.2
Client questionnaire 1.......................................................................... 107
6.2.1
Response Rate .......................................................................................... 107
6.2.2
Descriptive statistics and frequency distribution ..................................... 108
6.2.3
Cross-tabulation and statistical tests ........................................................ 120
6.2.4
Open-ended comments ............................................................................. 125
6.3
Client questionnaire 2.......................................................................... 131
6.3.1
Response Rate .......................................................................................... 131
6.3.2
Descriptive statistics and frequency distribution ..................................... 132
6.3.3
Cross-tabulation and statistical tests ........................................................ 149
6.3.4
Open-ended comments ............................................................................. 156
6.4
Financial adviser questionnaire ........................................................... 160
6.4.1
Response Rate .......................................................................................... 160
6.4.2
Descriptive statistics and frequency distribution ..................................... 160
6.4.3
Cross-tabulation and statistical tests ........................................................ 172
6.4.4
Open-ended comments ............................................................................. 180
6.5
Interviews ............................................................................................ 184
6.5.1
Client interviews ...................................................................................... 184
6.5.2
Financial adviser interviews ..................................................................... 196
6.6
Summary and Conclusion ................................................................... 212
Chapter 7: DISCUSSION ............................................................................................ 215
iv
7.1
Introduction ......................................................................................... 215
7.2
Research Question 1: Characteristics of Trust in Personal Financial
Planning............................................................................................... 216
7.2.1
Vulnerability and Risk .............................................................................. 217
7.2.2
Feeling ....................................................................................................... 218
7.2.3
Honesty...................................................................................................... 219
7.2.4
Faith ........................................................................................................... 221
7.2.5
Best interests ............................................................................................. 222
7.2.6
Accountability ........................................................................................... 224
7.2.7
Competence ............................................................................................... 225
7.3
Research Question 2: How Financial Advisers Perceive Their Role in
Developing Trust ................................................................................. 228
7.4
Research Question 3: Factors Influencing Trust between Client and
Adviser ................................................................................................ 230
7.4.1
Individual factors....................................................................................... 231
7.4.2
Demographic factors ................................................................................. 231
7.4.3
Society based factors ................................................................................. 234
7.4.4
Systems and institutional based factors ..................................................... 235
7.4.5
Process based factors ................................................................................. 238
7.5
Research Question 4: Implications of Business Models for Trust ...... 242
7.6
Research Question 5: The Relationship Between Ethical Behaviour
and Trust .............................................................................................. 246
7.7
Research Question 6: The Impact of Recent Changes in the Financial
Planning Environment on Trust .......................................................... 253
7.8
Emerging Issues .................................................................................. 257
7.8.1
A mismatch of trust ................................................................................... 257
7.8.2
Importance of the professional bodies ....................................................... 258
7.9
Conclusion........................................................................................... 259
v
Chapter 8: CONCLUSION .......................................................................................... 261
8.1
Introduction ......................................................................................... 261
8.2
Research processes undertaken ........................................................... 262
8.3
Limitations .......................................................................................... 263
8.4
Research Findings and Contribution ................................................... 264
8.5
Implications and recommendations ..................................................... 266
8.6
Final Conclusions ................................................................................ 268
8.7
Concluding statement .......................................................................... 269
REFERENCES............................................................................................................. 270
LIST OF APPENDICES .............................................................................................. 289
APPENDIX A ............................................................................................................. 290
Appendix A1: Recommendations from Ripoll Report ................................................ 291
Appendix A2: Financial planning legislation .............................................................. 293
Appendix A3: Tiers of financial advice and education requirements.......................... 294
Appendix A4: Recommendations from the PJC on Corporations and Financial
Services inquiry into proposals to lift the professional, ethical and
education standards in the financial services industry ........................ 295
APPENDIX B ............................................................................................................. 299
Appendix B1: Definitions of trust and trust constructs found in the literature............ 300
Appendix B2: An overview of the multidimensional construct of trust (Svensson,
2004, p.473)......................................................................................... 303
APPENDIX C ............................................................................................................. 304
Appendix C1: Client Questionnaire 1 .......................................................................... 305
Appendix C2: Participant Information Sheet - Client Questionnaire 1 ....................... 309
Appendix C3: Observational Studies Procedure.......................................................... 310
Appendix C4: Coding Sheet for Client Questionnaire 1 ............................................. 311
Appendix C5: Coding of Open- Ended/Free Responses: Client Questionnaire 1 ....... 319
Appendix C6 : Participant Information Sheet: Client Questionnaire 2/ Client
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Interview.............................................................................................. 320
Appendix C7: Script for client invite to complete questionnaire 2 ............................. 322
Appendix C8: Client Questionnaire 2 .......................................................................... 323
Appendix C9: Coding Sheet for Client Questionnaire 2 ............................................. 329
Appendix C10: Coding of Open-ended/Free responses: Client Questionnaire 2 ........ 345
Appendix C11: Sample of stamped C5 Envelope (Client Questionnaire 2) ................ 347
Appendix C12: Unaddressed Mail Service (UMS) details (client questionnaire 2) .... 348
Appendix C13: ASIC Australian Financial Service Licence Authorisations .............. 350
Appendix C14: Script for financial adviser invitation ................................................ 351
Appendix C15: Financial Adviser Questionnaire ........................................................ 352
Appendix C16: Participant Information Sheet – Financial Adviser Questionnaire/
Financial Adviser Interview ................................................................ 361
Appendix C17: Participant Consent Form (Interviews) .............................................. 363
Appendix C18: Coding Sheet for Financial Adviser Questionnaire ............................ 364
Appendix C19: Coding of Open- Ended/Free Responses for Financial Adviser
Questionnaire ...................................................................................... 389
Appendix C20: Matching of research questions to themes addressed by data
collection instruments. ........................................................................ 394
Appendix C21: Interview Checklist – Clients ............................................................. 395
Appendix C22: Interview Checklist – Financial Advisers .......................................... 397
Appendix C23: Full transcript of a client interview………………………………….399
APPENDIX D ............................................................................................................. 408
Appendix D1: Cross-tabulation results of demographic groupings against
usefulness of Statement of Advice (SOA): client questionnaire 1 ...... 409
Appendix D2: Cross-tabulation results of organisation type and behavioural skills:
client questionnaire 1 .......................................................................... 412
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LIST OF TABLES
Table 2-1 Education requirements recommended by PJC inquiry into proposals to lift
the professional, ethical and education standards in the financial services
industry.............................................................................................................. 18
Table 2-2 Professional bodies supporting financial planning ........................................... 19
Table 3-1 Elements of behavioural trust............................................................................ 29
Table 3-2 Modes of trust production .................................................................................. 30
Table 3-3 Trust antecedents in the literature ..................................................................... 34
Table 3-4 Six Stages of Moral Judgement Development .................................................. 38
Table 3-5 Differences between mean emphasis ratings for behavioural and cognitive
skills .................................................................................................................. 48
Table 3-6 Behavioural skills as antecedents of trust in financial planning ....................... 50
Table 4-1 Research Questions ........................................................................................... 61
Table 5-1 Research Instruments ........................................................................................ 65
Table 5-2 Research questions and instruments.................................................................. 66
Table 5-3 Major themes addressed in client questionnaire 1 ............................................ 69
Table 5-4 Questionnaire design concerns .......................................................................... 71
Table 5-5 Analysis of Questionnaire Concerns or Errors from Observational Study ...... 72
Table 5-6 Mail survey response pattern: client questionnaire 1 ........................................ 74
Table 5-7 Data screening procedure: client questionnaire 1 ............................................. 77
Table 5-8 Additional themes addressed by client questionnaire 2 .................................... 81
Table 5-9 Mail surveys delivered by state: client questionnaire 2 .................................... 82
Table 5-10 Mail survey response pattern: client questionnaire 2 ...................................... 82
Table 5-11 Matching of questions in client questionnaire and financial adviser
questionnaire ................................................................................................... 87
Table 5-12 Questions developed specifically for financial adviser questionnaire ............ 87
Table 5-13 Analysis of financial adviser questionnaire: concerns or errors from pilot
study................................................................................................................ 89
Table 5-14 Mail survey response pattern: financial adviser questionnaire ....................... 90
Table 5-15 Interview questions: clients ............................................................................. 97
Table 5-16 Interview questions: financial advisers ........................................................... 99
Table 5-17 Twelve step process undertaken for Leximancer analysis ............................ 102
viii
Table 6-1 Sample Size and Confidence Intervals ............................................................ 108
Table 6-2 Number of respondents who have sought financial planning advice (pre-GFC)
......................................................................................................................................... 112
Table 6-3 Client responses to the influence of commissions on financial advice (pre-GFC)
......................................................................................................................................... 117
Table 6-4 Financial Adviser Behaviour Score (FABS): client questionnaire 1 .............. 119
Table 6-5 Financial adviser behaviour: client questionnaire 1 ........................................ 120
Table 6-6 Organisation type and usefulness of SOA: client questionnaire 1 .................. 121
Table 6-7 Remuneration by organisation type ................................................................ 122
Table 6-8 Payment type and usefulness of financial advice ............................................ 123
Table 6-9 Payment type and perception of commissions on advice................................ 124
Table 6-10 Cross-tabulation of FABS and usefulness of SOA: CQ1.............................. 124
Table 6-11 FABS and organisation type: CQ1 ................................................................ 125
Table 6-12 FABS One-Sample Test: CQ1 ...................................................................... 125
Table 6-13 Themes by significance: CQ1 ....................................................................... 127
Table 6-14 Concept connections and trust rankings: CQ1 .............................................. 130
Table 6-15 Number of respondents who have sought financial planning advice: pre and
post-GFC....................................................................................................... 135
Table 6-16 Financial Adviser Behaviour Score (FABS): client questionnaire 2 ............ 141
Table 6-17 Financial adviser behaviour: client questionnaire 2 ...................................... 142
Table 6-18 Additional financial adviser behaviours included in CQ2 ............................ 142
Table 6-19 Financial adviser competence-based skills ................................................... 143
Table 6-20 Likert scale results for trust factors: client questionnaire 2 .......................... 145
Table 6-21 Trust judgements of financial planners/advisers ........................................... 148
Table 6-22 Cross-tabulation of trust factors and trust antecedents ................................. 153
Table 6-23 Themes by significance: CQ2 ....................................................................... 157
Table 6-24 Response rate: financial adviser questionnaire ............................................. 160
Table 6-25 Financial Adviser Behaviour Score (FABS): financial adviser questionnaire
......................................................................................................................................... 164
Table 6-26 Financial adviser behaviour: financial adviser questionnaire ....................... 165
Table 6-27 Additional financial adviser behaviours: rated by financial advisers ........... 166
Table 6-28 Financial adviser self-rated competence based skills.................................... 166
Table 6-29 Likert scale responses for trust factors: financial adviser questionnaire....... 167
Table 6-30 Trust judgements made by financial advisers in dealing with clients ........... 169
ix
Table 6-31 Competence-based skills by remuneration type of advisers ......................... 173
Table 6-32 Financial adviser DIT P scores ..................................................................... 178
Table 6-33 Financial adviser DIT P score by quartile with recommended cut-off points
according to Rest (1986) ............................................................................... 179
Table 6-34 Years of experience and P score ................................................................... 180
Table 6-35 Themes by significance: FAQ ....................................................................... 182
Table 6-36 Themes by significance: client interviews .................................................... 186
Table 6-37 Themes by significance: financial adviser interviews .................................. 197
Table 7-1 Likert scale rankings of honest behaviour displayed by financial advisers .... 220
Table 7-2 Society based trust measures and financial planner trust (CQ2)..................... 234
Table 7-3 DIT P-scores from comparison studies ........................................................... 250
x
LIST OF FIGURES
Figure 3-1 Antecedents of trust ......................................................................................... 35
Figure 3-2 Sources of Client Trust .................................................................................... 36
Figure 4-1 Theories of trust underpinning this study ........................................................ 52
Figure 4-2 Four-component model ................................................................................... 54
Figure 4-3 Variables to be tested in the current study ....................................................... 58
Figure 4-4 Sequential stages of trust ................................................................................. 58
Figure 5-1 The inter-relationship of philosophical assumptions, research topic and
methodology. .................................................................................................. 64
Figure 5-2 How the research instruments address the research questions ........................ 67
Figure 5-3 Overview of questionnaire data analysis process ............................................ 75
Figure 5-4 Four stage content analysis ............................................................................ 101
Figure 6-1 Age range of respondents: client questionnaire 1 .......................................... 109
Figure 6-2 Respondents by occupation: client questionnaire 1 ....................................... 111
Figure 6-3 Frequency of respondents by state: client questionnaire 1 ............................ 112
Figure 6-4 Year respondents last sought advice – pre GFC ............................................ 113
Figure 6-5 Reasons why respondents have not sought financial advice – pre GFC ....... 114
Figure 6-6 Financial adviser organisation type – client questionnaire 1 (pre-GFC) ....... 115
Figure 6-7 Remuneration provided to financial advisers 1990-2009: client
questionnaire 1 .............................................................................................. 116
Figure 6-8 AFSL and FSG provided (post FSRA) – client questionnaire 1.................... 118
Figure 6-9 Usefulness of Statement of Advice – client questionnaire 1 ......................... 119
Figure 6-10 Usefulness of SOA by organisation type: client questionnaire 1 ................ 121
Figure 6-11 Map of concepts and themes: CQ1 open-ended comments ......................... 126
Figure 6-12 Age range of respondents: client questionnaire 2 ........................................ 133
Figure 6-13 Respondents by occupation: client questionnaire 2 ..................................... 134
Figure 6-14 Year respondents last sought advice: client questionnaire 2 ....................... 135
Figure 6-15 Reasons why respondents have not sought financial advice: client
questionnaire 2 ........................................................................................... 136
Figure 6-16 Financial adviser organisation type – client questionnaire 2 ....................... 137
Figure 6-17 Remuneration provided to financial advisers: client questionnaire 2 .......... 138
Figure 6-18 Preference to paying a flat fee for advice .................................................... 139
xi
Figure 6-19 Government banning of commissions and trustworthiness of financial
planners ...................................................................................................... 139
Figure 6-20 AFSL and FSG provided (post FSRA) – client questionnaire 2.................. 140
Figure 6-21 Usefulness of financial advice – client questionnaire 2 ............................... 141
Figure 6-22 The public reputation of a firm and trust ..................................................... 144
Figure 6-23 Large versus small advice firms and trust ................................................... 146
Figure 6-24 Technical competence versus ethical values in choosing a planner ............ 146
Figure 6-25 Qualifications and trustworthiness............................................................... 147
Figure 6-26 Professional membership of advisers as reported by clients ....................... 149
Figure 6-27 Dependability of adviser 1992-2013: ‘I have found that my adviser is
dependable, especially in helping meet my goals’. .................................... 154
Figure 6-28 Reliability of adviser: 1992-2013: ‘I can rely in my adviser to do the things
he/she has promised to do’. ........................................................................ 155
Figure 6-29 Confidence in adviser 1992-2013: ‘When my adviser explains things that
may seem rather unlikely, I am confident that he/she is telling the truth’. 155
Figure 6-30 Map of concepts and themes: CQ2 open-ended comments ......................... 156
Figure 6-31 Age of respondents: financial adviser questionnaire ................................... 161
Figure 6-32 State of residence: financial advisers ........................................................... 162
Figure 6-33 Financial adviser organisation structure ...................................................... 163
Figure 6-34 Financial adviser remuneration method....................................................... 163
Figure 6-35 Support for a fee for advice model: financial adviser questionnaire ........... 164
Figure 6-36 Government legislation banning commissions and trustworthiness: financial
adviser questionnaire .................................................................................. 168
Figure 6-37 Highest level of education: financial adviser questionnaire ........................ 170
Figure 6-38 Professional designations: financial adviser questionnaire ......................... 171
Figure 6-39 Years of work experience as a financial adviser.......................................... 172
Figure 6-40 Stage profile: development of financial adviser moral judgement .............. 179
Figure 6-41 Map of concepts and themes: FAQ open ended-comments ........................ 181
Figure 6-42 Map of concepts and themes: client interviews ........................................... 185
Figure 6-43 Map of concepts and themes: financial adviser interviews ......................... 197
Figure 7-1 Characteristics of trust identified by clients of personal financial advisers .. 216
Figure 7-2 Factors influencing trust in personal financial planning................................ 242
Figure C12-0-1 Sample of returned UMS mail ............................................................... 348
xii
LIST OF ABBREVIATED TERMS
Abbreviated Term
Description
AAII
American Association of Individual Investors
ABS
Australian Bureau of Statistics
ADFS
Advanced Diploma in Financial Services
AFA
Association of Financial Advisers
AFP
Association for Financial Professionals
AFSL
Australian Financial Service Licence
AFS Licensee
Australian Financial Service Licensee
APESB
Accounting Professional and Ethical Standards Board
ANZIIF
Australian and New Zealand Institute of Insurance and Finance
ASFA
Association of Superannuation Funds of Australia
ASIC
Australian Securities and Investments Commission
BID
Best Interests Duty
CFP®
Certified Financial Planner™ practitioner
CIP
Certified Insurance Professional
CPA
Certified Practising Accountant
CPA Australia
CPA Australia Ltd
CQ1
Client Questionnaire 1 (pre-GFC)
CQ2
Client Questionnaire 2 (post-GFC)
DIT
Defining Issues Test
DIT2
Defining Issues Test 2
EU
Enforceable Undertaking
FABS
Financial Adviser Behaviour Score
FAIT
Financial Advisory Issues Test
FAQ
Financial Adviser Questionnaire
FBAA
Finance Brokers Association of Australia (est. 1992)
FINSIA
Financial Services Institute of Australasia
FOFA
Future of Financial Advice Reform Regulatory Regime
xiii
FP
Financial Planner
FPA
Financial Planning Association of Australia Ltd
FPEC
Finance Professionals’ Education Council
FPS
Financial Planning Specialist
FPSB
Financial Planning Standards Board
FSR
Financial Services Reform Regulatory Regime
FSRA
Financial Services Reform Act 2001
GFC
Global Financial Crisis
HREC
Human Research Ethics Committee
ICAA
Institute of Chartered Accountants Australia
IPA
The Institute of Public Accountants
MJI
Moral Judgement Interview
NIBA
National Insurance Brokers Association
PFP
Personal Financial Planning
PJC
Parliamentary Joint Committee
SCI
Semi-structured Client Interview
SDIA
Securities and Derivatives Institute of Australia
SFI
Semi-structured Financial Adviser Interview
SIA
Securities Institute of Australia
SMSF
Self-Managed Superannuation Fund
SOA
Statement of Advice
SPAA
Superannuation Professionals Association of Australia
SPSS
Statistical Package for the Social Sciences (Version 22)
SSA
SMSF Specialist Advisor
The Act
Corporations Act 2001 (Commonwealth)
xiv
PUBLICATIONS ASSOCIATED WITH THIS THESIS
Cull M 2009, 'The rise of the financial planning industry', The Australasian Accounting
Business and Finance Journal, vol 3 (1), 26 - 37.
Cull M and Davis G 2013, 'Students' perceptions of a scaffolded approach to learning
financial planning: an empirical study', Accounting Education: An International Journal,
vol 22 (2), 125 - 146.
xv
ABSTRACT
The financial planning environment has experienced significant change and development in
the last decade with the global financial crisis (GFC) being blamed for loss of the public’s
trust in the financial services industry (Collett, 2009). The GFC has also provided a turning
point for the industry as it moves from a ‘transactional, investment-and-product-focused
industry, to one offering principally strategic advice and services’ (Hoyle, 2010, p.1).
Further changes are on the horizon, stemming from regulatory reform which was a direct
result of the Parliamentary Joint Committee (PJC) on Corporations and Financial Services,
commissioned after the collapse of prominent financial product and services providers.
However, there is still much debate on whether such regulatory reform will increase trust in
the financial advice environment.
The purpose of this study was to investigate the role of trust of financial planning
participants within this context. This study is therefore a significant one in what is a
relatively under-researched area of interest. The study’s purpose was divided into six
research questions to explore the various dimensions of trust in the financial advice
environment.
The literature review and conceptual framework outline the complex nature of trust and its
central role in the client-adviser relationship using trust theories from social psychology,
sociology, management, and marketing literature. Concepts of cognitive-based trust
(thinking) versus affect-based trust (feeling) are used as a basis to explain the construct of
trust. Prior literature on the antecedents of trust (Morgan and Hunt, 1994; Mayer, Davis and
Schoorman, 1995; McAllister, 1995; Christiansen and DeVaney, 1998; Sharma and
Patterson, 1999; Kirchmajer and Patterson, 2003; Johnson and Grayson, 2005, Sharpe et al,
2007) and other influencing factors for trust production, are considered in formulating a
model to assist in analysing and explaining the role of trust in client-adviser relationships.
The impact of external events, such as the (GFC) and regulatory reform on the different
dimensions of trust in the personal financial planning context are also considered.
The research design employed a mixed methods approach comprising both quantitative
and qualitative research methods to test the research questions. The quantitative methods
adopted included two client questionnaires to examine financial adviser behaviour and to
provide an indication of the level of trust that clients or potential clients have in financial
advisers. A financial adviser questionnaire was also administered to determine how
xvi
financial advisers viewed their own behaviour and trustworthiness as well as to provide
insight as to their ethical reasoning and how that might affect trust. Qualitative methods
included a number of interviews with both clients and advisers to provide an
understanding of trust issues and the variables affecting the trustworthiness of financial
advisers to assist in answering the research questions.
A number of different methods of data analysis were applied in order to achieve the study’s
objectives, including statistical analysis, content analysis and triangulation.
The study has:
1. Identified characteristics of trust that are relevant to personal financial
planning;
2. Explained how financial advisers perceive their role in developing trust with
their clients;
3. Established individual, demographic, society, systems and process based
factors that influence the trust between client and adviser;
4. Explored the implications of different business models for trust;
5. Examined the interplay between ethical behaviour and trust, and
6. Shown how recent changes in the financial planning environment have
impacted on trust in financial planning.
A number of theoretical contributions to the existing academic knowledge base on trust are
made by the study. It provides a comprehensive analysis of the t ypes and levels of
trust of financial advisers and the trust issues facing both consumers and financial
advisers in their respective roles.
Specific contributions of the study to the academic literature include:
•
The finding that behavioural skills of financial planners are linked with trust;
•
The finding that remuneration is not important for the development of trust in a
relationship.
•
The link established between ethics and trust in an empirical manner;
•
The finding that ethical development is lower in Australian financial planners.
Furthermore, the study makes a practical contribution to financial planning. Specifically,
the study found that affective trust is the most important in financial planning relationships
and established the importance of accountability for trust. These findings have implications
for advisers, educators, regulators and professional bodies in the financial planning context.
xvii
Chapter 1: Introduction
Chapter 1: INTRODUCTION
1.1
Introduction
This chapter introduces and provides an overview of the research that is to be undertaken
in this thesis on the role of trust in personal financial planning.
The section begins with a summary of the background and context of the research,
highlighting recent changes in the financial advice environment and public debate that
point to the importance of client trust in the engagement and delivery of financial advice.
This is followed by a section outlining the research problem which establishes the
importance and significance of the role of trust in personal financial planning in achieving
the economic and social objectives in Australia.
The role of trust in personal financial planning is introduced as the research problem along
with specific research questions about characteristics of trust, how advisers financial
perceive their role in developing trust, trust factors, business models, the relationship
between ethics and trust and the impact of recent changes in the financial planning
environment on trust.
The chapter also provides a summary of the conceptual framework that underpins the
study, using a combination of trust theories from social psychology, sociology,
management and marketing literature. This is followed by the justification for the research,
including the collapse of prominent financial providers, the subsequent GFC, public
concerns about remuneration and trust as well as the contribution to academic literature on
trust and on the link between ethics and trust. Practical contributions of the research to
guide financial adviser behaviour and to future educational and legislative reform are also
introduced.
An outline of the methodological approach to the study which includes mixed methodology
is introduced in this chapter and an overview of the thesis structure provided, followed by a
brief discussion of the delimitations of the scope of the study and a summary of the key
1
Chapter 1: Introduction
assumptions and definitions that apply in this thesis.
Finally, the material presented in this chapter is synthesized in the conclusion before
beginning the next chapter, Chapter 2: The Context of the Study.
1.2
Background
The financial planning environment has experienced significant change and development
in the last fifteen years. Changes are continuing to take place in the industry in light of
ongoing regulatory reform which resulted from the Parliamentary Joint Committee (PJC)
on Corporations and Financial Services: Inquiry into financial products and services in
Australia, commissioned after the collapse of prominent financial product and services
providers. Results from the inquiry were tabled in November 2009 in a report known as
the Ripoll Report (Commonwealth, 2009) that highlighted the sales-advice conflict
perceived to exist in the personal financial planning (PFP) industry. This lead to the
Future of Financial Advice (FOFA) reform and Accounting Professional and Ethical
Standards Board (APESB) exposure draft on Financial Planning Services APES 230
(APESB, 2012) which proposed a ban on commissions and the introduction of a statutory
fiduciary or ‘best interests’ duty. However, there still exists little empirical research as to
the impact these changes would have on the client-adviser relationship and the resulting
quality of advice.
Research on trust in the client-adviser relationship is required to assist in the
development and implementation of the proposed legislative changes. This has been the
catalyst for this thesis which makes a significant contribution to the literature in terms of
understanding the various factors which affect trust in the context of financial planning
and the implications for policy and consumers.
1.3
Research Problem
The purpose of the research is to understand the role of trust in personal financial
planning (PFP) and forms the basis for the central research question identified here.
Central Research Question
What is the role of trust in the personal financial planning profession?
Specific research objectives were developed from the central research question as a
2
Chapter 1: Introduction
means of understanding the role of trust in PFP and to address the research gaps as
identified in the literature review in Chapter 3. Six research objectives were identified in
order for the study to achieve its purpose:
1. To identify characteristics of trust relevant to personal financial planning.
2. To explain how financial advisers perceive their role in developing trust with
their clients.
3. To establish individual, demographic, society, systems and process based factors
that influence the trust between client and adviser.
4. To explore the implications of different business models for trust.
5. To examine the interplay between ethical behaviour and trust.
6. To show how recent changes in the financial planning environment have
impacted on trust in financial planning.
These objectives are presented in the form of research questions which are developed in
the conceptual framework outlined in Chapter 4, and introduced below.
Research Question 1
What characteristics of trust are evident in personal financial planning?
Research Question 2
How do financial planners and advisers perceive their role in developing trust with their
client?
Research Question 3
How do individual, demographic, society, systems and process based factors influence
the trust between client and adviser?
Research Question 4
What are the implications of different business models for trust?
Research Question 5
What is the relationship between ethical behaviour and trust?
3
Chapter 1: Introduction
Research Question 6
How have recent changes in the financial planning environment impacted on the role of
trust?
In order to answer these research questions and achieve the objectives of the thesis, a
social constructivist approach that utilises both quantitative and qualitative research
methods is employed.
1.4
Conceptual Framework
The research utilises a combination of trust theories to guide the analysis of the research in
meeting its aims and objectives and to explain phenomena from a social constructivist
perspective. Trust theories from social psychology, sociology, management and marketing
literature are adapted and integrated to form the foundation of a conceptual framework to
examine the role of trust in the changing personal financial planning environment.
For the purposes of this research, trust theory is grounded in social psychology which
identifies the importance of both cognition and affect in the development of trust. Rest’s
(1986) moral development theory in the social psychology literature also assists in
understanding trust in personal financial planning in this study through considering what
financial planners ought to do when there are various issues at play.
Sociological theories also assist in examining trust in the financial planning environment as
they consider the impact of personal characteristics, institutions, regulation and stressful
situations on trust. Furthermore, these theories are useful in analysing the role of
professional bodies and legislators in building trust in personal financial planning.
Theories presented in the marketing literature have established a number of antecedents of
trust such as reliability, competence, shared values, communication, interpersonal
characteristics, expertise, interaction and reputation that provide a useful foundation to
understanding the role of trust in personal financial planning and assist in shaping the
questions to be included in the research instruments in this study. Many of these trust
antecedents have also been identified as behavioural competencies for personal financial
planners (Birkett, 1996).
Organisational behaviour studies from the management literature that examine penance and
regulation as trust repair states following a transgression are also used in the study in
4
Chapter 1: Introduction
understanding trust in personal financial planning, as are theories that suggest the influence
of ethical behaviour on trust (Brien, 1998). The organisational trust model involving
ability, benevolence and integrity (Mayer, Davis and Schoorman, 1995) also provides a
useful foundation to the study.
The theories adopted in this study suggest that trust is a sequential process that is built up
over a period of time, beginning with an individual’s propensity to trust, followed by a
cognitive stage known as calculus-based trust and evolving to identification-based trust
which incorporates both affective and cognitive components. These theories have assisted
in shaping the research questions which have determined the research methodology and
data collection instruments to be used in the study. Justification for this study on the role of
trust in personal financial planning is outlined in the following section.
1.5
Justification for the Research
The collapse of prominent financial service providers in Australia, beginning with
Westpoint in 2006 (Jenman, 2006), followed by Opes Prime in 2008 (Kohler, 2008) and
then Storm Financial in 2009 (Lampe, 2010), placed considerable pressure on the financial
services industry, particularly financial planners, for regulatory reform to protect
consumers from poor quality advice that may result in significant economic losses. These
events were exacerbated by the impact of the global financial crisis (GFC) and served to
diminish the public’s trust in the financial services industry (Collett, 2009). The
culmination of such events provided the impetus for regulatory reform (Commonwealth of
Australia (Ripoll Report), 2009; Hoyle, 2010) and the catalyst for this study.
The events outlined above placed financial planning in the spotlight with a renewed
interest in the future development of financial planning. While consumers and regulators
were calling for an inquiry to investigate the link between commission based payments and
the collapse of companies in the financial planning industry that led to investor losses, the
industry itself was at a crossroads as to whether it was to be classified as an ‘industry’ or a
‘profession’. With financial advice having the potential for large and long-lasting
ramifications for many Australians, it became apparent that further research on clientadviser relationships was required in order to address concerns about trust that were
publicised in the media but had received little attention both academically and practically.
The study provides empirical evidence that suggests remuneration methods may affect
initial trust but establishes that remuneration is not important for the development of trust
5
Chapter 1: Introduction
in a client-adviser relationship.
There are two types of contribution made by the empirical research in this study - one is to
the existing academic knowledge base in the area of trust and the other is a practical
contribution that addresses key areas of public debate concerning the professionalisation of
financial planning and legislative reform in an effort to provide the economic and societal
benefits of quality financial advice to all Australians, as was alluded to in the Ripoll report
(Commonwealth of Australia, 2009).
The study contributes to the existing academic knowledge base on trust by identifying the
characteristics of trust that are essential to the client-adviser relationship and establishing
the key factors that influence trust in personal financial planning. Furthermore, the study is
the first empirical study of its kind to use a mixed methods approach to examine trust from
both a client and adviser perspective. The findings are able to be applied to future studies
on trust, and in a range of contexts, thus building on existing trust theory.
Moreover, although the link between ethics and trust has been somewhat theorised in the
academic literature (Brien, 1998; Amrhein, 2009; Shockley-Zalabak, 2011), this study is
the first to provide empirical evidence that supports claims of a link between trust and
ethics. In addition, the research makes a contribution to academic knowledge by measuring
the ethical development of financial advisers in Australia for the first time using Rest’s
DIT (1986), allowing for comparisons against other studies, specifically the two Bigel
studies (1998, 2000) of financial planners in the United States. More generally, this study
assists in closing the research gap in the academic literature available in financial planning
and provides a basis on which to undertake further studies in the area.
From a practical perspective, the study may be useful in guiding practitioner behaviour and
assisting practitioners to establish and maintain trusting relationships with clients. It also
provides much needed empirical evidence to assist with implementation of the federal
government’s FOFA reforms to improve trust in personal financial planning and will guide
policy in relation to the recent PJC Inquiry into proposals to lift the professional, ethical
and education standards in the financial services industry (Commonwealth of Australia,
2014e).
The study also aims to assist professional bodies to build and maintain trust as they seek
for financial planning to be seen as a stand-alone profession. The study will play a key role
in contributing to a positive reputation of financial advisers and consideration of thesis
6
Chapter 1: Introduction
findings by the Finance Professionals’ Education Council (FPEC) in fulfilling its
obligations to raise the standard of financial planning education through setting degree
curriculum requirements; developing a standardised framework for the graduate
professional year; developing and administering a registration exam at the end of a
professional year; and establishing and maintaining a professional pathway for financial
advisers (Commonwealth of Australia, 2014e).
This research on the role of trust in financial planning makes academic and practical
contributions that benefit both advisers and clients. The study will guide the profession,
educators and regulators in ensuring that financial advisers are suitably qualified and
competent to provide quality financial advice that consumers can trust.
1.6
Methodology
A social constructivist approach that utilises both quantitative and qualitative research
methods is employed to answer the research questions and achieve the objectives of the
thesis. The quantitative information provides much of the descriptive and measurement
data while the qualitative data enables a richer understanding of the complex nature of and
role of trust in personal financial planning.
The research design comprises five main instruments including three questionnaires and
two types of interviews. The questionnaires were administered prior to the interview
process and results from these questionnaires assisted in structuring the interview
questions. The data was collected from three main research groups as follows:
•
Australian consumers who have not accessed financial advice (potential
clients).
•
Australian consumers who have accessed financial advice (clients).
•
Australian Financial Service Licence holders (financial advisers).
A number of different methods of data analysis were applied in order to achieve the study’s
objectives, including descriptive analysis, statistical analysis, content analysis and
triangulation. Quantitative methods incorporated descriptive and statistical analysis using
SPSS for Windows (Version 22) and included frequency distribution, cross-tabulation,
calculation of means, percentage distributions, chi square tests, t-tests and analysis of
variances (ANOVA). Qualitative methods included a four stage content analysis to draw
out the major themes and concepts in the data, utilising a manual method in conjunction
7
Chapter 1: Introduction
with automated data mining via Leximancer software. An overarching qualitative approach
was taken in interpreting and discussing the results through triangulating the data obtained
from the research groups using the various research instruments.
The study also considered the objectivity of respondents by ensuring responses to
questionnaires were provided anonymously, that responses were analysed without
identification of any participant, that no sensitive information was sought and that
participation was voluntary. The study was also approved by the appropriate university
ethics committee.
1.7
Outline of Report
This thesis, as it studies the role of trust in personal financial planning, is divided into eight
chapters and begins with an introduction to the study as provided in the current chapter.
This first chapter introduces the background of the study, the research problem, conceptual
framework and justification for the research. The chapter also introduces the methodology
adopted, the scope of the study and key assumptions and definitions used in the study.
The first chapter is followed by Chapter 2 which provides further background to the study
and places the study in the context of financial planning in Australia while considering the
impact of domestic and global events that are relevant to the study. Following from
Chapter 2 is the literature review in Chapter 3 which discusses the complex notion of trust,
difficulties in defining trust and the different trust theories that apply to the study. It also
examines the antecedents of trust outlined by the literature and provides a summary of the
conceptual and theoretical dimensions of the literature.
Chapter 4 includes the conceptual framework of the study where the main themes and
theories underlying the research are organised with a presentation of the research questions
to guide the analysis of the research. The methodology used to collect the data, including
sample groups and design of quantitative and qualitative research instruments as well as
methods employed to analyse the research is presented in Chapter 5.
The results obtained from utilising the methods presented in Chapter 5 are presented in
Chapter 6. A discussion of the results arising from the research is undertaken in Chapter 7
where the research questions are answered. The thesis concludes in Chapter 8 with a
summary of the research processes and contributions made by the findings, along with
implications for policy, implications for various stakeholders and recommendations for
8
Chapter 1: Introduction
future research. A final concluding statement completes the chapter. Following the eight
chapters of the thesis are the list of references and appendices that are referred to
throughout the thesis.
1.8
Delimitations of Scope
The scope of this study is limited to the role of trust in personal financial planning in the
Australian context. Although the findings may also be relevant to other vocations,
professions and contexts, there may be some limitations as to the generality of the findings.
It was not feasible to include these other occupations and contexts in this study due to the
sheer quantity of data that would have been involved in addition to budgetary constraints.
A domestic study was thus seen to be an appropriate choice for the researcher, especially as
the Australian financial planning environment was experiencing significant change and
development with the collapse of prominent financial product and services providers,
ongoing regulatory reform, significant public debate about perceived conflicts of interest
and issues surrounding self-regulation.
Furthermore, although there are many other areas of study in personal financial planning,
worthy of further research, this study of trust was selected due its central role in the
development of personal financial planning as a profession and in meeting social and
economic responsibilities. While technical competence, interpersonal skills and ethical
behaviour were all found to be influencing factors for the role of trust, it is not the intention
of this study to evaluate the individual or collective performance of personal financial
planners.
Although the study included both clients and potential clients, it was not viable to include
the entire Australian population in the data collection process – hence the sampling frame
was limited to 2,511 clients and potential clients, small cross-section of the population
found to best represent the demographics of the Australian population. Similarly, the
financial advisers included in the sample were limited to a selection of 1,700 advisers
holding an Australian Financial Services Licence (AFSL) or being an authorised
representative of an AFSL holder. For convenience purposes, interviews for all sample
groups were chosen from the questionnaire respondents who indicated their interest
accordingly.
9
Chapter 1: Introduction
1.9
Key Assumptions and Definitions
Key assumptions and definitions are clarified in this section of the thesis to aid in
understanding their application to the study of the role of trust in personal financial
planning.
The terms ‘financial adviser’ and ‘financial planner’ are used interchangeably throughout
the thesis, as they are within the industry and as per the prorogued Corporations
Amendment (Simple Corporate Bonds and Other Measures) Bill 2013: Amendments
relating to the use of the expressions “financial planner” and “financial adviser”
(Commonwealth of Australia, 2013) which enshrine the terms ‘financial adviser’ and
‘financial planner’ in law. A financial adviser/planner for these purposes is someone who
holds an Australian Financial Service Licence (AFSL) or who is authorised to act on behalf
of an AFSL holder to provide personal financial advice on financial products.
The term ‘financial planning’ in this study is taken to have the same meaning as that
defined by the Financial Planning Standards Board (FPSB, 2006) in the Financial Planning
Association (FPA) Code of Professional Conduct (FPA, 2013a) as follows:
Financial Planning:
Financial planning is the process of developing strategies to assist
clients in managing their financial affairs to meet life goals, which
involves reviewing all relevant aspects of a client’s situation across a
large breadth of financial planning activities, including interrelationships among often conflicting objectives.
(FPSB, 2006 in FPA, 2013a)
The term ‘trust’ is central to this study and thus requires a suitable definition. The
definitions and constructs of trust as identified in the literature review in Chapter 3 assisted
in deriving a definition for ‘trust’ appropriate to the client-adviser relationship in the
context of financial planning. The following definition of ‘trust’ applies for the purposes of
this study:
10
Chapter 1: Introduction
Trust:
Trust is the expectation that the adviser (‘trustee’) can be relied on to
act honestly, competently and in the best interests of the client
(‘trustor’) and thereby reduce the trustor’s risks of loss.
In addition to these definitions, a List of Abbreviated Terms used in this study is provided
at the front of the thesis.
1.10 Conclusion
This chapter has introduced and provided a background to the thesis, and presented the
research problem and main research questions to be addressed by the study. A summary of
the conceptual framework incorporating a combination of trust theories to guide these
research questions was also provided.
The chapter has outlined the importance and significance of the role of trust in personal
financial planning in achieving the economic and social objectives in Australia through
widening participation and high quality advice. It has also highlighted recent changes in the
financial advice environment and public debate that point to the importance of client trust
in the engagement and delivery of financial advice.
Furthermore, the chapter has outlined the social constructionist approach to the research
and provided a summary of the qualitative and quantitative methods adopted to test the
research questions on the role of trust in personal financial planning. It has also identified
the scope of the study and summarized the key assumptions and definitions that apply in
the thesis.
The following chapter describes the context of the study in more detail and considers the
economic, legal, educational, professional and ethical aspects of the financial planning
environment and the various stakeholders who can affect or are affected by trust in
personal financial planning.
11
Chapter 2: The Context of the Study
Chapter 2: THE CONTEXT OF THE STUDY
2.1
Introduction
The previous chapter introduced the objectives and significance of the research. This
chapter examines trust in the context of the financial planning environment, considering
the professional, ethical and legal aspects. The impact of external economic events in
addition to current issues such as remuneration structures and the future of financial advice
reform are also discussed before following with a review of the literature on trust in the
next chapter.
2.2
Why financial planning?
In Australia, the collapse of financial product and services providers such as Westpoint in
2006, Opes Prime in 2008 and more recently Storm Financial, has resulted in significant
negative publicity on the use of commission-based payments and the perceived integrity of
financial planners and advisers. In February 2009, the Parliamentary Joint Committee on
Corporations and Financial Services resolved to inquire into and report on the issues
associated with these collapses with the resulting Ripoll Report (2009) giving credibility to
claims that commission arrangements were partly responsible, and that ‘the regulation of
financial services providers has been designed to maximise market efficiency, with
minimal regulatory intervention to protect investors’ (Commonwealth of Australia, 2009,
p.7).
The report made several recommendations which call for more rigorous financial planning
standards and regulatory regimes (see Appendix A1 for a summary of recommendations).
This has provided the impetus for the professional bodies and government to initiate
reform in the financial planning industry. At the heart of this reform is the banning of
commission based payments (which includes an implicit assumption about trust and ethical
behaviour). Many believe that this regulatory intervention is a step in the right direction,
however at the same time it is also recognised that history has proven that no amount of
regulation will stop some people engaging in activities that are not in the interest of society
(Gaffikin, 2005).
12
Chapter 2: The Context of the Study
Although the Ripoll Report has linked commission based payments to the collapses of
companies in the financial planning industry and to investor losses, there is little empirical
research to support claims of how this may affect the client-adviser relationship.
Central to the client-adviser relationship is trust. Anecdotal reports, in both the public arena
and in industry media releases since the GFC have indicated a loss of trust in financial
advice. In addition, the financial planning industry itself has made claims that the events
surrounding corporate collapses and the GFC has meant that advisers are going to have to
re-establish and nurture clients who may be ‘cynical and mistrustful’ (Constantine, 2009).
However, there has been little academic research to substantiate these claims. As a result,
the focus of this thesis is to examine the characteristics of trust in the client-adviser
relationship; to analyse the various factors which may influence the trust between client
and adviser and to examine if claims of a loss of trust are supported by clients. Such
research will have implications for policy makers, educators, industry groups, the
developing profession, consumers and the society at large.
2.3
Policy aspects
This study on the role of trust in financial planning has a number of policy aspects to be
considered as old policies are reviewed and new policies developed to protect consumers
from receiving poor quality financial advice. The government has led policy in financial
planning in Australia through the legislative environment with the main professional
bodies unable to adopt a consistent self-regulated framework on their own.
Legislative reform in this area has included the implementation of a range of Acts (see
Appendix A2). The Financial Services Reform Act 2001 (Cth) (FSRA) was the first of the
more comprehensive reforms for the financial planning industry and made a major
contribution to improving the integrity of the industry by stipulating licence requirements,
specific training standards and requiring that financial planners properly disclose fees and
commissions. The FSRA made extensive changes to the Corporations Act 2001 (Cth) and
came into effect on 11 March 2002, with a two year transitional period ending 10 March
2004. The FSRA meant that practitioners carrying on a financial services business after 10
March 2004 must hold an Australian Financial Services Licence (AFSL) or be an
authorised representative of a licence holder. The AFSL is obtained from the Australian
Securities and Investment Commission (ASIC) and is specific to each applicant, outlining
transactions that can be undertaken by the licensee or to those who are authorised by that
13
Chapter 2: The Context of the Study
particular licence. In addition, ASIC also issued corresponding Regulatory Guides that
assisted in interpreting the legislation and gave practical guidance to AFSL holders and
authorised representatives.
While the implementation of the Financial Services Reform Act 2001 (FSRA) in 2004 was
seen as a positive for the financial planning industry in Australia, the following high profile
corporate collapses and GFC prompted the Parliamentary Joint Committee Inquiry on
Corporations and Financial Services in 2009. The report (known as the Ripoll Report) from
this inquiry made several recommendations (outlined in Appendix A1) calling for more
rigorous financial planning standards and regulatory regimes (Commonwealth of Australia,
2009). This led to more comprehensive policy reform in 2012 through the Future of
Financial Advice (FOFA) to improve the trust and confidence of Australian retail investors
and ensure that affordable, high quality financial advice is available (Commonwealth of
Australia, 2015a).
The Future of Financial Advice reform (FOFA) was implemented through two separate but
related Acts which are the Corporations Amendment (Future of Financial Advice) Act 2012
(Cth) and Corporations Amendment (Further Future of Financial Advice Measures) Act
2012 (Cth) and became mandatory on 1 July 2013 (and was voluntary from 1 July 2012).
These acts included a fiduciary ‘best interests’ duty, a ban on conflicted forms of
remuneration (such as commission payments), opt-in requirements, annual fee disclosures
and changes to ASIC’s licensing and banning powers.
However, since the change of Government in 2013, a raft of changes to FOFA has been
proposed but there have been considerable difficulties in having these being passed into
legislation through the Senate. The Corporations Amendment (Streamlining of Future of
Financial Advice) Bill 2014 (Commonwealth of Australia, 2014b) was proposed to reduce
compliance costs and make advice more affordable for consumers but was disallowed by
the Senate on 19 November 2014. A further amendment, the Corporations Amendment
(Statements of Advice) Regulation 2014 (Commonwealth of Australia, 2014c) dated 14
September 2014 was repealed on 16 December 2014 by the Corporations (Statements of
Advice) Repeal Regulation 2014 (Commonwealth of Australia, 2014d).
The disallowance of the amended FOFA regulations in the Corporations Amendment
(Streamlining of Future of Financial Advice) Bill 2014 (Commonwealth of Australia,
2014b) was described as ‘catastrophic’ by Mark Rantall, the chief executive of the
14
Chapter 2: The Context of the Study
Financial Planning Association of Australia, who claimed that it would cause uncertainty
for financial planners and their clients as well as unnecessary compliance obligations that
the amendments to FOFA had addressed (Prakash, 2014). The amendments had sought to
soften the more controversial aspects of the original FOFA legislation that big banks had
been lobbying for by removing the ‘catch all’ provision with regards to best interest
obligations; removing renewal notice obligations; removing the requirement to provide
yearly fee disclosure statements to certain clients; and by providing an exemption on the
ban on conflicted remuneration for some benefits that relate to general advice. A number of
industry groups and academics were strongly opposed to the amendments, and lodged their
concerns specifically around consumer protection to the Treasury through the exposure
draft submission process during a three-week consultation period (Commonwealth of
Australia, 2015b). Even a ‘Save our FOFA’ group was established to campaign for fair
financial advice laws (Save our FOFA, 2015).
Although the amendments were proposed as part of the Federal Government’s mission to
reduce red tape (Frydenberg, 2014), it seems that the disallowance in fact had the opposite
effect, causing confusion and instability in the financial planning arena (Vrisakis, 2014).
Mixed messages were sent to financial advisers, many of whom were operating on the
basis that the amendments would become law (ASIC, 2014; Walker, 2014). The unchanged
legislation may retain greater consumer protection but the constant media attention given to
the amendments, the subsequent disallowance and possibility of further reform undermines
the original intention of FOFA by driving consumers to procrastinate seeking advice until
the issues have been firmly resolved (Spits, 2014). At a time that additional financial
planning scandals involving the Commonwealth Bank, Macquarie Private Wealth and
Timbercorp have come to the fore, the end result has been to diminish confidence in the
financial planning sector (Ferguson, 2014), adding to the significant cost to clients of not
engaging or trusting financial advice (Spits, 2014).
Despite the issues surrounding FOFA reform, there has still been little empirical research
conducted that asks consumers themselves what needs to be done to increase trust in
financial planning and to seek out quality advice. Further research is needed in order to
guide policy in this area and settle current debate. Furthermore, it has been suggested that
the only way to address the poor reputation of the Australian financial planning industry is
to raise educational, professional and ethical standards for financial planners (Walker,
2014). Although the initial motivation for the study to improve trust in financial planning
15
Chapter 2: The Context of the Study
began prior to FOFA reform, it is evident from the above discussion that there are ongoing
issues affecting trust in personal financial planning. This study addresses such issues and
may assist with the design and implementation of policy involving financial planning in
Australia.
2.4
Educational aspects
One of the main drivers behind the professionalisation process has been education. The
Financial Planning Association of Australia (FPA) was initially responsible for ensuring
industry members were properly educated through the development of the Certified
Financial Planner (CFP) education course in 1997 (Cowen, Blair and Taylor, 2006). The
FPA also commissioned the Birkett Report in 1996 (Birkett, 1996) that outlined knowledge
and skill competencies required of financial planners to undertake comprehensive financial
planning which assisted in designing educational programs for personal financial planning.
CPA Australia and the Institute of Chartered Accountants in Australia (ICAA) have since
both developed their own specialist financial planning designations and CPA Australia also
offers its own self-administered educational programs. There are also a number of
accredited programs in Australia on offer from private providers (such as Kaplan Higher
Education Pty Ltd) as well as universities (for example, Deakin University, Griffith
University, University of New South Wales, University of the Sunshine Coast, University
of Western Sydney) . Australian Securities and Investment Commission (ASIC) approved
courses (up until 24 September 2012) were listed in the ASIC Training Register (ASIC,
2012a) which is currently under review. In addition, in 2010 the FPA announced a
requirement that all new FPA members hold an approved degree (FPA, 2010).
Minimum education standards along with skills and knowledge requirements at two tier
levels (see Appendix A3) have been stipulated by ASIC through Regulatory Guide 146
(ASIC, 2012b), however this is now under review by ASIC to explore options pending
final policy positions following from Consultation Papers (CP) 153, 212 and 215 whereby
the regulator outlined proposals to lift minimum education requirements and cease
maintenance of the training register. Submissions lodged with ASIC generally agreed that
standards of education needed to be lifted but also that an independent body was required
to maintain a national industry-wide training register (AFA, 2013; CPA Australia and
ICAA, 2013; FPA, 2013c). The then Assistant Treasurer, Senator Arthur Sinodinos
signaled that planner educations and qualifications were a matter for the industry rather
16
Chapter 2: The Context of the Study
than for the Government to impose requirements (Taylor, 2013). This has placed
considerable pressure on the relevant professional bodies to take responsibility for the
education of financial planners.
Furthermore, in response to a 2013 Senate Inquiry into the performance of ASIC, the
Government announced that it would work on the establishment of an ASIC Register of
Financial Advisers and carefully consider the Senate Committee’s recommendations in
relation to a national exam, continuous professional development requirements and the
requirement for financial advisers to hold a relevant degree qualification (Commonwealth
of Australia, 2014f). This was coupled with the parliamentary joint committee on
corporations and financial services inquiring into proposals to lift the professional, ethical
and education standards in the financial services industry, commencing July 2014. With
regards to qualifications and competence, the inquiry acknowledged that under the
Corporations Act 2001, Australian Financial Service Licence (AFSL) holders were
required to ‘…maintain competence to provide the financial services covered by their
licence (s912A(1)(e)); and ensure that their representatives are adequately trained and
competent to provide those financial services (s912A(1)(f))’ (Commonwealth of Australia,
2014e, p. 36).
The parliamentary joint committee (PJC) received thirty-nine submissions for the inquiry
into proposals to lift the professional, ethical and education standards in the financial
services industry; including submissions from the Accounting Professional and Ethical
Standards Board (APESB), academics, individuals, financial planning organisations, and
various professional and industry bodies. Evidence presented to the committee during the
inquiry indicated concern that the regulatory guides (specifically regulatory guide 146, or
RG 146) do not deliver appropriate standards and that approved training courses vary
significantly in terms of content and quality. ASIC also submitted that there was ‘no
consistent measure of financial adviser competence’ (ibid, p. 37). Other submissions
suggested that a degree qualification (level seven of the Australian Qualifications
Framework) be required for financial advisers providing personal, more complex Tier 1
advice and the accounting professional bodies recommended ‘a comprehensive review to
identify the knowledge and skills required to become a holistic financial adviser' (p.41). It
was suggested this review be a basis for a new curriculum.
After reviewing the submissions, the parliamentary joint committee (PJC) recommended
17
Chapter 2: The Context of the Study
the education requirements as set out in Table 2-1 be met in order to become a registered
financial adviser able to provide personal advice on Tier 1 products.
Table 2-1 Education requirements recommended by PJC inquiry into proposals to lift
the professional, ethical and education standards in the financial services industry
Education requirement
A degree qualification
Professional year
National Registration Exam
•
•
•
•
•
•
•
•
•
Details
Must be at Australian Qualifications Framework (AQF) level 7
Approved by a new independent body, the Finance
Professionals’ Education Council (FPEC)
The FPEC to set the core and sector specific requirements.
Structured mentoring program
Includes the competent and ethical application of knowledge
and professional behaviour
Must satisfactorily pass structured assessment component
At the end of the professional year
Set by the Finance Professionals' Education Council (FPEC)
Administered by an independent invigilator
Source: Commonwealth of Australia, 2014e
The PJC noted the existence of the Financial Planning Education Council established by
the FPA in 2012 and considered it to be a useful model, being controlled by a professional
body and industry funded with no cost to the Government. As a result, the PJC
recommended that a similar independent Finance Professionals' Education Council be
established, and on 12 December 2014, in a supplementary submission, the FPA ‘gifted’
the Financial Planning Education Council to the industry to become the new independent
regulatory body, the Finance Professionals’ Education Council (FPEC) from 1 July, 2015.
The PJC recommended the FPEC include members from each professional association; a
number of academics with relevant expertise; at least one consumer advocate, and an
ethicist (Commonwealth of Australia, 2014e).
A full list of the recommendations made by the PJC inquiry into proposals to lift the
professional, ethical and education standards in the financial services industry can be found
in Appendix A4. In particular, the recommendations to increase the minimum education
requirements have been well received by a range of stakeholders including ASIC, financial
institutions, financial associations and politicians from both sides of the Senate (Christie,
2015; Klan, 2014; O’Donoghue, 2015). Evidence from the PJC highlighted that one of the
reasons for the lack of confidence in the financial planning industry has been the low
educational entry requirements that in some cases could be completed in as little as a few
days.
Through its examination of the results, this thesis will make a contribution to the future
education of financial advisers and will provide useful information for curriculum design
18
Chapter 2: The Context of the Study
and for determining the skills to be assessed in the proposed professional year. The
contribution to education will also serve to increase trust in personal financial planning and
provide consumers with confidence that financial advisers in Australia provide quality
advice that meets high professional standards.
2.5
Professional aspects
It is estimated that there are approximately 54,000 financial planners in Australia,
comprised of 40,000 authorised representatives of AFSL holders and 14,000 employees of
licence holders but only about 20% of these financial planners are members of professional
bodies (Collett, 2014). In Australia, there are three main professional bodies that have
been involved in developing financial planning as a profession – the Financial Planning
Association of Australia (FPA) and accounting bodies CPA Australia and the Institute of
Chartered Accountants in Australia (ICAA). The FPA is recognised as the peak
professional body for financial planning with almost all of its 10,000 members being
practising financial planners.
Some financial planners are members of other professional bodies like accounting bodies
CPA Australia and the ICAA and others are members of small industry groups and
associations that support financial planners, as outlined in Table 2-2 below. In addition,
there are some financial planners who are members of more than one professional body or
association.
Table 2-2 Professional bodies supporting financial planning
Name of Body
Association for Financial Professionals
Association of Financial Advisers
Association of Superannuation Funds of Australia
Australian and New Zealand Institute of Insurance and Finance
Australian Financial Markets Association
Australian Institute of Company Directors
Australian Institute of Company Directors
CPA Australia Ltd
Finance Brokers Association of Australia
Financial Planning Association of Australia
Financial Services Institute of Australasia
Institute of Chartered Accountants Australia (since amalgamated with the
New Zealand Institute of Chartered Accountants to become Chartered
Accountants Australia and New Zealand)
Securities Institute of Australia
Superannuation Professionals Association of Australia
The Institute of Public Accountants
Abbreviation
AFP
AFA
ASFA
ANZIIF
AFMA
AICD
AICD
CPA Australia
FBAA
FPA
FINSIA
ICAA ( CA)
SIA
SPAA
IPA
Although the FPA is recognised as the peak professional body for financial planning, the
19
Chapter 2: The Context of the Study
accounting profession has also made a substantial impact on the development of financial
planning as a profession. The FPA, CPA Australia and the ICAA have all supported
financial planners through education, training, technical advice, high ethical standards and
advocacy. With regards to professionalising the financial planning industry, the accounting
bodies, with a traditional focus on independence attempted early on to ensure that financial
planners adopt a fee for service arrangement (Australian Society of Certified Practising
Accountants and The Institute of Chartered Accountants in Australia, 2005: APS 12–
Statement of Financial Advisory Service Standards, operative 1 November 2005) with the
ICAA stating:
‘the introduction of these standards enables the profession to uphold the public
interest by ensuring the highest quality of advice and transparency’ (ICAA Media
Release, 2006, n.p.).
Although this was the first step for financial planning in gaining acceptance as a
profession, such standards needed to be implemented by all financial planners, not just
those who were members of the accounting bodies implementing the standard. In 2005, it
seemed too radical to even suggest that financial institutions might volunteer to cease
distributing commissions and due to the traditional nature and structure of the industry it
was difficult to have it considered as an option by many who had been in the industry for a
long time. However, it remained a highly contentious issue, with an ICAA commissioned
paper proposing the removal of ‘product-based’ remuneration models, and the adoption of
a fee for service model. Brown (2007) suggested this type of reform would help clients to
trust and seek out advice. The ICAA paper also argued that another trademark of a
profession is to develop a culture for assisting the disadvantaged in the community. This
was also supported by the FPA (Mace, 2007).
Pressure continued to be placed on the financial planning industry to move from an
occupation operating with a sales-based culture, to a profession exercising independent
judgement in the best interests of clients. This created much discussion surrounding the
criteria for financial planning to become a profession:
‘…ultimately the issue of professionalism can be demonstrated by whether advice
is always provided in the client’s best interests...’ (Viskovic, 2008, p. 4)
‘…the criteria for determining if an occupation is a profession come down to
20
Chapter 2: The Context of the Study
whether the broader community accepts it as such’ (McMaster, cited in Burgess,
2007, p. 98).
The concept of a profession goes back to ancient Greece with the formation of professional
guilds and doctors have led the way by requiring members to take the Hippocratic Oath.
Hence, the concept of the profession exists to serve the public interest and not just an
individual’s ambition (Daykin, 2004). To be recognised as professionals, financial
advisers need to demonstrate their concern for the consumer and be seen to be serving the
public interest. This is what distinguishes a profession from an occupation. Other
distinguishing features (as suggested by Daykin, 2004, p. 12) might include:
•
Advanced educational requirements, usually above first degree level;
•
Accreditation by a professional body;
•
A high degree of integrity in exercising professional judgement;
•
A code of professional conduct, including the centrality of ethical standards;
•
Responsibility for competence and standards;
•
Continuing professional development
•
A discipline process;
•
A common voice to participate in public debate.
In guiding the journey for financial planning becoming a profession, the main professional
bodies have taken a number of steps towards achieving several of the distinguishing
features listed above. However, the industry still has a long way to go if it is to realise the
benefits of being a true profession. The first steps toward education requirements was in
1997, when the FPA introduced the CFP designation and later in 2010 when the FPA set a
requirement for all new FPA members to have an undergraduate degree as a minimum
qualification by July 2013. However, as mentioned earlier, only around 20% of practising
financial planners are members of the FPA and hence the remaining practitioners are not
bound by the FPA’s education requirements. To that end, the Government (through
legislation regulated by ASIC) rather than a ‘profession’ has mainly been responsible for
setting minimum standards in regards to education, competence and standards (outlined in
section 2.4 of this chapter). The same can be said for discipline processes for unacceptable
behaviour where it is expected that ASIC will investigate further and impose any sanctions.
Furthermore, it has been the Government that has led recent proposals to lift the
professional, ethical and education standards in the financial services industry
21
Chapter 2: The Context of the Study
(Commonwealth of Australia, 2014e). Recommendations outlined by the PJC (see
Appendix A4) are now pointing the way for a new overarching independent professional
body, the FPEC, to oversee these matters for all financial planners who must be registered
with the FPEC in order to provide advice. Recommendations also related to the
requirement for continuing professional development of financial planners; for training to
incorporate the application of ethical and professional skills, and for all professional
associations in the financial services industry to establish approved codes of conduct and
ethical codes (it is noted that the three main professional bodies already have this in place).
If implemented appropriately, these PJC recommendations could certainly be the biggest
step towards professionalisation of the industry. This in turn will do much to raise the
quality of advice and improve levels of consumer confidence and trust in financial advice.
2.6
Ethical aspects
Ethical aspects of the financial advice industry are part of the broader approach to
professionalisation (as discussed in the previous section), with the ultimate goal to increase
consumer trust in financial advisers. In its report on the Inquiry into proposals to lift the
professional, ethical and education standards in the financial services industry, the PJC
(Commonwealth, 2014e) acknowledged that ‘while there are many financial advisers who
operate to very high ethical standards… there has been a significant minority of financial
advisers being driven by self-interest’ (p. 65).
The FPA, CPA Australia and ICAA all have a code of ethics imposed on its members but
as the codes apply to members only, there is a significant need to adopt a code of ethics
that applies to all financial adviser practitioners if the industry wants to achieve consistent
ethical behaviour. However, it is recognised that a code of ethics on its own is not
sufficient in achieving ethical behaviour as it needs to be ‘promoted, implemented and
enforced…Ethical rules do not make ethical people’ (Brien, 1998, p. 392).
Ethical principles and standards included in codes of ethics are usually codified and sit
above minimum legal and regulatory requirements (Smith, 2009b). Most ethical codes
usually include principles relating to serving the public interest, integrity, objectivity,
fairness, independence, professional behaviour and competence, all of which are included
in the FPA Code of Ethics (FPA, 2013a) and the CPA Australia/ICAA Financial Planning
Services Standard (APSB, 2012: APES 230) , and with the FPA including a principal
known as ‘client first’. Francis (2000) suggests that codes of ethics should also try to
22
Chapter 2: The Context of the Study
achieve the highest of Kohlberg’s categories of moral development, which are explained
further in the following chapter and used to examine the level of moral development of
financial advisers in this thesis.
Ethics in financial planning is part of a complex system involving regulation, professional
bodies, education, financial advice organisations, compliance officers and individual
financial advisers. For financial advisers to consistently demonstrate ethical behaviour, all
parts of the system need to complement one another. To address these concerns, this thesis
examines the relationship between trust and ethical behaviour.
2.7
Stakeholders
This section identifies the numerous stakeholders who can affect or are affected by trust in
personal financial planning. Accordingly, these stakeholders may be groups or individuals,
including:
•
Clients who use financial planning services;
•
Potential clients of those providing financial planning services;
•
Financial planners/advisers providing financial advice;
•
Future financial planners/advisers;
•
Organisations employing financial planners/advisers ;
•
Legislators and regulatory bodies such as the Federal Government and ASIC;
•
Professional bodies representing financial planners;
•
Educators of financial planning courses and programs;
•
Students of financial planning courses and programs;
•
The Australian public at large with an interest in the provision of accessible,
affordable, high quality financial advice.
Each stakeholder is considered throughout the study in addressing the research questions as
the role of trust in personal financial planning is investigated. Further detail on stakeholder
consultation in this thesis is found in Chapter 5: Methodology, beginning on page 63.
2.8
Summary
This chapter has placed the study in the context of financial planning in Australia and
presented some of the current issues facing financial planners in terms of recent events,
policy, education and ethical development. It has also outlined the professional
23
Chapter 2: The Context of the Study
environment of financial planning and demonstrated how contextual issues relate to the
role of trust in personal financial planning which is seen as central to financial planning
becoming recognised as a fully-fledged profession.
The next chapter explores the complex nature of trust and a discussion of the literature
relating to the different trust theories and trust antecedents that apply to the study.
24
Chapter 3: Literature Review
Chapter 3: LITERATURE REVIEW
3.1
Introduction
The previous chapters have introduced the background to the thesis, its objectives and
significance, and explained the context of the study in the financial planning environment.
The study explores the role of trust in personal financial planning in the last decade,
particularly since the GFC in 2009 which was blamed for loss of the public’s trust in the
financial services industry (Collett, 2009). Furthermore, the Parliamentary Joint Committee
(PJC) on Corporations and Financial Services highlighted the perceived sales-advice
conflict in personal financial planning (PFP) in the Ripoll Report (Commonwealth of
Australia, 2009) but there still exists little empirical research to support this perception
with further research on trust in the client-adviser relationship required. As a result, the
theoretical basis for this research concerns the characteristics of trust and the factors
influencing the trust between client and adviser.
This chapter begins by discussing the complex notion of trust, and the difficulties in
defining it. This is followed by a discussion of the literature relating to the different trust
theories that apply to the study. This literature on trust is from the domains of psychology,
sociology, marketing and management with little research available on trust in personal
financial planning. Section 3.8 on page 40 elaborates on trust in the context of personal
financial planning.
The chapter then examines the antecedents of trust applicable to the study, followed by the
sources of trust at four distinct levels. The impact of ethical behaviour, sales and
remuneration and soft skills is also discussed. The chapter ends with a summary of the
conceptual and theoretical dimensions of the literature and uncovers the research gaps that
are to be addressed by the research questions in this study.
3.2
Defining Trust
Although ‘trust’ seems like a relatively simple term, it has been studied by a number of
experts in different disciplines, with no overall consensus on a definition of the term.
25
Chapter 3: Literature Review
Nooteboom (2002, p.18) offers a simple definition of trust as ‘an expectation that things or
people will not fail us’ while the Oxford Dictionary (which claims on its book cover to be
‘world’s most trusted dictionary’) defines trust as ‘firm belief in the reliability, truth,
ability, or strength of someone or something’ (ed. Soanes, 2002, p. 984). To put this in the
context of financial advice, the keywords are reliability (that the adviser will do what they
say they will do); truth (that the adviser is honest about products and advice) and ability
(that the adviser has the competence and skill to provide advice).
There are a number of objects in which one can have trust. According to Nooteboom
(2002, p. 192), this can include people (e.g. advisers), higher powers, forces of nature,
institutions (e.g. industry associations, legislation, professional bodies), and organisations.
Of all of these, Nooteboom claims trust in people (also referred to as behavioural trust) is
the most complicated.
The marketing literature identifies trust as a key aspect of business relationships (Aurier
and N’Goala, 2010; Eisingerich and Bell, 2008; Johnson and Grayson, 2005; Morgan and
Hunt, 1994; Mouzas, Henneberg and Naude, 2007). Mouzas, Henneberg and Naude (2007,
p. 1016) found that ‘one of the particularities of trust is its inherent anthropocentricity’ and
Sheppard and Sherman (1998, p. 423) argued that trust is linked with the acceptance of
‘risks associated with the type and depth of the interdependence inherent in a given
relationship’.
In a professional-client relationship, it is argued that trust is even more important because
of the ‘competence gap’ that exists between the client and the professional (Brien, 1998;
Lewis and Weigert, 1985; Miranda and Klement, 2009; Parsons, 1972) due to complexity
of subject matter and education requirements. Furthermore, ‘fiduciary relationships
demand that the dependent party trust in the competence and integrity of the professional
or official in accordance with the highest ethical standards’ (Lewis and Weigert, 1985, p.
978).
An extensive literature search identified a number of definitions of trust constructs across a
range of contexts. A summary of these can be found in Appendix B1: Definitions of trust
and trust constructs found in the literature. Upon further examination of these trust
constructs and definitions, some common characteristics of trust emerge such as:
26
Chapter 3: Literature Review
•
Expectation
•
Risk
•
Belief/faith
•
Confidence
•
Reliability/Dependability
•
Action or Behaviour
•
Ability/Competence
•
Honesty/Integrity
In addition, the trust definitions in Appendix B1 demonstrate how trust can be viewed as
cognitive, affective (Sheth and Sobel 2002; Guenzi and Georges 2010) or both cognitive
and affective (Johnson & Grayson 1998; Johnson & Grayson in Swartz & Iacobucci (Eds)
2000; Albaum and Young 2003; Johnson and Grayson 2005).
The definitions and constructs of trust identified above can be adapted to provide a
definition appropriate to the client-adviser relationship in the context of financial planning.
For the purposes of this research, the definition of ‘trust’ applies to the client as ‘trustor’
with the financial adviser the ‘trustee’. Hence, ‘trust’ is defined in this thesis as follows:
Trust is the expectation that the adviser (‘trustee’) can be relied on to act honestly,
competently and in the best interests of the client (‘trustor’) and thereby reduce the
trustor’s risks of loss.
3.3
Trust in theory
Due to the complex nature of trust and its central role in a client-adviser relationship, it is
necessary to adapt and integrate trust theories from social psychology, sociology,
management and marketing literature. A review of these theories follows.
Social Psychology
Social psychology is defined as ‘the study of behavioural dependence and interdependence
among individuals’ (Zajonc, 1968, p. 5). Thus, it involves behavioural interdependence
among individuals in a relationship. Interpersonal trust is an important variable affecting
relationships at all levels, whether it be between governments, buyers and sellers, doctors and
patients, parents and children, and so on (Rotter 1980).
27
Chapter 3: Literature Review
Zajonc (1980) identifies the importance of both affect and cognition in the development of
trust. Zajonc (1980) theorised that affect (emotions such as empathy, friendship, love) and
cognition are ‘under the control of separate and partially independent systems that can
influence each other in a variety of ways, and that both constitute independent sources of
effects in information processing’ (Zajonc, 1980, p.151). Others believe that affect and
cognition are intertwined (Lewis and Weigert, 1985; Russell and Woudzia, 1986;
Weisinger, 1998, Nooteboom, 2002; Mouzas, Henneberg and Naude, 2007).
It has been established that interpersonal trust is based on both affect and cognition 1 (Lewis
and Weigert, 1985; McAllister, 1995; Nooteboom, 2002; Johnson and Grayson, 2005;
Eisingerich and Bell, 2008; Aurier and N’Goala, 2010). An interpersonal trust scale has
been developed in social psychology and bases interpersonal trust on three major factors
being dependability, predictability and faith (Rempel, Holmes and Zanna, 1985).
Concepts of cognitive-based trust (thinking) versus affect-based trust (feeling) are further
developed in the literature. Cognition based trust is primarily concerned with competence,
knowledge, reliability (predictability) and dependability (Johnson-George and Swap, 1982;
Rempel, Holmes and Zanna, 1985; Rousseau et al, 1998; Johnson and Grayson, 2005) while
affect based trust relates to personal care, emotional bonds, security and benevolence (Lewis
& Weigert, 1985; Rempel, Holmes and Zanna, 1985; Johnson and Grayson, 2005).
Sociology
It has been argued that trust must be examined as a wider social reality and incorporate the
contemporary challenges presented by society (Lewis and Weigert, 1985; Johnson and
Grayson, 2005). Such examination can be assisted by the use of Aristotle’s paradigm
(theory) of causality (Falcon, 2011). This is adapted by Nooteboom’s taxonomy of objects of
behavioural trust in Table 3-1 below.
1
In the marketing literature affect and cognition can be measured as functional quality and technical quality respectively.
28
Chapter 3: Literature Review
Table 3-1 Elements of behavioural trust
Forms of trust
Object of trust
Type of cause (Aristotle)
Behavioural trust
An actor
Efficient cause
Material trust
Means, inputs
Material cause
Competence trust
Ability, skills, knowledge,
technological literacy, language.
Formal cause
Intentional trust
Dedication trust
Benevolence trust
(goodwill trust)
Aims, intentions
Dedication/care
Benevolence, goodwill , lack of
opportunism
Final cause
Conditional trust
Outside enablers, constraints
Conditional cause
Exemplar trust
Role models
Exemplary cause
Informational trust
Honesty trust
Information
Truthfulness
All causes
Source: Nooteboom, 2002, p. 193
The taxonomy outlines multiple forms and causes of trust which can be applied to the
context of personal financial planning. The types of causes of trust include efficient cause
(agency), material cause (inputs), formal cause (knowledge, skills, competence), final cause
(goals of individual advisers), conditional cause (external factors), and exemplary cause
(rules, procedures, regulatory guides, codes of ethics). Such causes can also be categorised
into individual causes (knowledge, competence, skills, commitment, care, motivation,
opportunism, and moral judgement); organisational causes (organisation structure, working
conditions, remuneration, incentives, training, technology, culture, rules and procedures,
codes of ethics, reputation), and external causes (regulation, competition). It is with due
consideration of these many factors that the research questions will be addressed.
Zucker (1986) and Nooteboom (2002) discuss the modes of trust production by making a
distinction between personal characteristics, institutional influences and the process through
which relationships develop. These modes of trust production (as outlined in the table below)
will be further integrated with the theories of cognitive and affect based trust to form a more
comprehensive framework with which to analyse the proposed research.
29
Chapter 3: Literature Review
Table 3-2 Modes of trust production
Mode
‘Intentional’ examples of trust
‘Competence-based’
examples of trust
Characteristics-based trust
Membership of family,
community, culture, religion
Education, Professional
association membership
Institutions-based trust
Rules, procedures, professional
standards, codes of ethics,
organisational culture
Professional standards,
certification
Process-based trust
Loyalty, commitment
Learning by doing
Source: adapted from Zucker, 1986 and Nooteboom, 2002.
While much of the theorising in the literature on trust focuses on interpersonal trust, which
is based on a relationship between two individuals, such as a specific doctor-patient
relationship, or adviser-client relationship, trust more generally can include trust in a
specific, known institution, such as a particular dealer or firm, and trust in a broader social
or professional system (Rousseau et al, 1998; Nooteboom, 2002). This more general trust is
also relevant to this study as this may contribute to the willingness of an individual to form
vulnerable interpersonal relationships with an adviser without extensive knowledge about
their individual personal characteristics. Nooteboom (2002) discusses the modes of trust
production by making a distinction between personal characteristics, institutional
influences and the process through which relationships develop. This study attempts to
integrate these modes of trust production with the theories of cognitive and affect based
trust to form a more comprehensive framework with which to analyse trust. Young (2006,
p. 442) supports such an approach, suggesting that future research ‘investigate the way
components of trust combine’. This comprehensive framework also aims to consider the
various externalities affecting trust that have often been absent from the trust literature.
A theoretical insight from Lewis and Weigert (1985) on the sociology of trust provides that
trust must be examined not only on the psychological and institutional level but also as a
wider social reality that examines the whole of society and the contemporary challenges it
presents. The reason for this is that different cultural and social contexts have different
levels and constructs of trust which shape relationship. This is further supported by
Johnson and Grayson (2005, p. 506), proposing that a ‘potentially fruitful avenue of future
research is the impact of dissatisfying events on the different dimensions of trust’. One
such ‘dissatisfying’ event identified in this study is the GFC. As stated by Rempel, Holmes
and Zanna (1985, p. 111):
30
Chapter 3: Literature Review
In the physical sciences many phenomena are most salient when they are in the process of
change...Therefore the most opportune time to examine trust may occur when stress or
conflict has created a situation where confidence in the other is an issue.
Sharma and Patterson (1999) support the view that trust is especially important in situations
where uncertainty and risk are present and as Luhmann (1988) suggests, trust is only
required where the outcome may make one regret their action. Furthermore, trust researchers
have called for more literature examining trust breaches (Chen, Saparito and Belkin, 2011) as
a means of understanding trust generally.
Marketing
The marketing literature measures trust in the form of customer satisfaction through variables
known as functional quality and technical quality where functional quality (how) relates to
affective trust, and technical quality (what) relates to cognitive trust (Sharma and Patterson
1999). The trust literature also includes many studies examining the antecedents of trust as
outlined in section 3.5 which form the theoretical foundations of investigating the role of
trust in the financial planning environment. When integrated with social psychology, these
antecedents are able to be classified as affect based or cognitive based.
In addition, the marketing literature assists in understanding trust through examining client
commitment as an output of trust.
The marketing literature has led the way in examining the role of trust in the business
environment and Svennson (2004) has referred to trust as being ‘multi-dimensional’ with 22
trust dimensions categorised as 5 ‘main’ dimensions, namely:
•
Dependability/Reliability
•
Honesty
•
Competence
•
Customer orientation
•
Friendliness
The multi-dimensional view of trust is further discussed in section 3.4 on page 32.
Prior research has established a number of antecedents of trust (Morgan and Hunt, 1994;
Mayer, Davis and Schoorman, 1995; McAllister, 1995; Christiansen and DeVaney, 1998;
Sharma and Patterson, 1999; Kirchmajer and Patterson, 2003; Johnson and Grayson, 2005,
31
Chapter 3: Literature Review
Sharpe et al, 2007) which will assist in analysing and explaining the role of trust in
financial planning. Johnson and Grayson (2005) used previous research findings to
formulate a model of antecedents and behavioural consequences of cognitive and affective
trust for service relationships and McAllister (1995) assessed a theoretical model for
studying interpersonal trust in organisations and the factors influencing trust relationships.
Both of these theoretical models have been integrated and adapted in this study to assist in
analysing and explaining the research findings. A more detailed review of the literature on
antecedents of trust is found in section 3.5.
Management
Literature from the management discipline includes organisational studies such as Zucker,
1986; Mayer, Davis and Schoorman 1995; Lewicki and McAllister 1998, and McAllister ,
1995. Zucker, 1986 assists in examining the relationship between qualifications of financial
planners and trust while McAllister, 1995 also examines the importance of ‘reliableness’ in
forming trusting relationships. Furthermore, the management literature contains an argument
that there must first exist cognitive trust before there can be affect based trust (McAllister,
1995; Holmes and Rempel, 1989; Rempel, Holmes and Zanna, 1985). This argument
concurs with the social psychologist Zajonc (1980). However, McAllister, 1995 (pp. 51-52)
states that more theoretical work is required to investigate the factors influencing the
development of cognition based trust. Although there have been some studies that have
attempted to address this gap, there is little empirical research available to address these
factors in the context of personal financial planning.
As opposed to marketing literature, the management literature also found that theory based
predictors of cognition based trust such as reliable role performance and professional
credentials were found not to be associated with cognitive based trust in an organisational
environment amongst peers.
The management literature is also responsible for constructing an integrative model of
organisational trust, now known as the ‘ABI’ model (Mayer, Davis and Schoorman, 1995) of
trust (ABI referring to Ability, Benevolence and Integrity) but this has also been criticised as
being underdeveloped in terms of domain-specific trust (Chen, Saparito and Belkin, 2011).
3.4
A Multidimensional View of Trust
Across disciplines the literature has demonstrated the complex multidimensionality of the
32
Chapter 3: Literature Review
trust construct through the various ways in which trust has empirically been measured and
evaluated (Svensson, 2004). While trust has been acknowledged as a multidimensional
construct (Chun and Campbell, 1974; Corazzini, 1977; Kaplan, 1973; Lewicki, McAllister
and Bies, 1998; Kirchmajer and Patterson, 2003; Lewis and Weigert, 1985; Pellegrini and
Scandura, 2008; Ralston and Chadwick, 2010; Rotter, 1967), some of the trust literature
examines trust as a uni-dimensional construct (Dienesch and Liden, 1986; Graen and
Scandura, 1987; Graen and Uhl-Bien, 1995).
Svennson (2004, p. 473) attempted to provide an overview of the multidimensional
construct of trust by identifying twenty-two trust dimensions (see Appendix B2) that he
tentatively categorised into five ‘main’ dimensions (dependability/reliability, honesty,
competence, customer orientation, friendliness), according to the conceptual framework of
trust dimensions developed by Swan et al (1985). However, Svensson (2004) also added an
additional seven underlying dimensions to the dependence dimension of trust that he
adapted from Hammarkvist et al (1982) and Mattsson (1999), both cited in Svensson
(2004) to assist in explaining his research in the vehicle industry which focused on the gap
between perceived trust and perceived dependence in business relationships. These seven
underlying dimensions of dependence were identified as technical dependence, time
dependence, knowledge dependence, social dependence, economic/juridical dependence,
market dependence and information technology (IT) dependence (Svensson 2004, p. 474).
A variety of other notions of trust are discussed in the literature, including mode of trust,
antecedents of trust, sources of trust, trust production and outcomes or consequences of
trust. Modes of trust were discussed in section 3.3 as part of the social psychology theory.
Antecedents of trust, sources of trust and other influencing factors for trust production are
explored in the following sections.
3.5
Antecedents of Trust
Antecedents of trust are factors or conditions that must exist in order for the action of trust
to take place. There are several theoretical models in the literature that have been applied to
establish various antecedents of trust (Morgan and Hunt, 1994; Mayer, Davis and
Schoorman, 1995; McAllister, 1995; Christiansen and DeVaney, 1998; Sharma and
Patterson, 1999; Kirchmajer and Patterson, 2003; Johnson and Grayson, 2005, Sharpe et al,
2007). Table 3-3 below summarises the antecedents of trust from various literature sources
across a range of contexts.
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Chapter 3: Literature Review
Table 3-3 Trust antecedents in the literature
Literature Source/s
Antecedents
Trust Context
Rotter 1980
Socio economic level of trustor
Social life
Johnson-George and Swap 1982
Reliability
Interpersonal relationship
Lewis and Weigert 1985
Familiarity, competence
Society
Rempe, Holmes and Zanna 1985
Reliability
Close interpersonal relationships eg. heterogenous couples
Support provided, common goals, cultural similarity, competence, age of
Manufacturer and sales agents
Anderson and Weitz 1989
relationship, communication
Anderson and Narus 1990
Communication
Manufacturer and distributor partnership
Crosby, Evans and Cowles 1990
Similarity, expertise, anticipation of future interaction.
Selling life insurance
Moorman, Zaltman and
Individual characteristics, perceived organisational characteristics
Market research
Ganesan 1994
Satisfaction with previous interactions
Buyer-seller relationships
Morgan and Hunt 1994
Shared values, communication, opportunistic behaviour
Commitment in relationship marketing
Mayer, Davis and Schoorman
Ability, benevolence, integrity
Organisational studies
McAllister 1995
Citizenship behaviour, interaction frequency
Managers and professionals in organisations
Doney and Cannon 1997
Expertise, firm reputation
Buyer-Seller relationship
Christiansen and Devaney 1998
Shared values, communication, opportunistic behaviour
Financial planner-client relationship
Rousseau et al 1998
Dependence, reputation, competence, concern, reliability
Within and between firms
Sharma and Patterson 1999
Communication effectiveness, functional quality, technical quality
Personal financial planning services
Johnson and Grayson in Swartz &
Shared values, goal congruence, cooperation, age of relationship,
Service relationships
Iacobucci (Eds) 2000
expertise, interpersonal characteristics, relational selling behaviour
Kirchmajer and Patterson 2003
Interpersonal communication (communications clarity, social
Small to Medium enterprise (SME) professional services
Deshpande 1992
1995
communications and information provision)
providers
Johnson and Grayson 2005
Expertise, product performance, firm reputation, satisfaction with previous
Service relationship provided by financial advisers.
Sharpe et al 2007
Communication skills
Financial planning process
Miranda and Klement 2009
Communication, firm reputation, satisfaction with previous interactions
Advisory business
interactions, similarity
Chapter 3: Literature Review
Many of these trust antecedents will be used to study the role of trust in personal financial
planning in Australia. Recent changes in the Australian financial planning regulatory
environment also have the ability to impact on the antecedents of trust in personal financial
planning in Australia. For example, the FPA has reviewed the educational requirements of
financial planners, possibly affecting the antecedent ‘competence’ while Future of
Financial Advice (FOFA) reforms allowing for ‘opt-in’ and ‘opt out’ arrangements
impact on frequency of interaction between client and adviser.
The antecedents of trust adapted from the literature and relevant to this study are shown in
Figure 3-1 below.
Communication
effectiveness
Honest/
integrity
Frequency
of
Interaction
Satisfaction
with
previous
interaction
Reliability
Antecedents
of Trust
Caring/
concern
Reputation
Age
of
relationship
Perceived
organisational
characteristics
Competence
Figure 3-1 Antecedents of trust
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Chapter 3: Literature Review
3.6
Sources of Trust
It is possible to classify the antecedents of trust identified in the previous section into four
main sources of trust: generalised trust (Coleman, 1988; Fukuyama 1995, Johnson and
Grayson, 2000 in Swartz TA and Iacobucci D (Eds), 2000); personality/character-based
trust (Rotter, 1967; Zucker, 1986; Nooteboom, 2002; Johnson and Grayson, 2000);
systems/institution-based trust (Citrin, 1974; Zucker, 1986; Johnson and Grayson, 2000 in
Swartz TA and Iacobucci D (Eds), 2000; Nooteboom, 2002); and process based trust
(Zucker,1986; Johnson and Grayson, 2000 in Swartz TA and Iacobucci D (Eds), 2000).
These sources of trust are depicted in the following Figure 3-2.
Derived from
social norms
Generalised
trust
Driven by
personal
characteristics
Characterbased trust
Driven by law,
regulations,
codes,
professionalism
Driven by
repeated
interaction,
reputation,
interpersonal skills
Systems/
Institutionbased trust
Client
Trust
Process-based
trust
Source: adapted from Johnson & Grayson in Swartz & Iacobucci (Eds) 2000, p. 359.
Figure 3-2 Sources of Client Trust
The antecedents of trust as discussed in section 3.5 drive the four main sources of trust
identified in Figure 3-2. However, while some antecedents are responsible for initial trust
production, other antecedents continue to develop or maintain this trust or may work
towards increasing it.
In this study, the sources of trust are used to examine how a client will initially trust an
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Chapter 3: Literature Review
adviser, maintain trust in an adviser and increase or decrease trust in an adviser. To begin
with, an individual’s propensity to trust will lead to initial trust production but this
propensity to trust may be dependent upon both the norms of the society that the individual
is part of as well as the personal characteristics of an individual. Once there is initial
‘general’ trust, a client may approach a personal financial adviser for advice – it is this
initial trust that is most difficult to achieve (Boyd, 2003, p. 403). Here, the client is relying
on the generalized expectancy that the adviser will act ethically and the systems based
expectancy that the adviser will lose their licence if they do not (Fukuyama, 1995; Johnson
and Grayson in Swartz & Iacobucci (Eds), 2000). The process-based sources are driven by
reputation (Rousseau et al, 1998); repeated successful interaction (Ganesan, 1994;
McAllister, 1995; Miranda and Klement, 2009), and interpersonal skills (Christiansen and
Devaney, 1998; Kirchmajer and Patterson, 2003) which are responsible for developing,
maintaining and increasing trust over time.
3.7
Trust and Ethical Behaviour
Central to the FOFA reform is a fiduciary or ‘best interests’ duty, which requires that the
client trusts in the competence and integrity of the adviser in accordance with the highest
ethical standards (Lewis and Weigert, 1985). Brien (1998) argues that attempts to control
unethical behaviour in professions by using codes of ethics, self-regulation and legislation
are on their own unsuccessful, and that a culture of trust in the profession and
trustworthiness exemplified in each individual is the answer (p. 391). He goes on to claim
that ‘trust is the essential and central element in the development of a professional culture
and trustworthiness is the first virtue of professional life’ (p. 396), and that ‘if an action is
unlikely to promote trust then it is also unlikely to be ethical’ (p. 401).
Empirical studies examining the relationship between trust and ethical behaviour are scarce
and none are known to exist in the context of personal financial planning. However,
Roman (2003) found evidence from 630 clients from three major banks in Spain, that the
greater the salesperson’s ethical sales behaviour as perceived by the customer, the greater
the customer trust in the bank. In addition, in a study of 387 Cypriot consumers, Leonidou,
Leonidou, and Kvasova (2013), found that perceived unethical marketing behavior
decreases consumer trust.
Brien (1998) asserts that cultivating a culture of trust is required to attain the professional
ideal and that directly cultivating this trust, indirectly promotes ethical behaviour. He also
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Chapter 3: Literature Review
suggests that trustworthiness promotes cooperation. For example, an adviser has an
obligation to the client to be trustworthy and to do the things they promised. Fulfilling this
professional-client obligation begins at Stage 1 of the Kohlberg moral judgement
development scale as identified in Table 3-4 and progresses to Stage 2. The building of the
client-planner relationship would be at Stage 3 which when combined with adherence to
financial advice regulations and procedures would place an adviser at Stage 4. While Stage
4 appreciates the importance of the law, there is an underlying assumption that following
the law means one is morally right (Rest and Narvaez, 1994), or behaving ethically. Stages
5 and 6 recognise that this may not be the case and instead focus on the idealistic principles
of cooperative societies where ‘what is morally right best furthers the principle’ (Ibid, p.7).
Table 3-4 Six Stages of Moral Judgement Development
Stage 1
The morality of obedience: Do what you’re told or else there will be pain.
Stage 2
The morality of instrumental egoism and simple exchange: Let’s make a deal.
Stage 3
The morality of interpersonal concordance: Be considerate, nice, and kind: you’ll make friends.
Peer groups are the source of values.
Stage 4
The morality of law and duty to the social order: Everyone in society is obligated to and
protected by the law.
Stage 5
The morality of consensus- building procedures: You are obligated by the arrangements that are
agreed to by due process procedures. Based on social contracts and utilitarianism.
Stage 6
The morality of non-arbitrary social cooperation: Morality is defined by how rational and impartial
people would ideally organize cooperation and is rooted in deontological absolutes such as
those of religion and Kant’s categorical imperative.
Source: Adapted from Rest and Narvaez, 1994: p.5; Kohlberg and Hersh, 1977.
Table 3-4 provides a summary of six stages of decision making when one is faced with a
moral dilemma. It is based on Lawrence Kohlberg’s (Kohlberg and Hersh, 1977) cognitive
development approach to morality which embraced Jean Piaget’s work on childhood
development. Kohlberg’s work is based on the premise that individuals have six different
stages of moral judgement development that are sequential. Kohlberg described
characteristics from each stage after conducting lengthy interviews (moral judgement
interviews) with subjects and used the transcriptions to creating a scoring guide. This was
later re-developed into the defining issues test (DIT) by Rest (1986) which made scoring
much easier and provided more reliable data. The test itself presents moral dilemmas from
which respondents must evaluate a number of responses on a Likert scale and then rate
these items from most important to least important. A score is then allocated to the
respondent based on the way they have rated and ranked their responses and this score
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Chapter 3: Literature Review
indicates the relevant ‘stage’ of moral judgement development.
Bigel’s (1998) study found that the mean P-score (the score used in Rest’s DIT to measure
ethical development) for Certified Financial Planner (CFP) licensees in the United States
(38.01) was lower than adults in general (40.0) (Rest, 1994, p.14). It could be suggested, in
the case of CFPs, that commission-based remuneration may be an instigating factor for
lower ethical development, however Izzo (2000) found that real estate salespersons in
Florida and California (also remunerated through commissions – although much more
transparent) had a higher level of ethical development (41.38 and 41.9 respectively) and
Bigel (1998) found that compensation source had no significant impact on P scores.
The literature suggests that the social settings and culture of an organisation may also have
significant influence on performance (Antonacopoulou & FitzGerald, 1996; Collins, 1987,
Hofstede, 1980). Just as the organisation’s culture impacts on employee competencies, the
same holds true for the impact on ethical choices made by employees. Studies by
Armstrong and Francis (2008) concluded that by promoting an ethical climate, an
organisation can influence employee behaviour. This is further supported by Trevino,
1986; Dean, 1997; Tyler 2005; Dawes, 2005; Bampton and Maclagan, 2005; Dellaportas et
al, 2006; Smith et al, 2007; Boatright, 2008).
Using the (DIT) on a sample of financial planners in the United States, Bigel (1998) found
a statistically significant difference at the 0.04 level between experienced planners (5-10
years) and established planners (10+ years) in terms of ethical development, being that
planners who had longer career tenure had lower moral reasoning abilities than their
counterparts. This also suggests that both the ethical climate and ethical culture of an
organisation influences the moral development of a financial planner.
Financial planners with longer career tenure are more likely to be in senior management
and under pressure by the organisation to make increased sales and profits. This is
supported by Ponemon (1990) who found ethical stage was lower among managers and
partners in public accounting firms when compared with staff at other slightly lower levels
of the hierarchy in these firms such as a supervisor. Ponemon suggested that this was
attributable to the socialisation process within accounting organisations and was later
supported by findings of Eynon, Hill and Stevens (1997). The idea that different positions
in the firm’s hierarchy result in different ethical tendencies is further supported by Cooper
(1981), Neimark and Tinker (1986) and Lehman and Tinker (1987) who recognise the
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Chapter 3: Literature Review
competing issues surrounding the social context of accounting and of organisations more
generally. A further study by Ponemon in 1992 supports the existence of selectionsocialisation in accounting firms and Jeffrey and Weatherholt (1996) and Douglas et al
(2001) found that there was an effect of organisational culture on a professional’s moral
development and ethical judgement.
Smith (2009b) researched the perceptions of financial planners and compliance officers of
the ethical climate and ethical culture within financial planning firms in Australia. As part
of this research, Smith (2009b) designed a profession specific test, called the Financial
Advisory Issues Test (FAIT), which was based on the DIT. The FAIT used an analysis of
consumer complaints of financial planners to identify profession specific dilemmas to
include in the FAIT in order to examine various predictors of ethical reasoning of financial
planners and compliance officers. The research found that these predictors were positively
related to age, experience (in years) and the CFP® designation and supported previous
research conducted by Bigel (1998).
Although the FAIT is useful in identifying predictors, it may make comparisons with other
professions difficult. Furthermore the FAIT instrument has only been used in the one study
and ‘more testing is necessary to confirm the validity of both the FAIT instrument and the
FAIT score as valid predictors of cognitive ethical reasoning in financial planning’ (Smith,
2009a, p. 296).
No studies were found in the literature that examined the ethical development of financial
planners in Australia using the DIT and no studies were found to examine the relationship
between the ethical behaviour of financial planners and trust in personal financial planning.
3.8
Trust in the context of financial planning
Trust is central to the client-adviser relationship in personal financial planning, yet there is
a notable absence of research on the topic (Jackling & Sullivan, 2007, p.2-3; Cull, 2009;
Hunt, Brimble and Freudenberg, 2011; Bruce and Gupta, 2011), especially as the financial
planning industry has grown rapidly in the last decade (Cowen et al, 2006; Jackling &
Sullivan, 2007, p.2-3; Cull, 2009; Hunt, Brimble and Freudenberg, 2011). Furthermore, a
study conducted by Hunt, Brimble and Freudenberg (2011) on relationship quality in a
financial planning setting, found the relationship dimension of ‘trust’ to be critical for
client-professional relationship quality.
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Chapter 3: Literature Review
Prior to the 1970s, financial advice in Australia was mainly provided by bank managers,
accountants and insurance sales staff (Toten, 2006 in Santacruz & Lukashenok, 2009) who
were often regarded as ‘trusted’ people in their community. As financial products became
more complicated and the ‘mum and dad’ investors increased, more comprehensive
financial advice was needed. In the late 1970s independent insurance advisers began to
take on this role although they had almost no formal training. The adviser would simply
refer the clients to specialists where additional advice was needed.
The introduction of compulsory superannuation through the Superannuation Guarantee
(Admin) Act 1992 placed further demands on advisers who were able to promote their
product using commission based incentives. At the same time, the Association of
Independent Professional Advisors (AIPA) joined with the International Association of
Financial Planning (IAFP) to form the Financial Planning Association (FPA) (Cowen,
Blair and Taylor, 2006). This also saw the first step towards education specifically for
financial planners through the granting of the Certified Financial Planning (CFP)
designation through the FPA, beginning with a Diploma of Financial Planning (DFP).
In 1996, the FPA commissioned the Birkett Report that set out knowledge and skill
competencies required of financial planners. Universities around Australia began to offer
courses that satisfied these competencies. The behavioural skills identified in the Birkett
Report (1996, p. 95) included ‘honesty’ and ‘trust building’. These competencies aided in
progressing the industry’s profile however downturns in superannuation investment returns
and increased corporate failures made consumers anxious (Gallery, 2003 and Gallery and
Gallery, 2003 cited in Cortese, Aylward and Glynn, 2006) and consumers began to lose
trust. The subsequent Financial System Inquiry (or the Wallis Inquiry) in 1996 then led to
the consolidation of the insurance industry and superannuation industry as the financial
services industry which resulted in the Financial Services Reform Act 2001 (FSRA).
The FSRA stipulated minimum standards of competency and ethical behaviour as a means
of protecting consumers and ensuring market participants (such as financial advisers) acted
with integrity (Commonwealth of Australia, 2001c). Since the GFC, changes to the
educational landscape of personal financial planning in Australia have once again been
planned, with a major professional body, the FPA, now requiring planners to be degree
qualified in order to receive the Certified Financial Planner (CFP) designation (FPA,
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Chapter 3: Literature Review
2010). Research has found that credentials can also increase trustworthiness (Christiansen
and DeVaney, 1998; Sharma and Patterson, 1999; Kirchmajer and Patterson, 2003;
Johnson and Grayson, 2005).
Factors such as increased life expectancy, growth in the size and affluence of the middle
class (Warschauer, 2002), lower retirement age, the introduction of superannuation choice,
and the economic objectives of Australians (Smith, 2009b), have placed a heavier
dependency on financial advice. However, recent economic events and major collapses of
financial planning firms; have led to much distrust of the financial planning industry.
Pricewaterhouse Coopers’ recent biennial Global Private Banking and Wealth
Management Survey found only 15 per cent of chief executives believed their financial
advisers had attained ‘trusted adviser’ status, indicating that advisers are still struggling to
win back the trust of clients, three years after the GFC (Parker, 2011). The results also
indicate that advisers will need to do more than comply with minimum industry standards
if they want to win back the trust of clients. As highlighted in the Ripoll Report (2009),
removal of remuneration structures that create a conflict of interest (real or perceived) such
as commission based payments, would play an important role in restoring trust.
3.9
Trust, Personal ‘Sales’ and Remuneration
The financial planning industry has received significant negative publicity in recent years
due to the use of commission-based payments.
An empirical investigation of trust in the life insurance sales industry (Oakes, 1990) found
that although sales depended on trust, ‘the techniques required to form trust in personal
sales nullify the conditions under which trust is possible’. In layman’s terms, it was found
that high pressure ‘selling’ of a product led to greater distrust between the buyer and seller.
This may be linked to the obvious known reward received by the seller in the form of
commissions or bonuses should the sale be successful. Similarly, in the real estate industry
a buyer is acutely aware that a successful sale will result in the real estate agent receiving a
substantial commission which is linked to selling price of the property. The seller is also
aware of the amount of commission that will be owed to the real estate agent upon
successful sale of their home. Hence there are some significant differences between the
service provided by a real-estate agent and a financial adviser.
Firstly, a real estate agent represents them self to clients as a ‘salesperson’ and does not
42
Chapter 3: Literature Review
hide the fact that they earn commissions from sales. It is common knowledge that real
estate sales people earn their income this way. Secondly, a real estate salesperson only
receives commission once the property is sold (i.e. they have proven that they have
fulfilled their obligations). Often once this occurs, the relationship between real estate
salesperson and client is terminated. Thirdly, the sale of a property usually also involves
other independent evaluations (for example, a valuation from a finance provider,
comparisons with other available properties in the market, building and pest inspections
and/or a solicitor). Finally, both the seller and buyer can ‘shop around’ and compare with
other agents before outlaying any funds or making any commitments and at the end of the
day, if the client is not happy with the product they themselves will choose not to purchase
it.
A financial adviser, on the other hand, holds them self out to be a ‘professional’ that is
providing the client with ‘independent’ advice (i.e. the adviser is selling a ‘service’ rather
than a ‘product’). The relationship between an adviser and a client is not usually a terminal
one and the expectation is that it will be a long-term ongoing relationship. The amounts
received by financial planners in the form of commissions and bonuses have not always
been transparent to clients and such payments may be ongoing regardless of the success or
otherwise of the financial advice provided. Furthermore, unlike in real estate where the
client usually decides on the product that is in their best interests, the client needs to trust
their financial adviser has chosen the product/s that is/are in their best interests.
ASIC conceded that even with regulation (such as the introduction of the Financial
Services Reform Act 2001 in 2002), the sales-advice conflict may mean that financial
planners are not always providing their clients with independent advice (ASIC & ACA,
2003; ASIC submission in Ripoll Report, Commonwealth of Australia, 2009, p.76). The
collapses of Storm Financial (Lampe, 2010), Opes Prime (Kohler, 2008) and Westpoint
(Jenman, 2006) added considerable pressure to the financial services industry for further
reform, particularly in the area of fiduciary duty.
Research conducted by Sue Viskovic of Elixir Consulting in 2008 (Viskovic, 2008) on
adviser pricing models conducted with over 120 financial advice firms, found that there is
no single ideal method of remuneration in the views of her respondents. The research
highlighted that there are various interpretations to the term ‘fee for service’ in how it is
expressed to and collected from the client. Peter Rickard (2006) suggests the use of
43
Chapter 3: Literature Review
commissions can lead an otherwise ethical financial adviser to unethical behaviour. He
advocates the abolition of all forms of commission payments to obtain a ‘...balance
between meeting client needs and being paid for the professional and independent advice’.
Although the abolition of all forms of commission payments may increase the ‘perceived’
trustworthiness of advisers and provide additional protection to clients from unethical
behaviour of advisers, it may also make financial advice initially more costly for clients if
they are required to pay upfront fees. However, a research project commissioned by CPA
Australia in August 2005 showed that at least two-thirds of consumers believe consumer
protection is a higher priority than cost minimisation. This may be because consumers also
believe that greater consumer protection and initial outlay will more than outweigh the
longer term costs associated with an unethical financial planner who recommends an
inappropriate strategy or product. Furthermore, 30% of participants believed investment
advisers were not independent from products or were not trustworthy. Those citing lack of
independence were reported to be from the more affluent clients.
The debate surrounding commissions and conflicts of interest is not a new one. In the
United States in 1990, the Federal Trade Commission (FTC) alleged that the AICPA
(American Institute of Certified Public Accountants) had attempted to restrict trade by
including the banning of commissions, referral fees and contingent fees in its ethical code.
Allen and Ng (2001) conducted a study in the United States on 480 randomly selected
AICPA members to determine if CPAs’ moral reasoning was related to their views on the
bans on commissions. From the 123 usable responses, a significant relationship was found
between financial stake and moral reasoning as those with a significant financial interest
(such as partners) were less in favour of a ban than others. These findings led the authors to
state ‘if self-interest clouds moral judgement made by CPAs, capital markets are in danger’
(p.29). Such findings also have implications for trust of professionals when there is
significant financial interest at stake. Additional empirical data provided by this study
assists in further understanding the relationship between moral reasoning and trust.
The Ripoll Report (Commonwealth of Australia, 2009) suggested that the financial advice
industry had ‘significant structural tensions that are central to the debate about conflicts of
interest and their effect on the advice consumers receive’ (Commonwealth of Australia, p.
69). Several submissions (such as those from MLC, the Institute of Chartered Accountants
Australia and the Australasian Compliance Institute) supported the view that the industry
44
Chapter 3: Literature Review
was still ‘product-based’ but was moving towards an ‘advice-based’ system (op cit, pp. 7071). Furthermore, ASIC described 85 per cent of financial advisers as being associated
with a product manufacturer (op cit, p.71).
As a result, there is now increased pressure for self-regulation of the industry such as that
which exists in the accounting profession. A number of submissions to the Parliamentary
Joint Committee (PJC) suggested the use of a professional standards body to manage the
quality of advice and to assist in forming a professional identity for the industry. A
submission made by Argyle Lawyers went one step further and recommended that
mandatory ethics training be introduced (op cit, pp.130-138). Interestingly, the Financial
Planning Association introduced a new FPA Code of Ethics in November 2009 (FPA,
2013a), around the same time the PJC report was released. First and foremost in this new
code is the principle known as ‘Client First’, which was designed to be consistent with the
fiduciary duty of loyalty (Smith, 2009a). There is no empirical research to date that has
examined the impact of ethics training or the FPA code of ethics on the client-adviser
relationship although it has been suggested that ethics affects both relationship quality and
perceptions of trust (Bejou, Ennew and Palmer, 1998).
The FPA is not alone in placing greater emphasis on a fiduciary duty to act in the best
interests of clients. The Federal Government’s response (in 2010) to the PJC was to deal
with conflicts of interest within the financial planning industry through further reform
known as the Future of Financial Advice (FoFA) to take place from July 2012. These
reforms are proposed to include a ban on conflicted remuneration structures such as
product-specific commissions and volume based payments and an increased focus on the
quality of advice through the introduction of a statutory fiduciary duty (Commonwealth of
Australia, 2010) since re-named as a Best Interests Duty (Commonwealth of Australia,
2011).
As suggested by Bejou et al (1998), the degree to which clients trust their adviser should be
positively influenced by the belief that the adviser is acting in the client’s best interests
(customer-oriented) and negatively influenced by the belief that the adviser is acting out of
self-interest (sales-oriented). This is reinforced by David Hasib, head of accounting firm
Chan and Naylor who has said ‘the quality and delivery of advice is more important than
product flogging to achieve a sales target’ and ‘advisers owe it to their customers to
identify the most suitable products based on individual circumstances irrespective of
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Chapter 3: Literature Review
commission’ (Taylor, 2011).
3.10 Trust and ‘soft’ skills
While it has been established that there is a problem with ‘soft’ skills of graduates from
business degree courses (Zaid and Abraham, 1994; Morgan, 1997; Albrecht and Sack,
2000; Tempone and Martin, 2003; Goetz, Tombs and Hampton, 2005; Hassall et al, 2005;
Dale, Cable and Day, 2006; De Lange, Jackling and Gut, 2006; Jackling and Sullivan,
2007; Gray, F. E., 2010; Mitchell, Skinner and White, 2010; Purnell, 2010), research has
also found that interpersonal communication skills are fundamental to client trust
(Christiansen and DeVaney, 1998; Kirchmajer and Patterson, 2003; Sharma and Patterson,
1999; Sharpe et al, 2007). However, a shortcoming of much of the existing research is that
it is based on service marketing models where communication is defined in terms of
exchanging facts rather than specific communication skills or the qualitative aspects of the
client-adviser relationship (Sharpe et al, 2007).
Demands for further research into the behavioural competencies of financial planners and
the importance of this in financial planning education and the professionalization process
have been made by educators, professional bodies and regulators (Christiansen &
DeVaney, 1998; Warschauer, 2002; ASIC, 2003; Altfest, 2004; CPA Australia, 2005;
Goetz, Tombs & Hampton, 2005; Cowen, Blair & Taylor, 2006; Jackling & Sullivan,
2007; Rich, 2007).
A survey of the quality of advice by financial planners, jointly conducted by the Australian
Securities and Investments Commission (ASIC) and the Australian Consumers Association
(ACA) (ASIC and ACA, 2003), judged that the quality of financial plans was largely
unacceptable and suggested that poor communication skills and listening skills affected the
advice provided. Furthermore, a large number of plans did not adopt the general principle
of ‘know your client’. Many of these plans provided only general advice or advice that was
not particularly suitable to the individual client’s situation and goals.
Morgan (1997, p.103) found that two-thirds of accounting practitioners surveyed expressed
the view that ‘communication skill deficiencies are best remedied by formal training’ and
‘that they would be prepared to accept a reduction in the technical content of degree
courses to create time for communication skill training’. Similarly, Jackling and Sullivan
suggested a ‘greater emphasis on behavioural skill development would be beneficial in
46
Chapter 3: Literature Review
courses that prepare financial planners’ (2007, p.209).
The Jackling and Sullivan (2007) study is one of the most recent academic studies to
attempt to evaluate the gaps in technical and behavioural skills as identified by Birkett
(1996) of financial planners in Australia. The study involved comparing the ranking of
behavioural and cognitive skills considered important by financial planners for career
success with the rating of the standard of technical and behavioural skills displayed by
recently qualified financial planners. The research included the administration of a mail out
questionnaire to 1242 financial planning firms across Australia drawn from a database of
registered FPA members on the FPA website. A total of 162 usable responses were
received with a response rate of 13%. The survey instrument ranked the importance of
various skills outlined by Birkett (1996) as important for career success as well as the
perceived gaps in skills of recently qualified financial planners recruited in the last three
years. The findings indicated that financial planners believed listening skills (mean
importance of 4.63) and oral communication skills (mean importance of 4.49) were most
important to career success with listening skills showing the biggest gap against the
standard exhibited by recently qualified planners (mean standard exhibited of 3.66). Table
3-5 shows the mean ratings and mean differences based on t-test results.
47
Chapter 3: Literature Review
Table 3-5 Differences between mean emphasis ratings for behavioural and cognitive skills
____________________________________________________________________________________________________
Skills
Mean
Mean standard Mean differences t
Significance
Importance
exhibited
____________________________________________________________________________________________________
Behavioural skills
Interpersonal
Oral communication
4.49
3.79
0.70
6.20
0.000
Listening skills
4.63
3.66
0.97
8.89
0.000
Written communication
3.98
3.71
0.27
2.69
0.000
Personal skills
Questioning technique
4.39
3.49
0.90
8.26
0.000
Presentation skills
4.09
3.60
0.49
4.63
0.000
Organizational skills
Time management skills
3.74
2.95
0.79
5.77
0.000
Cognitive skills
Analytic/problem solving skills
Resolving financial problems
4.38
3.80
0.58
5.58
0.000
Appreciative skills
Logical thinking
4.09
3.77
0.32
3.53
0.001
Technical skills
Quantitative/numerical
3.88
3.82
0.06
0.61
0.545
Knowledge of FSRA
3.96
3.61
0.35
3.11
0.003
Social security
3.89
3.49
0.40
3.66
0.000
Insurance/ risk management
3.96
3.42
0.54
5.64
0.000
Estate planning
3.83
3.26
0.57
5.55
0.000
Investment strategy skills
Principles of investment
4.31
3.95
0.36
3.97
0.000
Taxation principles
4.15
3.79
0.36
3.97
0.000
Superannuation/retirement
4.51
3.80
0.71
6.84
0.000
Financial Markets
4.09
3.70
0.39
3.87
0.000
Awareness social/ethical issues
2.84
3.15
0.31
2.94
0.004
_____________________________________________________________________________________________________
Source: Jackling and Sullivan, 2007
Chapter 3: Literature Review
It is important to highlight that the skills in the Jackling and Sullivan study were ranked in
order of importance for career success. Had the skills been ranked in order of importance
for quality of advice, one wonders if the results would look any different. This would rely
on the respondents’ interpretation of the term ‘career success’. For some, the term may
have been interpreted as referring to individual self-interest for career advancement,
remuneration, bonuses and commissions. Others may have interpreted ‘career success’ to
be the achievement of client goals through the quality of advice provided. It is the quality
of advice in which clients are placing their trust. Research has already shown that both
cognitive and behavioural skills impact on client trust (Sharma and Patterson, 1999).
Interestingly, the Jackling and Sullivan study found that the standard exhibited by recent
financial planning graduates (mean of 3.15) exceeded the perceived importance of financial
planning professionals (mean of 2.84) in only one of the eighteen skill levels measured,
being ‘awareness of social and ethical problems’. This difference is significant at 0.004
level. It is noteworthy that ‘awareness of social and ethical problems’ was rated as the least
important skill by personal financial planners.
Behavioural skills, particularly interpersonal communication skills, as those outlined by
Birkett (1996) and included in the Jackling and Sullivan (2007) study are fundamental to
client trust (Christiansen and DeVaney, 1998; Kirchmajer and Patterson, 2003; Sharma and
Patterson, 1999; Sharpe et al, 2007).
Table 3-6 on the following page, identifies the literature sources which recognise a number
of these behavioural skills as antecedents of trust.
49
Chapter 3: Literature Review
Table 3-6 Behavioural skills as antecedents of trust in financial planning
Financial adviser behavioural
skill (Birkett 1996)
Literature referring to skill as antecedent of trust
Reliable
Rotter 1980, Rempel, Holmes and Zanna 1985, Anderson and
Weitz 1989, Morgan and Hunt 1994, McAllister 1995, Rousseau et
al 1998
Caring
Rempel, Holmes and Zanna 1985, McAllister 1995, Weisinger
1998, Johnson & Grayson in Swartz & Iacobucci (Eds) 2000,
Sheth and Sobel 2002, Kirchmajer & Patterson 2003, Johnson
and Grayson 2005
Honest
Rempel, Holmes and Zanna 1985, Dwyer and Lagace 1986,
Morgan and Hunt 1994
Relationship Building
Surprenant and Solomon 1987, Rempel, Holmes and Zanna 1985,
Anderson and Weitz 1989, Crosby, Evans and Cowles 1990,
McAllister 1995, Christiansen and Devaney 1998, Weisinger 1998,
Johnson & Grayson in Swartz & Iacobucci (Eds) 2000, Sheth and
Sobel 2002, Johnson and Grayson 2005
Communicative
Anderson and Weitz 1989, Christiansen and Devaney 1998,
Johnson & Grayson in Swartz & Iacobucci (Eds) 2000, Kirchmajer
& Patterson 2003
Listening
Weisinger 1998, Sheth and Sobel 2002
Empathy
Weisinger 1998, Sheth and Sobel 2002
Friendly/Approachable
Johnson & Grayson in Swartz & Iacobucci (Eds) 2000, Kirchmajer
& Patterson 2003, Johnson and Grayson 2005
Trustworthy
All of the above
Note: Behaviours such as Responsible, Professional, Patient, Flexible, Marketing Oneself and Tactful are
also identified as financial adviser behavioural skills by Birkett 1996 but not specifically referred to as an
antecedent of trust in the literature.
This study will attempt to measure the abovementioned behavioural skills observed of
financial advisers by their clients both before and after the GFC as a means of gaining
greater insight into the how these skills affect trust in the client –adviser relationship in
personal financial planning.
As much of the literature on trust concerns itself with the cognitive skills associated with
trust and omits the affective and behavioural aspects (Young, 2006), this research will
attempt to close the gap by analyzing the behavioural skills that impact on trust in a
professional client-adviser relationship.
3.11 Summary and Conclusion
This chapter has examined the literature on trust and highlighted the importance of ethics
50
Chapter 3: Literature Review
in examining trust issues. The chapter began with an analysis of the various trust constructs
and definitions available in the literature and provided the definition of trust to be used in
this study. A review of the various trust theories from social psychology, sociology,
marketing and management followed.
The multi-dimensional nature of trust was examined as were the antecedents and sources of
trust. The relevance of soft skills of financial advisers as antecedents to trust was identified
and gaps in the study of affective skills in the literature were addressed.
A review of the literature revealed existing knowledge and provided a greater insight to the
concepts and relationships being studied which are further discussed in the following
chapter. Furthermore, this chapter has identified research gaps that have contributed to the
development of research questions in this study.
The next chapter provides a link from this literature review chapter to the methodology
chapter. It examines the study’s conceptual framework by organising the main themes and
theories presented in the literature review that underpin the research and how they will
assist in meeting the study’s aims and objectives.
51
Chapter 4: The Conceptual Framework
Chapter 4: THE CONCEPTUAL FRAMEWORK
4.1
Introduction
The previous chapters have introduced the objectives and significance of the research,
considered the context of the study in the financial planning environment and provided a
review of the literature on trust. It examines the conceptual framework of the study to assist
in organising and understanding the main themes and theories underlying the research and to
guide the analysis of the research in meeting its aims and objectives.
For the purpose of this research, trust theory is grounded in social psychology and influenced
by a combination of theories to explain phenomena from a social constructivist perspective.
Trust theories from social psychology, sociology, management and marketing literature are
adapted and integrated to form the foundation of a conceptual framework to examine the role
of trust in the changing personal financial planning environment. These theories have
assisted in shaping the research questions which have determined the research methodology
and data collection instruments to be used.
Figure 4-1 below depicts a visual representation of the key theories underpinning the
research conducted in the current study. Each of these theories will be discussed in more
detail in the following sections.
Social Psychology
Marketing
Trust
Sociology
Management
Figure 4-1 Theories of trust underpinning this study
52
Chapter 4: The Conceptual Framework
The theories underlying this study also assist in the analysis of the research data through
triangulation to provide answers to the research questions and to provide meaningful
information about the role of trust in providing financial advice in Australia. Changes to
the financial planning environment have also impacted on the role of trust in personal
financial planning.
4.2
Social psychology
4.2.1 Affect and cognition
Theories from social psychology identify the importance of both affect (feeling) and
cognition (thinking) in the development of trust (Zajonc, 1980; Lewis and Weigert, 1985;
Russell and Woudzia, 1986; McAllister, 1995; Weisinger, 1998; Nooteboom, 2002;
Johnson and Grayson, 2005; Mouzas, Henneberg and Naude, 2007; Eisingerich and Bell,
2008; Aurier and N’Goala, 2010). Affect-based trust includes concepts such as personal
care, emotional bonds, security and benevolence (Lewis and Weigert, 1985; Rempel,
Holmes and Zanna 1985; Johnson and Grayson, 2005) while cognition-based trust includes
competence, knowledge, reliability (predictability) and dependability (Johnson-George and
Swap, 1982; Rempel, Holmes and Zanna, 1985; Rousseau et al, 1998; Johnson and
Grayson, 2005). The social psychology concepts of affect and cognition underpin all of the
theories adopted for use in the current study.
Although both affect-based and cognition-based concepts are identified in theoretical
studies of trust, there are few empirical studies that examine both affect and cognition, with
many focussing on the cognitive aspects of trust only. Furthermore, these affective and
cognitive concepts are generally observed in controlled environments involving high trust
as opposed to an environment involving conflict and stress. The current study attempts to
address these gaps by testing both affective and cognitive components in the context of
personal financial planning in an environment implicated by a number of dissatisfying
events.
Fine and Holyfield (1996) state that ‘one not only thinks trust, but feels trust’ (p.25) and
that cognitive models provide a necessary but not a sufficient understanding of trust as
interpretation must consider cultural meanings, emotional responses, and social relations.
Furthermore, Fine and Holyfield (1996) maintain that understanding trust must consider ‘a
moral world that depends on what people ought to do, as well as what it is in their interest
to do’ (p.25). As a result, moral development theory may also assist in understanding trust
53
Chapter 4: The Conceptual Framework
in personal financial planners.
4.2.2 Moral development
Morality can provide basic guidelines for optimising mutual benefits (Rest, Bebeau and
Volker, 1986) and is relevant to the context of financial planning because what one person
does can affect another. This involves different kinds of cognitive-affective
interconnections and thus assists in understanding the role of trust.
Rest, Bebeau and Volker (1986) explain the complex interconnections involved in the
psychology of morality through the ‘Four-component model’, as outlined in Figure 4-2 and
summarised below.
Moral Awareness
Implementation
Moral Reasoning
Moral Motivation
Source: adapted from Rest et al, 1986
Figure 4-2 Four-component model
The four psychological components identified in Figure 4-2 must be developed for moral
behaviour to occur. Moral awareness means that a person is capable of recognising that a
moral situation exists. How a person makes judgements about a moral situation is known
as their moral reasoning, or moral development and what motivates a person to take action
is a person’s moral motivation. Actually taking action in regard to a moral situation is the
implementation process which builds one’s moral character.
As identified in previous chapters, there has been much controversy surrounding potential
conflicts of interest that exist in the personal financial planning environment in Australia
that have led to distrust of the industry. It is pertinent then that the moral development of
financial planners in Australia be investigated further, and applied to the study of trust in
54
Chapter 4: The Conceptual Framework
personal financial planning. The moral reasoning component can be measured by Rest’s
Defining Issues Test (DIT) (1986) which is adopted in this study (further details about the
DIT are included in section 3.7 on page 37 of the literature review chapter). Other
components of the model and their relationship to trust in personal financial planning are
tested through questionnaires and interviews with both clients and financial planners.
4.3
Sociology
Theories from sociology examine trust as a wider social reality, acknowledging the various
modes of trust production including personal characteristics as well as various institutional
influences and the relationship process itself (Zucker, 1986; Rousseau et al, 1998;
Nooteboom, 2002). The sociology literature also recognises the impact of situations such
as the GFC and corporate collapses which may involve stress or conflict that affects
consumer confidence (Rempel, Holmes and Zanna, 1985) and is relevant to personal
financial planning.
Sociology can assist with investigating trust in personal financial planning by using various
empirical methods to develop a body of knowledge about trust in personal financial
planning and to better understand the institutional influences of professional bodies,
financial planning organisations and regulatory bodies on the client-adviser relationship,
and on society as a whole.
Sociology theories were specifically employed in a range of instruments in the research
study with client questionnaires and financial questionnaires including questions on
organisation structure (Rousseau et al, 1986), regulation (Child and Mollering, 2003; Rao,
Pearce & Xin, 2005; Fulmer and Gelfand, 2012) and professional bodies (Zucker, 1986).
Client questionnaire two and the financial adviser questionnaire also included questions
about the GFC (Rempel, Holmes and Zanna, 1985) while the open-ended comments in all
questionnaires as well as the interviews reveal more detailed information about a range of
sociological influences prompted by the questionnaire results.
4.4
Marketing
Customer service relationship theories from the marketing discipline have much to offer in
understanding the role of trust and are applied to personal financial planning in this study.
These theories have established a number of antecedents of trust as outlined in Table 3-3
on page 34 and Figure 3-1 on page 35 in the literature review (chapter 3).
55
Chapter 4: The Conceptual Framework
Antecedents of trust are factors that must exist or occur before trust can be established. The
literature (Anderson and Weitz, 1989; Anderson and Narus, 1990; Crosby, Evans and
Cowles, 1990; Moorman, Zaltman and Deshpande, 1992; Ganesan, 1994; Morgan and
Hunt, 1994; Mayer, Davis and Schoorman, 1995; McAllister, 1995; Doney and Cannon,
1997; Christiansen and Devaney, 1998; Rousseau et al, 1998; Sharma and Patterson, 1999;
Johnson and Grayson in Swartz & Iacobucci (Eds), 2000; Kirchmajer and Patterson, 2003;
Svennson, 2004; Johnson and Grayson, 2005; Sharpe et al, 2007; Miranda and Klement,
2009) establishes a number of antecedents of trust such as:
•
Reliability
•
Familiarity
•
Competence
•
Shared values
•
Cultural similarity
•
Age of relationship
•
Communication
•
Interpersonal characteristics
•
Expertise
•
Interaction frequency and successful previous interaction
•
Integrity
•
Firm reputation
Trust antecedents in the marketing literature can be traced back to social psychology and
classified as affect based or cognitive based. Interpersonal communication skills have been
found to be fundamental to client trust (Christiansen and DeVaney, 1998; Kirchmajer and
Patterson, 2003; Sharma and Patterson, 1999; Sharpe et al, 2007) and a number of trust
antecedents have been identified as behavioural skill requirements of a competent personal
financial planner (Birkett, 1996; Jackling and Sullivan, 2007) as outlined in Table 3-6 on
page 50 of the literature review chapter.
Trust antecedents from the marketing literature have contributed to the research design
through informing questions for the research instruments used in this study as outlined in
the methodology chapter (chapter 5; specifically Table 5-8 and Table 5-11).
56
Chapter 4: The Conceptual Framework
4.5
Management
Various management theories through concepts such as the social settings and culture of an
organisation have found a significant influence on performance (Collins, 1987; Hofstede,
1980; Antonacopoulou & FitzGerald, 1996) and ethical behaviour (Ponemon, 1990 and
1992) that can influence trust. The integrative model of organisational trust constructed by
Mayer, Davis and Schoorman (1995), known as the ‘ABI’ model, refers to three trust
components – Ability, Benevolence and Integrity, which provides a useful foundation for
which to study trust in the personal financial planning environment.
The management literature has established that there must first exist cognitive trust before
there can be affect based trust (McAllister, 1995; Holmes and Rempel, 1989; Rempel,
Holmes and Zanna, 1985). However it has been acknowledged that further research is
required to investigate the factors influencing the development of cognition based trust
(McAllister, 1995). The current study attempts to investigate the factors influencing both
affect and cognition based trust in the context of personal financial planning and tests the
management theory that cognitive trust precedes affective trust.
Furthermore, organisational behaviour studies from the management literature can assist in
understanding trust in personal financial planning through examining penance and
regulation as trust repair states following a transgression (Dirks, Kim, Ferrin and Cooper,
2011).
4.6
Key variables to be investigated
The theories summarised in the previous section and elaborated on in the literature review
chapter provide potential variables capable of observation in the current study. These
variables are the operational pieces that apply to this study and are outlined below in
Figure 4-3.
57
Chapter 4: The Conceptual Framework
Characteristics
Personal
factors
Vulnerability
Credentials
Honesty
Faith
Society
factors
Systems
factors
Process
factors
Business
model
Benevolence
Social norms
Caring
Organisation
type
Honest
Integrity
Reliability
Competence
Predictability
Interpersonal
skills
Interaction
Ethical
Legislation
Listening
Reputation
Professional
regulation
Reliable
Competence
Shared values
Figure 4-3 Variables to be tested in the current study
In this study, it is recognised that trust evolves over a period of time, across a number of
sequential stages (Lewicki and Tomlinson, 2003) as outlined in Figure 4-4 below.
Propensity to
trust
Calculusbased
Identificationbased
TRUST
Source: adapted from Lewicki and Tomlinson, 2003
Figure 4-4 Sequential stages of trust
These trust stages begin with an individual’s propensity to trust which is usually associated
with components of generalised trust and systems/institution based factors and allows for
the formation of trust. Once this is established, trust can grow to the calculus-based level
where the individual will mentally weigh up the costs and benefits of continuing the
58
Chapter 4: The Conceptual Framework
relationship or ending the relationship. This stage of the relationship primarily deals with
characteristics of trust such as reliability and predictability but also includes
individual/demographic cognitive components such as education and work experience, and
cognitive process based factors such as competence. According to Lewicki and Tomlinson
(2003), repeated interactions then assist in the awareness of shared values and goals which
allows trust to evolve to being identification-based. This high level of trust is more
concerned with the affective components of trust such as benevolence and genuine care
and concern. Further details regarding trust factors and their components as part of the trust
process are discussed below.
4.6.1
Characteristics of trust
Trust characteristics as identified above in Figure 4-3 assist in understanding how trust is
applied in the current study. Previous research has identified a range of characteristics of
trust across various contexts (refer Appendix B1 on page 300) that can be tested in the clientadviser relationship in the context of personal financial planning. This study may also reveal
characteristics of trust unique to the context of financial planning. Tests on the impact of
dissatisfying events on these characteristics of trust will also be able to be conducted in the
study.
4.6.2
Individual and demographic factors
A range of individual and demographic factors of the trustee are relevant for the building of
trust at both the calculus-based and identification-based levels. Cognitive components such
as listening (Weisinger, 1998; Sheth and Sobel, 2002); reliability (Rotter, 1980; Rempel,
Holmes and Zanna, 1985; Anderson and Weitz, 1989; Morgan and Hunt, 1994; McAllister,
1995; Rousseau et al, 1998); honesty (Rempel, Holmes and Zanna, 1985, Dwyer and Lagace
1986, Morgan and Hunt, 1994); ethical behaviour (Lewis and Weigert, 1985; ShockleyZalabak, 2011; Fulmer and Gelfand, 2012), and credentials (Zucker, 1986; McAllister,
1995; Johnson and Grayson, 2005; Sharpe et al, 2007) have been found to build trust across a
range of contexts.
Affective based components such as showing genuine care and concern are also seen to be an
important factor in building trust and as essential to high trust relationships (Rempel, Holmes
and Zanna, 1985; Sharma and Patterson, 1999; Lewicki and Tomlinson, 2003). This study
will determine the cognitive and affective components that apply to trust in personal
financial planning and the relative importance of various individual and demographic factors
59
Chapter 4: The Conceptual Framework
in building trust between a client and adviser.
4.6.3
Society based factors (includes generalised trust)
An individual’s (or client’s) propensity to trust will lead to initial trust production. In this
study, a client’s propensity to trust may affect the client’s ability to initially seek out financial
advice. This propensity to trust may be dependent upon both the norms of the society and
personal characteristics of the client – including age, education, occupation and previous
experiences in society. If a client’s generalised trust is low, it is also likely that their initial
trust in financial advisers is low and therefore other trust components in the trust building
process become more relevant to the client in making a decision to trust. The media may also
play an important role here as news reporting trust breaches may impact on the reputation of
various parties and increase the perceived ‘costs’ of trust (Lewicki and Tomlinson, 2003). In
the context of personal financial planning, the media has used consumer advocate reporting
to highlight perceived inadequacies of the financial planning industry or at least players (such
as individuals or organisations) in it. The current study considers if and how components of
generalised trust affect trust in personal financial planning.
4.6.4
Systems and institution based factors
The way that individuals view systems and institutions has been found to affect initial trust
production (Citrin, 1974; Zucker, 1986; Rousseau et al, 1998; Johnson and Grayson, 2000;
Nooteboom, 2002; Stewart, 2003; Lin et al, 2011) with the expectancy that the trustee will
suffer negative consequences imposed by the system or institution should they be
untrustworthy (Fukuyama, 1995; Johnson and Grayson in Swartz and Iacobucci (Eds),
2000).
In the current study, a client’s initial trust may be affected by way in which the financial
planning industry is regulated, specific legislation, professional bodies or particular
organisation types. The current study will assist in determining the relevant systems and
institution based components of trust in personal financial planning.
4.6.5
Process based factors
Process-based sources are driven by both cognitive and affective components. Cognitive
components include repeated successful interaction (Ganesan, 1994; McAllister, 1995;
Miranda and Klement, 2009); interpersonal skills (Christiansen and Devaney, 1998;
Kirchmajer and Patterson, 2003); competence (Mayer, Davis and Schoorman, 1995;
60
Chapter 4: The Conceptual Framework
Nooteboom, 2002; Svensson, 2004) and shared values (Zajonc, 1980; Morgan and Hunt,
1994; McAllister, 1995; Christiansen and DeVaney, 1998; Gaudine and Thorne, 2001). Each
of these components are responsible for developing, maintaining and increasing trust over
time.
In order to build trust to a high level, the affective component, benevolence (Lewis and
Weigert, 1985; Rempel, Holmes and Zanna, 1985; Mayer, Davis and Schoorman, 1995;
Johnson and Grayson, 2005), plays a major role in demonstrating to trustors that the trustee
is genuine and has put the trustor’s needs above their own; the net positive benefit of trust.
Process based factors are tested in the current study to determine the relevant cognitive and
affective components that contribute to trust in personal financial planning.
4.7
Research questions
The research questions were introduced in Chapter 1 and a summary of the research
questions as developed from the theories presented in the literature review are presented
again here. The questions seek to investigate relationships between variables as discussed in
the preceding section.
The central research question is:
What is the role of trust in the financial planning profession?
This study will address six main research questions that were developed from this central
research question as listed in Table 4-1 below.
Table 4-1 Research Questions
Ref
Research Question
RQ1
What characteristics of trust are evident in personal financial planning?
RQ2
How do financial advisers perceive their role in developing trust with their client?
RQ3
RQ4
How do individual, demographic, society, systems and process based factors influence the trust
between client and adviser?
What are the implications of different business models for trust?
RQ5
What is the relationship between ethical behaviour and trust?
RQ6
How have recent changes in the financial planning environment impacted on the role of trust?
A mixed methods approach was adopted to test the research questions which employed five
main research instruments: two client questionnaires, a financial adviser questionnaire, client
interviews and financial adviser interviews. The following chapter, Chapter 5: Methodology
61
Chapter 4: The Conceptual Framework
elaborates on the design of the research instruments and how these instruments were used to
collect and analyse data relevant to the study.
4.8
Summary
This chapter has synthesized the various interdisciplinary theories, concepts and variables
that were raised in Chapter 3: Literature Review and that have formed the basis for the
research questions on the role of trust considered in this study.
The chapter began by outlining theories from social psychology, sociology, marketing and
management as the foundations for the study on trust in personal financial planning and
highlighted the concepts of affect and cognition found to be present among all theories. This
was followed by an explanation of the key variables to be investigated by the study which
included:
•
The characteristics of trust;
•
Individual and demographic factors;
•
Society based factors;
•
Systems and institutional based factors; and
•
Process based factors.
The chapter then presented the research questions as derived from the theoretical foundations
and variables to be investigated and a summary of how the research questions will be
operationalized by the research instruments in the study was provided.
The following chapter, Chapter 5, of the thesis describes these research instruments in
more detail along with the methodology adopted to test the conceptual framework
presented in this chapter.
62
Chapter 5: Methodology
Chapter 5: METHODOLOGY
5.1
Introduction
The previous chapters have introduced the background to the thesis, its objectives and
significance. The last chapter outlined the conceptual framework for the thesis and
identified the research questions to be tested. This chapter examines the research design,
including sample selection, data collection methods and methods of data analysis.
The research design represents an extension of the interpretive paradigm (Burrell and
Morgan, 1979; Chua, 1986) with the ontological assumption that reality is socially
constructed and continually changing and developing. The social constructivist approach
taken in this study utilises both quantitative and qualitative research methods to explore the
research questions and achieve the objectives of the thesis. A mixed methods approach that
incorporates both questionnaires and interviews presents opportunities for synergy and the
advancement of knowledge that a single method approach is unable to provide (Padgett,
2009, p. 104). In addition, a mixed methods approach can provide a richer source of data
with associated internal validity checks (Denzin, 1978). Mixing methods also allows for
more perspectives on the phenomena being studied (Easterby-Smith et al, 1991) with
qualitative methods complementing the quantitative survey research (Gable, 1994;
Neuman, 2006). The justification for the research paradigm and methodological approach
used to answer the research questions in this study is further discussed in section 5.2.
Section 5.3 presents a summary of the five main research instruments and how they are
used to address the research questions. Sections 5.4 to 5.7 discuss the details of the sample
selection process, instrument design, collection methods and methods of data analysis for
each of the main instruments including three questionnaires and two types of interviews.
The research was designed so that the three questionnaires were administered prior to the
interview process with questionnaire results assisting in structuring the interview questions.
The research design provides both quantitative and qualitative information to answer the
research questions. The quantitative information provides much of the descriptive and
measurement data while the interviews provide qualitative data that enables a richer
63
Chapter 5: Methodology
understanding of the complex nature of and role of trust in personal financial planning.
Further details as to methods of data analysis are provided in sections 5.4 to 5.7.
Before concluding with a summary of the chapter, section 5.8 discusses the ethical
considerations of the study including ethics committee approval and confidentiality of
participant data obtained from the research.
5.2
Justification for Paradigm and Methodology
The ontological position of a researcher determines the researcher’s epistemology which in
turn shapes the methodology (Gaffikin, 2004, p.4). The methodological approach that a
researcher chooses to inform the research methods will thus depend on a number of factors,
including the research topic chosen, the purpose of the research and the researcher’s
underlying philosophical assumptions.
Tomkins and Groves (1983) suggested that research methodology be dictated by the nature
of the phenomena to be researched. Others such as Sterling (1972); Inanga and Schneider
(2005), suggested the research question itself influences the choice of research methods.
Hussey and Hussey (1997) posited that understanding one’s underlying philosophical
assumptions is required to place the research in the correct theoretical framework and thus
identify the most appropriate research methods to use. Furthermore Ryan, Scapens and
Theobald (1992) emphasise the importance of a theoretical structure to guide the
researcher. Each of these factors is interrelated and contributes to the methodological
approach in this study, as illustrated in Figure 5-1 below.
Philosophical
Assumptions
Research
Research Question/
Findings
Research Topic
Methodology
Research Methods Used
Figure 5-1 The inter-relationship of philosophical assumptions, research topic and
methodology.
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Chapter 5: Methodology
The underlying philosophical assumptions in this study assume an extension of the
interpretive approach (Burrell & Morgan, 1979; Chua, 1986) with the ontological
assumption that reality is socially constructed and continually changing and developing. As
a result, the most suitable methodology is essentially qualitative in nature, asking the how
and why. In the quest for knowledge in this study, the research methods employed include
a combination of qualitative and quantitative data. The qualitative research is valuable in
that it provides more detailed insights that assist in interpreting and understanding
phenomena. Denzin (1978) supports the embracing of quantitative and qualitative methods
as it can assist in alleviating problems of generalisation. The strategy of mixing
questionnaires with interviews and detailed descriptive analysis can provide a richer source
of data with associated internal validity checks.
The research design comprises five main research instruments as outlined in Table 5-1
below. Two client questionnaires were utilised to represent pre-GFC and post-GFC data.
However this was not a traditional pre-test, post-test design as the GFC was not forecast at
the commencement of the thesis; but is an event that affected the collected data.
Table 5-1 Research Instruments
Ref
Research Instrument
Period of data collection
CQ1
Client Questionnaire 1 (pre-GFC)
April - May 2009
CQ2
Client Questionnaire 2 (post GFC)
September 2012 (1 mailing)
st
nd
March 2013 (2
FAQ
mailing)
st
Financial Adviser Questionnaire
February – March 2013 (1 mailing)
nd
July - August 2013 (2
mailing)
SCI
Semi-structured Client Interview
March 2014 – May 2014
SFI
Semi-structured Financial Adviser Interview
March 2014 – May 2014
As such, the research design utilises triangulation of both method (quantitative and
qualitative) and observers (client and adviser). The study is designed to provide
information relevant to the theoretical perspectives discussed in Chapter 3 and Chapter 4.
To do this, the study relates Zajonc’s theory of affect and cognition with the interpersonal
trust theories on the factors influencing trust relationships (Johnson and Grayson, 2005;
McAllister, 1995) and with trust in a broader institutional and social system (Rousseau et
al, 1998; Nooteboom, 2002; Lewis and Weigert, 1985). In addition to the factors
influencing trust relationships as previously identified by the trust literature, the ethical
development theories of Kohlberg (Kohlberg and Hersh, 1977) and Rest (1973) are used to
examine the influence of ethical development of advisers on trust in the client-adviser
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Chapter 5: Methodology
relationship. Such theories provide the basis for the study in analysing the role of trust in
personal financial planning.
The research instruments that were selected as part of the research design to address the
study’s research questions are mapped to the research questions in Table 5-2 below.
Table 5-2 Research questions and instruments
Research Question
RQ1: What characteristics of trust are evident in personal
financial planning?
Research Instrument
CQ1, CQ2, FAQ, SCI,
SFI
RQ2: How do financial advisers perceive their role in
developing trust with their client?
RQ3: How do individual, demographic, society, systems
and process based factors influence the trust between
client and adviser?
RQ4: What are the implications of different business
models for trust?
FAQ, SFI
RQ5: What is the relationship between ethical behaviour
and trust?
RQ6: How have recent changes in the financial planning
environment impacted on the role of trust?
FAQ, SCI, SFI
CQ1, CQ2, FAQ, SCI,
SFI
CQ1, CQ2, FAQ, SCI,
SFI
CQ2, FAQ, SCI, SFI
Respondents
Clients
Potential Clients
Financial Advisers
Financial Advisers
Clients
Potential Clients
Financial Advisers
Clients
Potential Clients
Financial Advisers
Clients
Financial Advisers
Clients
Potential Clients
Financial Advisers
As can be seen in Table 5-2, a number of research instruments are identified as being used
to answer the same research question as this is where true triangulation of data occurs
(Veal, 2005). The different data collected from each of these research instruments allow
the data to be analysed in more than one way, allowing for a more comprehensive study
(Neuman, 2006). Furthermore, the qualitative and quantitative instruments complement
one another with the strengths of one overcoming the weaknesses of another (Neuman,
2006; Veal, 2005). While the interview instruments used in the study provide rich data full
of detailed insights, the quantitative data obtained from the questionnaire instruments can
provide measures and scales which are able to be more easily compared with previous
studies.
The use of a variety of research methods as outlined in this chapter essentially involves an
overarching qualitative approach through the use of triangulation to explore the research
questions and achieve the objectives of the study.
5.3
Research instruments
The study utilised a mixed methods approach using a number of research instruments to
collect data to investigate the key relationships between variables and answer the research
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Chapter 5: Methodology
questions. There were five main research instruments in the study including two client
questionnaires, a financial adviser questionnaire (also comprising Rest’s DIT), client
interviews and financial adviser interviews. Figure 5-2 provides a visual representation of
how these instruments were used in the study to address the research problem.
Figure 5-2 How the research instruments address the research questions
The following sections provide details for the design of each of the research instruments
and how the various research instruments were used to collect and analyse data relevant to
the study.
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Chapter 5: Methodology
5.4
Client Questionnaire 1 (pre-GFC)
5.4.1
Sample Selection
The target population was financial planning clients (including past clients, current clients
or potential future clients) of the Australian population aged 18 and over. From onethousand surveys, a return rate of 150 responses would give 92% confidence in results
(estimated using the statistical formulae for margin of error). This is greater than the
generally accepted level of 90%, and hence a sample size of 150 was chosen. The mail out
of one thousand surveys was conducted in April 2009. Response rates and details
pertaining to final sample size are discussed further in Chapter 6.
In order to secure access to a large sample group, the Australian Address Reference File
(AARF) was used for the sampling frame for the first client questionnaire. Probability
sampling was chosen as the sampling method with computer generated systematic random
sampling being used. The rationale was that this sample would represent a broad crosssection of the Australian population in terms of geographical location, age, gender,
education, employment and socio-economic status, whilst it could also be useful in
analysing the role of trust and whether such demographic variables were influential in the
trust process.
The appeal of using the AARF was that along with a mailing address, it included an
individual’s name which was able to be used in the salutation on the envelope. This
personalised the mailing process and made the mail look less like ‘junk’ mail in an effort to
encourage the envelope to be opened and not simply placed in the rubbish bin.
5.4.2
Survey Design
Questionnaire surveys were chosen to gather self-reported information from respondents
using a formally designed schedule of questions. Although it has been suggested that
respondents may tend to exaggerate responses to some items while downplaying others
(Veal, 2005), the merits of using this research design for samples representative of a wide
population, were found to outweigh any such shortcomings. Furthermore, surveys were
appropriate for the research questions in this study as they are capable of measuring several
variables that relate to behaviours, experiences, attitudes and expectations (Neuman, 2006).
Other merits of using questionnaire surveys include the ability to quantify large amounts of
complex information in a relatively simple format (Neuman, 2006; Veal, 2005); the ability
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Chapter 5: Methodology
for others to more easily replicate the study in future research, and the possibility of using
the study for comparability purposes to study the role of trust over time.
Survey question items were developed from a number of sources including the Birkett
(1996) financial planning competencies, the behavioural skill research of Jackling and
Sullivan (2007), trust literature and the research project commissioned by CPA Australia
on the impact of the FSRA (CPA Australia, 2005). Table 5-3 below identifies the major
themes addressed in the questionnaire (refer to client questionnaire 1 in Appendix C1 on
page 305) that assist in understanding the role of trust in personal financial planning.
Table 5-3 Major themes addressed in client questionnaire 1
Theme
Questionnaire Ref
1,2,3,4
5,6
Demographics
If/when advice sought
Organisational structure of planner/adviser firm
Regulation of Advice
Remuneration
Usefulness of SOA
Behavioural Skills as antecedents of trust (for further
details see Table 3-6)
No advice sought
7
8,9
10, 15
11, 12
13 (a – o)
Free response
16
14
Research Question
RQ3
Criteria for
subsequent survey
questions
RQ3
RQ3
RQ4
RQ1, RQ3
RQ1,RQ3
Criteria for
subsequent survey
questions
RQ1, RQ3, RQ4
As part of the first client questionnaire, participants were asked to rank the extent to which
behavioural skills identified by Birkett (1996) were observed of personal financial planners
as research has suggested that behavioural skills, particularly interpersonal communication
skills, are fundamental to client trust (Christiansen and DeVaney, 1998; Kirchmajer and
Patterson, 2003; Sharma and Patterson, 1999; Sharpe et al, 2007). Table 3-6 in the
literature review chapter identified the literature sources which recognise a number of these
behavioural skills as antecedents of trust.
A five-point Likert scale was utilised to allow participants to indicate their extent of
agreement or disagreement that each behavioural skill was observed. Such a scale allows
for responses to be quantified and more easily compared with other studies. It is also
relatively simple and less burdensome for participants to complete. Demographic
information was also collected, along with questions pertaining to usefulness of
information received from financial planners and planners’ organisational structures. A
copy of the questionnaire can be found in Appendix C1.
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Chapter 5: Methodology
The survey design process considered sequencing, formatting, coding and printing issues
and a participant information sheet (PIS) was completed (see Appendix C2). Once the
questions were written, the order of questions (sequencing) was determined to ensure there
was a logical flow to the questions and to ensure that filter questions made questions
relevant to respondents. This was further noted for checking in the pre-test phase. As the
questionnaire was designed for self-completion, tick boxes were chosen (with one optional
free response question) to minimise the amount of time taken by the respondent as well as
minimising time required to code the responses. Where possible, questions were pre-coded
next to these tick boxes.
The Pre-test Phase
The document was edited for easy readability and navigation and to ensure the space was
used efficiently. Shading was also used to clearly define questions to ensure none were
accidentally missed and sequencing was checked. The final questionnaire was four pages
and was printed as one A3 page (double-sided) booklet format. This made the survey more
appealing and assisted in keeping printing costs down.
The observational studies method (as adapted from Steel, 2007) was used to test the
questionnaire with some minor modifications (such as using less ambiguous terms and
providing examples) made on the basis of this testing. The next section, including Table
5-4 and Table 5-5 provides further details regarding the testing and analysis of test results.
Testing the Questionnaire: Observational Studies Method
The observational studies method involved selecting three people to represent a range of
potential respondents and responses in order to identify potential problems. In this testing
phase, the respondents are told that the questionnaire is in its development stage and that
they are being asked to help improve it. It is a ‘declared’ pre-test (de Vaus, 2002).
Responses from these three individuals were used purely to test the instrument and not
included with any of the other data collected.
Person 1 represented an individual who had much experience with financial planners. This
ensured that at least one study involved a response to almost all questions. Person 2
represented an individual who was not currently employed and therefore may have had a
different attitude to the survey. Person 3 represented an individual who did not have
tertiary qualifications and had not yet seen a financial planner. This tested (i) if the survey
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Chapter 5: Methodology
was clear about what questions were required to be answered/sequencing, (ii) the interest
level of the respondent and (iii) ease of readability/potential jargon issues.
Thought was given to some key aspects of the form that was of concern or expected to be
problematic as outlined in Table 5-4 below.
Table 5-4 Questionnaire design concerns
Concerns
Introduction
Instructions
Sequencing
Response choice
Readability/Layout
Meaning
Word choice
Perplexity
Time to complete
Details
Was the purpose of the survey clear? Did it have credibility? Is confidentiality assured?
Were they easy to understand?
Correct numbering of questions and pages – were any questions missed?
Inclusion of all possible responses for all types of respondents. Were there enough
options or more than one response chosen?
Were the questions easy to read and follow?
What did the respondent think the question was asking – did it match the intention of the
question?
Did the words used suggest the meaning intended? Were any words ambiguous or
difficult to understand? In particular what meaning did the words chosen for question 10
invoke?
Were there any questions where the respondent was likely to hesitate (for example, rereading a question, a puzzled look, changing their answer) which may indicate possible
confusion?
How long did the questionnaire take to complete?
An informal cognitive or “think aloud”, one–on-one interview took place with each of the
three individuals while they were completing the questionnaire. Notes were taken
throughout the interview. The questions were mostly scripted with additional questions
raised if required. The interview began with initial instructions to the respondent as
follows (adapted from Ericsson & Simon, 1993 and Czaja & Blair, 2005):
I am testing a form for a questionnaire and am trying to improve it by seeing how well it
works. I am interested to know what you are thinking as you proceed to complete the form
just as if you were receiving it in the mail. I want you to think aloud. That is, tell me
everything you are thinking. Just act as if you are alone in the room speaking to yourself. I
may ask you some questions along the way.
Further details as to how the observational study was conducted are included in Appendix
C3.
The notes and forms from the observational studies were inspected with the type and
frequency of errors analysed. The results from the observational study are summarised in
Table 5-5, below. A tick () indicates the respondent raised no concerns or errors with the
item listed whereas an “” indicates a concern or error was raised by the respondent.
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Chapter 5: Methodology
Table 5-5 Analysis of Questionnaire Concerns or Errors from Observational Study
Items with Concerns or Errors
a.
Title meaning*
Q.
No.
Intro
b.
Credibility*
Intro



c.
Confidentiality*
Intro



d.
Willingness to respond if received in mail*
Intro



e.
4



5



g.
Occupation – hesitation before writing
response/unsuitable response
Use of the word “authorised” – misleading for terms
>6 yrs .(i.e. before Financial Services Reform)
Example of Dealer Group required
6


NA
h.
Tick more than one box
7


NA
i.
Sequencing –revision required
7,8,9


NA
j.
Was SOA read thoroughly or only skimmed over?
9


NA
k.
Incorrect page number given at “No”, should be p4
5
NA
NA

l.
Use of word “focused” is ambiguous
10


NA
m
Use of word “tactful” is ambiguous
10


NA
n.
Additional relevant information - respondents raised
issue of independence of financial planner/advisers
where commissions are paid.
12



f.
Person 1
Person 2
Person 3



(  No Concern/Error,  Concern/Error reported, NA Not Applicable, * Scripted question)
The items marked with a “” were carefully considered and the questionnaire was
modified on the basis of these results. Although much time and effort went into designing
the survey instrument with care to follow best practice in this area, a number of changes
were required after the first informal testing took place. All concerns/errors were addressed
in the modified form other than item “m” as although the respondent questioned the word
“tactful”, the meaning provided by the respondent was what was originally intended. Also,
an additional behavioural characteristic was included to replace the removal of “focused”.
This was due to comments about the planners wanting to “sell” a product and also relates
to item “n” above.
In addition to the improvements required in the form design, some positive comments from
the respondents in the observational study were also received. These related to questions
being relatively simple to understand, tick boxes making the form more approachable and
quick to fill out and the clear objective of the survey. The final version of the questionnaire
can be found in .
5.4.3
Collection Method
From the many different types of questionnaire surveys available, a mail based
questionnaire method (postal method) was chosen for the following reasons:
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Chapter 5: Methodology
•
Least intrusive method of collecting the required information;
•
Comprehensive information collected to better assist in determining answers to
research questions and to guide interviews;
•
More cost effective and time efficient than interviews, face to face surveys or
telephone surveys when administered to a wide population sample;
•
Appeals to a wider range of the population without being limited to those with
internet access;
•
Simple and easy to use.
A mail survey allowed for the questionnaire to be administered to a large sample at low
cost (Veal, 2005). However, as mail surveys often have poor response rates (Neuman,
2006) a number of mitigating factors were employed, including minimising the length of
the questionnaire, adopting a simple and easy to use design and providing a reply-paid
envelope. An optional free response section was also included for respondents to add
anything else that they felt was relevant to the research and it was clear from these
responses (see chapter 6) that the respondents identified with the intent of the
questionnaire.
The first client questionnaire was administered in paper format by mail, using addresses
provided by the Australian Address Reference File (AARF). Each form was given a unique
identification code. The questionnaire was designed for self-completion, being simple to
complete using tick boxes for almost all questions. One optional free response question
was also included. The survey form was required to be mailed back to the University in a
fully addressed/reply paid envelope (provided) to assist in improving the response rate
(Mangione, 1995).
One thousand questionnaires were mailed out in the first week of April 2009 (week ‘0’)
with a request to have the completed survey posted back by April 30, 2009 (week ‘4’).
Table 5-6 (below) contains details as to the survey response pattern which indicates a peak
in responses during the week ending April 30 when the surveys were due.
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Chapter 5: Methodology
Table 5-6 Mail survey response pattern: client questionnaire 1
Week
1
2
3
4
5
6
7
Total
Returned
to Sender
0
1
26
4
1
0
0
32
Completed
0
0
34
99
34
9
3
179
A total of thirty-two envelopes were returned to the university marked ‘returned to sender’,
with many also showing the markings ‘not at this address’, possibly because the respondent
believed that the letter was not intended for them but a former resident. One of these
envelopes had an insufficient address. The high number of surveys ‘returned to sender’
raised some concerns as to the currency and accuracy of the addresses provided in the
database, although the database provider had assured the researcher that the database was
previously maintained to keep its currency so to avoid such issues.
Further details as to the response rate and research findings are contained in chapter 6.
5.4.4
Methods of Data Analysis
Data from the client questionnaire was primarily subjected to quantitative analysis in the
first instance followed by qualitative analysis in later stages. Due to the large amount of
data consolidation and analysis involved, the questionnaire survey data was well suited to
computer-based statistical analysis (Veal, 2005). Statistical analysis of the questionnaire
data was conducted using the IBM computer software known as Statistical Package for the
Social Sciences (SPSS). The SPSS for Windows (Version 22) software was used to
undertake a range of analyses including frequency distribution, cross-tabulation, means,
and percentage distributions prior to subjecting the data to numerous statistical tests such
as chi square, t-tests and analysis of variances (ANOVA) as a means to address research
questions one, three and four.
In later stages of data analysis, qualitative methods were adopted to assist in interpreting
the findings which involved triangulating the data with the other questionnaires and
transcribed interviews. This assisted in drawing out any emerging themes and provided
greater depth and understanding of the data to analyse the research questions.
An overview of the steps involved in the questionnaire data analysis stage is provided in
Figure 5-3 below.
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Chapter 5: Methodology
2. Data entry
3. Data
screening
4. Frequencies
5. Multiple
response
6. Recode
7. Means
8. Weighting
9. Crosstabs
10. Statistical
Tests
11 Graphics
12. Emerging
themes
13.
Triangulation
1. Preparation
Source: Adapted from Veal (2005, p. 226)
Figure 5-3 Overview of questionnaire data analysis process
Preparing the data for analysis
In preparation for the data to be analysed by SPSS, data from the questionnaire first needed
to be coded (Veal, 2005). This meant that the responses were required to be converted to
numerical codes and organised in a systematic fashion. For the majority of questions
(except questions 14 and 16), there was only one response required and many questions
were already pre-coded with the codes discreetly printed alongside the boxes for each
response, ready for entering directly into the computer. A new code number was allocated
and manually recorded where additional responses were provided (such in an ‘Other –
please state’ field) and for the open-ended ‘free’ response question (question 16). Unique
codes were given to each free response which would later, after some initial analysis, be
grouped into more manageable and meaningful categories. Questions 13 and 15 included
scaled answers to Likert scales and were coded accordingly. For example code ‘1’ for
‘strongly disagree’ through to code ‘5’ for strongly agree. Other answers such as in
questions 1, 3 and 6 included a number already so there was no need to code these
responses. For example, ‘Please indicate the year you last sought advice’.
A coding sheet (see Appendix C4) was used to keep a record of the codes allocated to the
responses for each question, and also to assist in setting up the database correctly in SPSS.
The coding sheet listed each question number, a brief description (or name) of each
question, an abridged name for each question (to be used as the SPSS variable name which
has a limited number of characters), a description of each code and a column for any
specific coding instructions or notes to consider when analysing the data.
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Chapter 5: Methodology
Once the coding sheet was finalised, the SPSS data file was set-up by defining the
variables using the Variable View window in SPSS. Variables such as those included in the
coding sheet were entered along with a variable representing the identification number
allocated to each questionnaire. Each variable was defined according to its type
(numerical/string/date), width, decimals, label, values, measure (nominal/ordinal/scale),
alignment and how to treat any missing data.
Data entry
The data from the questionnaire surveys was entered in the Data View window after the
variables had been correctly defined. As part of the data entry process, it became evident
that there were a number of questions where the respondent had chosen more than one
response and each one of these responses needed to be included as a separate variable. For
example, some respondents selected two occupations for question 4, more than one
remuneration payment type for question 10 or more than one reason why they have not
sought financial advice in question 14. These questions were re-defined as multiple
response, dichotomous (two values only) variables because each answer was essentially a
yes/no variable (Veal, 2005) with it being possible for all boxes to be ticked. In addition, as
some respondents provided more than one response to the open-ended ‘free response’
question (question 16), it was necessary to re-define it as a multiple response, categories
variable so that up to 5 answers could be recorded. A coding system (see Appendix C5)
was devised to group these raw responses into more meaningful categories to assist in
understanding the role of trust in personal financial planning.
Data Screening
The next step in the analysis process involved screening the data to ensure its accuracy and
to check assumptions, in addition to assisting with decisions surrounding which statistical
tests will be most appropriate (Hills, 2011, p. 44). The procedure used for screening the
data is outlined in Table 5-7 (below).
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Chapter 5: Methodology
Table 5-7 Data screening procedure: client questionnaire 1
1.
2.
3.
4.
Procedure
Checked accuracy of data for
any out-of –range entries or
other data entry errors
Examined missing data – is it
systematic or random?
Looked for outliers
Checked for normality/parametric
test assumptions
•
•
•
•
•
•
•
•
•
•
Method
Frequency tables
Descriptive statistics
Result
Gender – one case entered as code ‘3’
(queer) for gender.
Look for evidence of
differential mortality
Histograms
Boxplots
Confirm by obtaining z
scores.
Missing data is ‘user defined’.
Histograms
Descriptive statistics –
skewness and kurtosis
Shapiro-Wilk test
Repeat tests after
dealing with outliers
Visual inspection of histograms and
boxplots revealed the following outliers:
•
Gender – outlier coded as 3
•
Occupation 1 – 4 coded over 30
which is not in normal distribution –
need to combine occupations &
recode.
•
Last time advice was sought –
1990 is outlier – all others normal
(1994-2010)
•
Financial planner type – above 16
are outliers. Coding to be checked.
•
Payment type– codes 11 &12 are
outliers
Visual inspection of histograms
revealed normal distributions for all
variables other than those with outliers
outlined above.
Data analysis
A number of methods of data analysis were applied in this study to assist in answering
research questions one, three and four. These methods included using SPSS for Windows
(Version 22) to obtain descriptive statistics, frequency distribution, cross-tabulation,
means, percentage distributions, Chi square test, the t-test and analysis of variances
(ANOVA).
The first step in analysing the data involved obtaining a demographic profile of the sample
through using descriptive statistics of demographic variables such as age, gender,
geographical location and occupation.
For the purposes of addressing research question 1, the sample was split into those who had
received financial advice and those who had not. The sample of respondents who had
received financial advice was then used to examine two main themes as outlined above in
Table 5-3, being firstly, the usefulness of the Statement of Advice (SOA) and secondly, the
behaviours observed of personal financial planners/advisers.
There were essentially three possible responses available to describe the usefulness of the
SOA: useless SOA; useful but irrelevant SOA; useful and relevant SOA. Frequency and
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Chapter 5: Methodology
percentage distributions were used to summarise variable data to determine how useful the
SOAs were in addressing the client’s needs and provided a measure of trust to reflect
characteristics such as reliability, dependability and ability.
Fifteen behaviours of personal financial planners, as observed by clients, were measured on
a five-point Likert scale to examine the both the characteristics of trust evident in financial
planning (research question one) as well as the importance of various individual factors on
trust (research question three). A total score out of a possible 75 (known as the financial
adviser behaviour score or FABS) was calculated by adding all fifteen scores, with the
lowest possible score being fifteen.
After allowing for reverse coded items, medians of the ordinal data were calculated and
used in cross-tabulation tables to compare with the usefulness of the SOA.
Statistical tests such as the Chi-square test, the t-test and analysis of variance (ANOVA)
were undertaken to reveal any significant relationships between variables such as
demographics and usefulness of SOA that may warrant further investigation.
To further assist in addressing research question three, frequency distributions were used to
ascertain the main organisational structures and the number of cases where a client
identified with regulatory requirements being adhered to (namely provision of an AFSL
number and a FSG). This data was cross-tabulated along with the usefulness of SOA and
the behaviours of financial planners to reveal any impact of these systems-based trust
factors.
Frequency distributions were also conducted on types of payment made by the client to
assist in answering research question four. The Chi-square test, the t-test and analysis of
variance (ANOVA) were undertaken to reveal any significant relationships between type
of payment and other variables.
The open-ended/free responses were entered into a Microsoft Word document with an
identifier. An initial manual analysis using ‘open coding’ (Neuman, 2006) was conducted
by using the ‘text highlight colour’ in word to identify major themes and assign initial
codes. A second and subsequent passes were conducted to review initial codes, divide data
into sub-themes and to classify themes as positive or negative before applying selective
coding to identify and select data to support the conceptual coding categories. Histograms
were employed to visually represent trends and patterns in the data to assist in explaining
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Chapter 5: Methodology
any significant relationships between variables in the questionnaire and to answer the
research questions. The word file was also processed through data-mining software
program Leximancer (version 4, 2013) as described in section 5.7.4, to visually show the
conceptual structure of the responses and the interrelationships that exist.
Results of both the quantitative and qualitative analyses are presented in Chapter 6, along
with associated graphical presentation. Further discussion and triangulation of the
questionnaires and interview data are provided in Chapter 7.
5.4.5
Reliability and Validity
Pilot testing of the questionnaire as outlined in section 5.4.2 was conducted to improve the
reliability of the data. Reliability of the FPBS scale was also tested using Cronbach’s alpha
coefficient.
5.5
Client Questionnaire 2 (post-GFC)
5.5.1
Sample Selection
The target population for the second client questionnaire was also financial planning clients
(including past clients, current clients or potential future clients) of the Australian
population aged 18 and over. A larger sampling frame (1,500) was used than with client
questionnaire 1, as a lower response rate was expected than in the first phase of the study
(as the AARF database was not used and hence mail was unable to be personally
addressed).
Due to logistical challenges, coupled with a large increase in the minimum cost of the
AARF which was used in the first client questionnaire, the second client questionnaire
utilised the Unaddressed Mail Service (UMS) to randomly access a sample of the
Australian population. Multi-stage sampling was conducted to subdivide the sample
proportionately across residential postcode delivery points in each state. Care was taken
not to reduce the delivery points too much so that the full range of population and area
types were included.
Further details about the collection method are outlined in section 5.5.3.
5.5.2
Survey Design
For comparability purposes, the design of the second client questionnaire (post-GFC)
79
Chapter 5: Methodology
replicated many of the questions used in the first client questionnaire (pre-GFC). However,
at the time that these questions were prepared, the GFC event had not occurred. The GFC
event placed the spotlight on the integrity of financial advisers and it became apparent that
further research was required to address concerns that were being publicised in the media
but had received little attention both academically and practically. Coupled with responses
from clients in CQ1, this led to the development of further questions surrounding trust. As
a result, additional questions (for example, question 1 and question 16) were included in
client questionnaire 2 in order to assist in understanding the role of trust since the GFC.
Previous trust literature was sourced to assist in the development of these questions. Survey
question items were developed from a number of sources including the Birkett (1996)
financial planning competencies; behavioural skill research of Jackling and Sullivan
(2007); the research project commissioned by CPA Australia on the impact of FSRA (CPA
Australia, 2005) and items adapted and tailored from trust scales utilised in the literature
(Johnson-George and Swap, 1982; Lewis and Weigert, 1985; Rempel, Holmes and Zanna,
1985; McAllister, 1995; Bigel, 1998; Christiansen and DeVaney, 1998; Rousseau et al,
1998; Sharma and Patterson, 1999; Johnson and Grayson, 2005 and Sharpe et al, 2007).
Table 5-8 (below) outlines the additional themes addressed in client questionnaire 2 to
assist in answering the research questions in the study. These additional themes, supported
by the literature, were derived from client questionnaire 1 responses and changes in the
financial planning environment to assist in understanding the role of trust in the clientplanner relationship.
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Chapter 5: Methodology
Table 5-8 Additional themes addressed by client questionnaire 2
Theme
Ethical
Integrity
Dependable
Benevolent
Competence
Credentials
GFC
Legislation
Experience of adviser
Business Size
Business Reputation
Common
interests/shared values
Adapted Trust Scale –
Dependability,
Predictability, Faith
Communication
Confidence
Genuine Care /Nurturing
Remuneration
General vs Specific Trust
Reference to Previous Research
Lewis and Weigert 1985; Shockley-Zalabak
2011; Fulmer & Gelfand 2012
Lewis and Weigert 1985; Mayer, Davis and
Schoorman 1995
Johnson-George and Swap 1982; Rempel,
Holmes and Zanna1985; Rousseau et al 1998;
Svennson 2004;
Johnson and Grayson 2005
Lewis and Weigert 1985; Rempel, Holmes and
Zanna1985; Mayer, Davis and Schoorman 1995;
Nooteboom 2002; Johnson and Grayson 2005
Mayer, Davis and Schoorman 1995; Nooteboom
2002; Svennson 2004; Jackling and Sullivan
2007
Zucker 1986; McAllister 1995; Johnson and
Grayson 2005; Sharpe et al 2007
Schoorman et al 2007; Kim et al 2009
Fulmer and Gelfand 2012
Child and Mollering 2003; Rao, Pearce & Xin
2005; Fulmer and Gelfand 2012
Bigel 1998
Rousseau et al 1998
Rousseau et al 1998; Stewart 2003; Lin et al
2011
Johnson and Grayson 2005 p.503 citing Byrne
1969; Zajonc 1980; Morgan and Hunt 1994;
McAllister 1995; Christiansen and DeVaney
1998; Gaudine and Thorne 2001
Rempel, Holmes and Zanna 1985; Crosby et al
1990; Moorman, Zaltman and Deshpande 1992;
Christiansen and DeVaney 1998
Anderson and Weitz 1989; Anderson and Narus
1990; Moorman Deshpande and Zaltman 1993;
Morgan and Hunt 1994; Christiansen and
DeVaney 1998
Crosby et al 1990; Moorman, Zaltman and
Deshpande 1992; Sharma and Patterson 1999
Rempel, Holmes and Zanna 1985; Sharma and
Patterson 1999; Nooteboom 2002
None found – additional question to that in client
questionnaire 1
Validity check
Questionnaire
Reference
1d, 12p,13g
Research
Question
RQ1, RQ5
12q
RQ1
12r, 16a
RQ1
12t
RQ1
1d, 13a-13g, 14,
15, 16n, 16p
RQ1
1h, 1l
RQ1, RQ3
1i,1k
RQ6
1g
RQ3
1b
1c
1e
RQ1, RQ3
RQ3
RQ3
1f, 1m
RQ1
16a-16l
RQ1
13b, 13 c, 16m-n
RQ1
16d, 16k
RQ1
12s, 16i, 16o
RQ1
1g, 1j
RQ4
1a, 1n
RQ1,RQ3
A complete copy of the second client questionnaire is contained in Appendix C8.
5.5.3
Collection Method
The second client questionnaire was administered in paper format by mail, using Australia
Post’s Unaddressed Mail Service (UMS). The database used for the first client
questionnaire was no longer feasible due to logistical challenges. After a lengthy
discussion on April 12, 2012 with First Direct Solutions, it was decided that a letterbox
drop with Australia Post using the UMS would be the most efficient alternative.
Lodgement of documents through the UMS took place on August 27, 2012 for mailing in
81
Chapter 5: Methodology
the week commencing September 3, 2012. To assist with planning the UMS delivery, files
were provided by Australia Post which showed indicative numbers of residential delivery
points within postcodes in each state as at August 2012. Proportionate random postcode
samples were then obtained from these files with 1381 questionnaires lodged with post
office delivery points in each state as shown in Table 5-9 below.
Table 5-9 Mail surveys delivered by state: client questionnaire 2
Victoria
Queensland
Western
Australia
Northern
Territory
Tasmania
South
Australia
New
South
Wales
Total
323
298
159
12
38
114
437
1381
The questionnaires along with participant information sheets and reply-paid envelopes
were posted in C5 envelopes which included the University logo and were addressed ‘To
the Householder’ in line with UMS requirements (see Appendix C11 for sample). This
differed to the envelopes used for the first client questionnaire where the database allowed
for envelopes to be personally addressed to the respondent. For this reason, it was expected
that the response rate may be lower for the second client questionnaire.
The mail out began the week commencing September 3, 2012 (week ‘0’) with a request to
have the completed survey posted back to the University in a fully addressed/reply paid
envelope (provided) by September 30, 2012 (week ‘4’). The poor response rate led to an
additional letterbox drop of 130 questionnaires after this date, bringing the total
questionnaires issued to 1,511. Table 5-10 contains details as to the survey response
pattern.
Table 5-10 Mail survey response pattern: client questionnaire 2
Week
1
2
3
4
5
6
7+
Total
Completed
3
7
3
2
0
0
15
30
Unfortunately the response rate was much lower for the second client questionnaire.
However it was not possible for each UMS article to be tracked to check that delivery
actually occurred, nor does the UMS provide a return to sender (RTS) service. Further
details regarding the service and correspondence with Australia Post on this matter are
included in Appendix C12 . Further discussion surrounding the response rate is included in
Chapter 6.
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Chapter 5: Methodology
5.5.4
Methods of Data Analysis
Data from client questionnaire 2 used similar methods of data analysis to client
questionnaire 1. The data was first subjected to quantitative analysis with qualitative
methods of data analysis used in later stages. As in section 5.4.4, the large amount of
questionnaire survey data was well suited to computer-based statistical analysis (Veal,
2005) and statistical analysis of the questionnaire data was conducted using the IBM
computer software known as Statistical Package for the Social Sciences (SPSS) for
Windows (Version 22).
A range of analyses were undertaken including frequency distribution, cross-tabulation,
means, and percentage distributions prior to subjecting the data to numerous statistical tests
such as chi square, t-tests and analysis of variances (ANOVA). Qualitative methods were
adopted in later stages to assist in interpreting the findings which included triangulating the
data with the other questionnaires and transcribed interviews which assisted in providing
greater depth and understanding of the data.
An overview of the steps involved in the data analysis stage is provided in Figure 5-3 in
section 5.4.4 above.
As part of the preparation stage, the data was coded to allow for the data to be analysed by
SPSS. Much of this process was similar to that in client questionnaire 1. A new code
number was allocated and manually recorded where additional responses were provided
(such in an ‘Other – please specify’ field) and for the open-ended ‘free’ response question
(question 22). Unique codes were given to each ‘raw’ free response and grouped into more
manageable and meaningful categories. Questions 1 (a-n), 12 (a-t), 13 (a-g) and 16 (a-p)
included scaled answers to Likert scales and were coded accordingly. For example code ‘1’
for ‘strongly disagree’ through to code ‘5’ for strongly agree. Other answers such as in
questions 3, 18 and 21 included a number already so there was no need to code these
responses. For example, ‘Please indicate the year you last sought advice’.
A coding sheet (see Appendix C9 ), setting up of the SPSS data file and screening the data
was conducted similar to that described in section 5.4.4 (above). To address research
question 6, the same methods of data analysis were used as in client questionnaire 1 where
questions in both questionnaires were identical. This allowed for items such as payment
type, usefulness of SOA and behaviours of financial planners to be compared pre-GFC to
post-GFC. As each of the additional items addressed in client questionnaire 2 (as
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Chapter 5: Methodology
identified in Table 5-8) were ranked using a five point Likert scale, the median score was
calculated to provide summary descriptive statistics. Cross-tabulations of these median
scores with other variables were compiled to detect associated relationships to assist in
answering research questions one, three, four, five and six. Some clustered bar charts and
Chi square tests were also used.
The open-ended comments assisted in explaining results provided by other sections of the
questionnaire and were analysed in a similar way to the interview transcripts (see section
5.7.4) using Leximancer. A thorough study of the statistical tests and associated graphical
presentation revealed emerging themes, with the results provided in Chapter 6. The
quantitative data from the questionnaires, along with qualitative data such as open-ended
comments and interview data were then able to be triangulated to answer the research
questions which are discussed in Chapter 7.
5.5.5
Reliability and Validity
Pilot testing of the questionnaire was conducted as a means to reduce ambiguity of survey
questions and improve reliability of data collected. In addition, client questionnaire 2 was
designed in such a way that a number of similar questions were asked throughout the
survey that were expected to have consistent responses from the same participant. For
example, question 1(f) and 1(m); 16(e) and 16 (h) (reverse coded); 16(d) and 16 (1). To
maximise reliability of results, any surveys found to have inconsistent answers to these
questions were excluded from the data analysis.
Reliability of the data was also tested using Cronbach’s alpha coefficient.
To check for construct validity, a question was included in the survey to measure
trustworthiness in general (1n) as opposed to trustworthiness of financial advisers
specifically (1a). For example, question 1(n) ‘I find it easy to trust people’.
5.6
Financial Adviser Questionnaire
5.6.1
Sample Selection
It is estimated that there are 18,000 financial advisers in Australia (Ripoll Report, 2009).
The sample chosen for the financial adviser questionnaire included systematic random
selection of 1,500 financial service representatives across Australia who are registered with
the Australian Securities and Investment Commission as holding an Australian Financial
84
Chapter 5: Methodology
Services Licence (AFSL) or registered as an Authorised Representative of an AFSL
licensee. An AFSL Representatives Report was purchased from ASIC (Information
Services Department) for a small cost of $110. The report, provided as a Microsoft Excel
file, included a listing of 58,927 Australian Financial Services (AFS) representatives along
with the representative number, AFS License number, start date, mailing details,
authorisations (for example general financial product advice – for a complete listing see
Appendix C13) and trading name.
Before the random selection process could take place, the file was cleaned which resulted
in the removal of 23,713 listings that showed ‘company only’ details with no individual
names/contacts and the removal of an additional 1,015 listings where the trading name
indicated that the representative was from a business type other than financial services (for
example: car, yacht, motorbike, caravan or aviation dealerships; computer dealerships;
photography (Kodak) dealers; real estates, property & strata management services;
chemists and removalists).
This left a total of 34,199 listings in the sample population that satisfied the criteria. These
listings were each given a random number using the RAND function in Microsoft Excel
and sorted by random number to generate a random sampling frame of 1,500
representatives. The names and mailing addresses of these individual representatives as
provided by the ASIC AFSL Representatives Report were used for posting of the
questionnaires to the sample.
Due to some unopened mail being returned with “insufficient address” or “not at this
address” (see further details in the section on ‘collection method’), an additional 200
representatives (not previously selected) were sought from the ASIC AFSL
Representatives Report. This sample more specifically targeted the sample criteria by only
including authorised representatives with the ‘FIN’ (Provide financial product advice)
authorisation, rather than all authorisation types (for a full list see Appendix C13). A
random sampling frame of 200 was generated using the RAND function in Microsoft
Excel. The mailing addresses in this listing were then individually checked and any
addresses deemed ‘undeliverable’ were deleted with the next randomised listing selected to
make up the sampling frame of 200.
In addition, where possible, the trading name or business name was also included in the
mailing address in the hope that this would better target delivery. The trading name or
85
Chapter 5: Methodology
business name was obtained by utilising one of the following methods:
i.
including the ‘trading name’ field from the ASIC report in the address line;
ii.
searching the representative’s details on the ASIC on-line professional register for
AFS licensees and authorised representatives at:
<https://connectonline.asic.gov.au/RegistrySearch/faces/landing/ProfessionalRegist
ers.jspx?_afrLoop=9390051447098164&_afrWindowMode=0&_adf.ctrlstate=oom4a6bvo_4> to obtain the relevant business name (in seven cases, this
search also revealed that the authorised representative had ceased as a
representative since the date the ASIC report had been compiled - a further random
sample selection was made from the database in this instance to replace the ceased
representative in the sample;
iii.
conducting a Google Maps search on-line of the representative’s address to obtain a
‘street view’ to reveal more details about the delivery address such as the name of
the building, or business name and/or to ensure the address is still current;
iv.
conducting a general Google search on the representative’s name and the words
“financial planning” which led to employer websites or social network site Linked
In which further revealed the business name.
5.6.2
Survey Design
The financial adviser questionnaire was designed to determine the extent to which various
factors (for example, age, education, experience, organisation type and size, remuneration
practices, ethical development) may impact on the trust of clients. As outlined below in
Table 5-11, some questions mirrored those included in the client questionnaires to allow
for comparison of similarities and differences in responses between client and adviser to
address research questions one, three, four, five and six to explain the role of trust in
personal financial planning.
86
Chapter 5: Methodology
Table 5-11 Matching of questions in client questionnaire and financial adviser
questionnaire
Theme
Behavioural Skills
Ethical
Integrity
Dependable
Benevolent
Competence
Credentials
GFC
Legislation
Experience of adviser
Business Size
Business Reputation
Adapted Trust Scale –
Dependability,
Predictability, Faith
Communication
Confidence
Genuine Care /Nurturing
Remuneration
General vs Specific Trust
Financial Adviser Questionnaire
(FAQ) Reference
Part A
Part C
8a-o
1d, 8p, 9g
8q
8r, 11a
8t
1d, 9a-g,
1, 11k
1i, 1m
1j, 1l
1g
1b
1c
1f
11a-e, 11g-i, 11k
1, 2
9b, 9c, 11k
11j
8s, 11d, 11h
1g, 1k, 7
1a, 1e,
Client Questionnaire 2
(CQ2) Reference
Research
Question (RQ)
12a-12o
1d, 12p,13g
12q
12r, 16a
12t
1d, 13a-13g, 14, 15, 16n,
16p
1h, 1l
1i,1k
1g
1b
1c
1e
16a-16l
RQ1, RQ3
RQ1, RQ5
RQ1
RQ1
RQ1
RQ1
13b, 13 c, 16m-n
16d, 16k
12s, 16i, 16o,
1g, 1j
1a, 1n
RQ1
RQ1
RQ1
RQ4
RQ1,RQ3
RQ1, RQ3
RQ6
RQ3
RQ1, RQ3
RQ3
RQ3
RQ1
Specific questions for the financial adviser questionnaire as addressed in Table 5-12 below
were developed from the literature to assist in examining research questions two and five.
Table 5-12 Questions developed specifically for financial adviser questionnaire
Theme
Integrity
Honesty
Work history
Genuine care/Nurturing
Validity check
Competence
Dependability
Ethical Development
(DIT1)
Education
Reference to Literature
FAQ Reference
Hoffman 2002 p92
Hoffman 2002 p54, p90
Bigel 1998
McAllister 1995 p37, p39
Hoffman 2002 p54
Hoffman 2002 p95
Hoffman 2002 p95
Rest 1979
Part A -1h
Part A - 1n, 1o
Part A- 4, 5, 6
Part A – 11l, 11m
Part A – 11n
Part A- 11o
Part A – 11p
Part B
Research
Question
RQ2
RQ2
RQ2
RQ2
RQ2
RQ2
RQ2
RQ5
Zucker 1986, Bigel 1998, Sharpe et al 2007
Part C – 1, 2
RQ5
With regards to Part B of the financial adviser questionnaire, copyright permission was
obtained from the University of Alabama Office for the Study of Ethical Development to
use three of the ethical dilemma stories from the DIT 1 (Rest 1979) in the financial adviser
questionnaire to calculate the mean P-score to measure the ethical development of financial
advisers in Australia. This would enable the score to be compared to Bigel’s study of
Certified Financial Planner (CFP) licensees in the United States (1998), real estate
salepersons remunerated through commissions (Izzo 2000), other professions and adults in
87
Chapter 5: Methodology
general (Rest, 1994, p.14). In addition, this information could be compared with various
trust indicators in the same questionnaire to further examine the relationship between trust
and ethical development.
The DIT is a useful and reliable measure for a number of reasons:
1.
Ease of administering: the test is a multiple choice based test that can easily be group
administered;
2.
Versions of this test have been used for over 35 years in over 40 countries (Rest,
1994, p.19) and across a range of secondary and tertiary level students as well as a
range of professions and emerging professions;
3.
Demonstrated high levels of reliability and validity (Rest et. al.1999, p. 644);
4.
Relies on ‘implicit or tacit knowledge that has been garnered through social
experience’ (Narvaez and Bock, 2002, p.309) and not on verbal explanation so as to
allow reasoning at the upper end of the zone of proximal development (Rest, 1973).
As with the client questionnaires, the financial adviser questionnaire also provided
respondents an opportunity to make further comment on the research topic through the use
of an open-ended or free response question at the end of the questionnaire.
Pilot Testing the Financial Adviser Questionnaire
The financial adviser questionnaire was pilot tested for both newly developed questions as
well as those adapted or adopted from questions previously used in the literature. Three
financial advisers who had a range of characteristics resembling those from the intended
sampling frame were asked to participate in the declared pilot test.
The pilot test used the observational studies method similar to that discussed in section
5.4.2 and outlined in Table 5-4 and Appendix C3 (1-6), with the additional step of
including a general critique from the each of the pilot respondents as a financial advising
‘expert’.
Observation notes and survey forms from the pilot test were analysed, noting the type and
frequency of errors analysed. The results from the observational study are summarised in
Table 5-13 below.
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Chapter 5: Methodology
Table 5-13 Analysis of financial adviser questionnaire: concerns or errors from pilot
study
Items with Concerns or Errors
Q. No.
Person
1
Person
2
Person
3
a.
Title meaning*
Intro



b.
Credibility* : should make it clear that the study is not
sponsored by or funded by any industry body or commercial
institution.
Intro



c.
Confidentiality*
Intro



d.
Willingness to respond if received in mail*
Intro



e.
Time to complete questionnaire is longer with the ethics
questions. Up to 30 minutes.
PIS



f.
Remove word ‘rewarded’/ change to “I would support a fee for
advice model rather than commissions”
1(k)



g.
Amend wording for first response to include ‘Advice business
with dealer group as licensee’ and include additional
response ‘Accounting practice with dealer group as licensee’
3



h.
Change wording from ‘How many years have you spent with
your most recent employer?’ to ‘How many years have you
worked as a financial adviser?’
5



(  No Concern/Error,  Concern/Error reported, * Scripted question)
In addition, the results from the observational study indicated that most of the time taken to
complete the questionnaire was spent on the ethical dilemmas. In one case, the respondent
took close to 30 minutes to complete the questionnaire.
The items marked with a “” were carefully considered and the questionnaire was
modified on the basis of these results. The final questionnaire is available in Appendix
C15.
5.6.3
Collection Method
The questionnaire was originally intended to be administered on-line (using
SurveyMonkey) through the peak industry bodies including the Financial Planning
Association (FPA), Financial Services Institute of Australasia (FINSIA), Institute of
Chartered Accountants and CPA Australia. Initial contact with the largest industry body for
financial planners, the FPA and later with CPA Australia, revealed that there would be
difficulty in obtaining email contact lists for members as a result of privacy issues. As a
result, an alternative collection method would be required.
As discussed in section 5.6.1 (sample selection), the AFSL Representatives Report
(prepared by ASIC - Information Services Department) provided a mailing address for
89
Chapter 5: Methodology
Australian financial service licence holders (but no email address). This led to the decision
that the data collection for the financial adviser questionnaire would be administered in
paper format by mail, using addresses provided in the AFSL representative report. Each
form was given a unique identification code. Like the client questionnaires, the financial
adviser questionnaire was designed for self-completion, being simple to complete using
tick boxes for almost all questions. One optional free response question was also included.
The survey form was required to be mailed back to the University in a fully addressed,
reply paid envelope (provided) to assist in improving the response rate (Mangione, 1995).
Preparation of the first batch of mailing documents took place from February, 2013 with
participant information sheets, survey questionnaires and reply-paid envelopes placed into
standard DL size envelopes for posting to addresses from the ASIC database. The mail out
began in the second week of February (week ‘0’) with a request to have the completed
survey posted back by March 15, 2013 (week ‘5’). Table 5-14 contains details as to the
survey response pattern. Due to a large number of envelopes returned unopened from the
first mail-out, a second batch of mailing documents (as outlined in section 5.6.1 sample
selection) were posted in the first week of July, 2013.
Table 5-14 Mail survey response pattern: financial adviser questionnaire
Week
st
1 Mail-out
Completed and returned
st
1 Mail-out
Returned to Sender
nd
2 Mail-out
Completed and returned
2nd Mail-out
Returned to Sender
5.6.4
1
2
3
4
5
6
7+
Total
1
10
1
12
7
1
28
60
0
66
103
37
6
4
6
222
0
5
6
4
0
0
0
16
0
5
4
4
0
0
1
14
Method of Data Analysis
As with the client questionnaires, the steps involved in the data analysis stage followed the
process provided in Figure 5-3 in section 5.4.4 above. A coding sheet was prepared and is
available in Appendix C18.
The methods of analysis in this section are discussed in terms of the three separate sections
of the FAQ.
90
Chapter 5: Methodology
Demographics
Using IBM’s Statistical Package for the Social Sciences (SPSS) for Windows (Version 22),
a demographic profile of the data provided in the final part of the questionnaire was
compiled through frequency tabulations on questions relating to age, gender, education and
professional designations. An analysis of response frequencies was conducted on this
demographic information with cross-tabulations used to detect associations with variables
in parts A and B of the financial adviser questionnaire.
Part A
To assist in answering all six research questions, means were calculated for all non-Likert
style questions to allow for comparison of the data to client questionnaires and to different
variables in the financial adviser data set such as organisational structure and payment type
through cross-tabulations, t-tests and Chi-square tests. Where the independent variable had
3 or more categories, analysis of variances (ANOVA) was conducted.
To assist in answering research questions one, two and three, medians were calculated for
the Likert-scale questions that involved fifteen behaviours of personal financial planners,
self-measured on a five-point Likert scale and added together to obtain the FABS. The
median scores for all Likert scale questions were then compared with those observed by
clients as provided by the client questionnaires using the Kruskal-Wallis test to determine
if there were statistically significant differences.
To further assist in answering the research questions, cross tabulations of the Likert scale
medians were also conducted against financial adviser work experience, current employer
type, remuneration basis and professional body membership. Where the independent
variable had 3 or more categories, analysis of variances (ANOVA) was conducted. The
Levene test was conducted to test the null hypothesis that the population variances were
equal. Where the Levene’s test was significant (Sig. < 0.05), the Kruskal Wallis test was
used as a nonparametric alternative.
Where test assumptions of normality and homogeneity of variance were satisfactory, the
Tukey HSD test was used as a post hoc analytical test of all pairwise comparisons to
determine where the differences were. Where test assumptions of normality and
homogeneity of variance were violated, post hoc comparisons between pairwise means
were conducted using the Mann-Whitney test to determine which groups showed
91
Chapter 5: Methodology
significant differences.
Pearson product-moment correlations were used to test for significance of any correlations
where variables were normally distributed and the Spearman rank correlation coefficient
used when the normality assumption was violated.
Part B
As part B related to Rest’s DIT (1979), the hand scoring and analysis procedure as itemised
in the DIT Manual (Rest, 1986) was followed. This included consulting the chart provided
to find the stage exemplified by each respondent’s item ranking. For example, if in the
Heinz story, item 6 was the respondent’s first rank, then according to the chart, this would
be a Stage 4 choice. This was repeated for each ranking up to the fourth rank and then
weighted according to rank with all results entered into a spreadsheet for each respondent.
Totals for each stage were calculated with the total points from Stages 5A, 5B and 6 giving
the raw Principled morality score (the ‘P’ score). The total raw stage scores were then
divided by 0.3 (as per directions for the ‘short form’) to express the stage percentages and
allow comparisons between forms.
Cross tabulations were used to compare the P score with various indicators such as age,
gender, education, professional membership, and work experience.
Cross tabulations were also used to compare the P score with the FABS and trust scales as
well as with variables such as employer type and remuneration type to assist in answering
research questions four and five.
Where the independent variable had 3 or more categories, analysis of variances (ANOVA)
was conducted. The Levene test was conducted to test the null hypothesis that the
population variances were equal. Where the Levene’s test was significant (Sig. < 0.05), the
Kruskal Wallis test was used as a nonparametric alternative.
Open-ended comments
The open-ended comments were analysed in the same way as the interview transcripts (see
section 5.7.4) using computer software package Leximancer. These open-ended comments
assisted in interpreting the quantitative findings, with the resulting analysis and visual
representation presented in Chapter 6.
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5.6.5
Reliability and Validity
Pilot testing of the questionnaire was conducted as a means to reduce ambiguity of survey
questions and improve reliability of data collected. As with client questionnaire 2, the
financial adviser questionnaire included a number of similar questions throughout the
survey that were expected to have consistent responses from the same participant. For
example, question 1(e) and 1(o). To maximise reliability of results, any surveys found to
have inconsistent answers to these questions were excluded from the data analysis. In
addition, the question I have NEVER told a lie was included twice, in 1(n) and 11 (n) and
assisted in testing the reliability of responses as for respondents to insist that they have
never lied is, as Hoffman puts it, ‘absurd’ (2002, p.54).
Analysis of Part B of the questionnaire followed procedures recommended by the
University of Alabama’s Office for the Study of Ethical Development which included two
internal checks on respondent reliability – one was to exclude cases where the ‘M’ score
was greater than four, and the second is the consistency check where cases were excluded
if there was an inconsistency in their 1st and 2nd ranks and their ‘scale of importance’ on
two or more stories. Furthermore, the use of the DIT 1 has proven to have appropriate
levels of reliability and validity (Rest et. al.1999, p. 644).
Reliability of the scaled data and the DIT was also tested using Cronbach’s alpha
coefficient after allowing for outliers and excluding items with missing data.
5.7
Interviews
Once the data from the questionnaires was analysed, the research was extended to include a
series of semi-structured, in-depth interviews with clients and financial advisers to address
questions informed from the survey results, and to provide a richer more complex
understanding of the role of trust in client-adviser relationships.
5.7.1
Sample Selection
Clients
Client questionnaire 2 included an invitation to respondents to participate in the interview
phase of the project. Respondents who were interested in participating in the interview
phase of the project were asked to return the invitation with their contact details and told
that they would be contacted with further information. Contact details for these
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Chapter 5: Methodology
respondents were not stored with or linked with the questionnaire results in any way.
There were 8 respondents who indicated that they were willing to be contacted for an
interview. A Microsoft Excel file was created to store the details provided by these
prospective client interviewees. The file included an ID number, along with the
participant’s name, contact phone number/s (where provided), email address (where
provided) and postal address (where provided). Columns were also included to record
contact dates and interview dates and times.
To schedule an interview date and time, participants who supplied email addresses were
initially contacted via email and then followed up by phone where possible. Those with no
email address were contacted by phone and where necessary, paperwork was mailed to
their postal address.
Financial Advisers
The financial adviser questionnaire included an invitation to respondents to participate in
the interview phase of the project. Respondents who were interested in participating in the
interview phase of the project were asked to return the invitation with their contact details
and told that they would be contacted with further information. Contact details for these
respondents were not stored with or linked with the questionnaire results in any way.
An initial number of 32 respondents indicated that they were willing to participate in an
interview to discuss their experiences in providing financial advice to clients. A Microsoft
Excel file was created to record contact details and contact methods.
First contact with financial adviser respondents took place via email and respondents who
did not provide an email address were contacted by telephone. Two weeks after the initial
contact, follow-up contact was conducted via email and phone, bringing the total to 9
financial adviser interviews.
5.7.2
Design and Structure
A number of general interview question ‘topics’ were developed from both the
questionnaire results and the literature. These include length of relationship, frequency and
type of interaction, common interests, trust building elements, reputation, ethical behaviour
and organisational culture. This was then followed by the careful design of more specific
interview questions that would provide deeper understanding of the questionnaire results,
such as those regarding distrust, the impact of regulation and the GFC. As outlined in
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Chapter 5: Methodology
Appendix C20 on page 394, the interview questions were designed to answer specific
research questions to determine the role of trust in personal financial planning and the
factors affecting trust in the client-adviser relationship.
The questions were sequenced in a manner conducive to discussion in that where possible,
questions would logically and naturally flow from the response to the previous question.
The aim was to facilitate a relaxed discussion of the question topics rather than asking
questions one after another in a formal fully structured interview. Every effort was made to
structure the interview in a way that would encourage the interviewee to participate and
offer up any information or ‘stories’ that they felt assisted in answering the questions.
As a result, the interview design was semi-structured. Firstly, it was necessary to have
some questions in order to guide the researcher and keep the discussion on track without
wasting too much of the interviewee’s time. Secondly, to make the interviewee feel
comfortable and more willing to share their experiences, the questions could not be too
rigid so a more relaxed approach was required.
In addition to the interview questions, an interview ‘checklist’ of topics was prepared in a
format adapted from Veal (2005, pp. 128-129). The questions were prepared on the basis
of this checklist which allowed for the researcher to shape the questions according to the
particular interviewee while being able to make a quick link back to the conceptual
framework of the study. The interview checklist for the clients and financial advisers are
shown in Appendix C21 and Appendix C22 respectively.
Pilot Testing the Interview Questions
The interview questions were tested on two pilot participants – one client and one adviser,
both known to the researcher. These participants did not form part of the respondent group.
As the interviews proceeded, notes were made where there may have been ambiguity about
a question or where questions did not seem to logically flow. The pilot testing resulted in a
number of small but important changes being made in addition to notes about the
questioning technique. Some changes included:
•
sequencing of some questions;
•
using the term ‘planner’ and ‘adviser’ interchangeably;
•
making the questions more open-ended, rather than questions that could be
answered as a simple yes/no;
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Chapter 5: Methodology
•
making use of a FOFA ‘cheat sheet’ for clients who may not have any knowledge
of FOFA;
•
splitting up one question into two separate questions;
•
gaining a better understanding by asking “can you tell me a little more about how
that made you feel?” or “can you give me an example?”
The pilot testing also highlighted that to keep the flow of the interview, it was sometimes
necessary to skip a question or a few questions and come back to them later as occasionally
the answer to a specific question naturally leaded into another later question. Other
advantages of the pilot testing included:
•
familiarising the researcher with the questions;
•
making the researcher more comfortable with the questioning technique, and
•
allowing the researcher to practice response techniques that are relatively unbiased
and that encourage the interviewee to provide an extended response; for example
through probing, backtracking and/or reflection.
Client Interview Questions
Final editing of the client interview questions resulted in a total of 28 questions as shown in
Table 5-15. These questions would be guided by the interview checklist. It was envisaged
that the interview would take at least thirty minutes to complete as where possible,
extended responses from the interviewees would be encouraged to gain richer, deeper,
more meaningful data.
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Table 5-15 Interview questions: clients
Question
Literature reference/s
1
How many years have you been seeing a financial adviser?
Bigel 1998
2
Why/when did you first visit a financial adviser?
N/a
3
Would you regard your financial adviser as a personal
friend/acquaintance or would you explain the relationship as
more professional?
Are you aware of any common interests you share with your
financial adviser? Can you provide some examples?
Rempel, Holmes and Zanna1985;
Sharma and Patterson 1999,
Nooteboom 2002
Zajonc (1968, 1980), Frank 1998,
McAllister 1995, Gaudine and Thorne
2001
Adapted from McAllister 1995 p.3739
4
5
6
7
8
Does your financial adviser provide you with anything above
and beyond what is set out in your advice agreement? If so, can
you explain further/provide some examples?
Tell me a little about your best experience/s with financial
advisers.
Tell me a little about your worst experience/s with financial
advisers.
On average, how often does your financial adviser interact with
you? In person? Via telephone? Via email? Via letters? Other?
N/a
N/a
Lewis and Weigert 1985; Fulmer and
Gelfand 2012
9
How do you feel about the type and frequency of interaction?
Lewis and Weigert 1986
10
What elements build trust with a financial adviser?
Moorman, Zaltman and Deshpande
1992, Crosby et al 1990 cited in
Sharma and Patterson 1999
11
Rotter 1980, Goldberg 1999, Mayer,
Davis and Schoorman 1995,
14
How would you detect if there were any trust issues with a
financial adviser? (Note here propensity to trust/institutional
trust/interpersonal trust)
Tell me what you know about your financial adviser's
qualifications or professional memberships? Do you think it is
important - why or why not?
Tell me more about the firm your Financial Adviser works for?
(Name/type e.g. insurance, bank, independent FP, dealer group
etc.) (large vs. small firm).
Does the identity of the firm affect your trust?
15
Explain what ethical behaviour consists of to you.
Lewis and Weigert 1985
16
Explain what trust means to you.
17
Do you think that behaving ethically always increases trust?
Why or why not?
Rempel, Holmes and Zanna1985;
Christiansen and DeVaney 1998
Shockley-Zalabak, P., 2011; Fulmer
& Gelfand 2012
18
What do you believe should be a financial adviser's
responsibilities for building ethical behaviour and trust?
Is your financial adviser genuinely interested in your personal
circumstances?
Do you often share issues about your personal life with your
financial adviser? If so, can you tell me more about the types of
information you might share. Why do you/do not share personal
information?
What sorts of things go through your mind when A) making an
appointment with your financial adviser? B) Going to your
appointment? C) After your appointment? (Note: Prospect of
gain vs. risk of loss)
Have you ever been emotional about things when your financial
adviser is providing advice to you? If yes - can you give an
example?
12
13
19
20
21
22
23
Explain how you reacted to the GFC.
Sharpe et al 2007, McAllister 1995,
Johnson and Grayson 2005
Rousseau et al 1998
Rousseau et al 1998; Lin et al 2011;
Stewart 2003.
Brien 1998
Rempel, Holmes and Zanna 1985
Zajonc (1968, 1980), Frank 1998,
McAllister 1995, Gaudine and Thorne
2001
Williams 2007
Sharma & Patterson 1999, Clark and
Waddell 1985, McAllister 1995 p.29,
Rempel, Holmes and Zanna 1985,
Holmes 1978, Holmes and Rempel
1989, Williams 2007.
Fulmer and Gelfand 2012; Kim et al
2009; Schoorman et al 2007
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Chapter 5: Methodology
24
Explain how your adviser dealt with issues surrounding the
GFC.
Fulmer and Gelfand 2012; Kim et al
2009; Schoorman et al 2007
25
What do you know about the newly introduced FOFA
legislation? (Provide FOFA cheat sheet if needed for next
question).
Fulmer and Gelfand 2012 (Also Child
and Mollering 2003; Rao, Pearce &
Xin 2005)
26
What are your thoughts on the newly introduced FOFA
legislation?
As above
27
A survey recently conducted by myself revealed …… Why do
you think that might be?
N/a
28
Demographics: occupation, gender, age, location
N/a
Financial Adviser Interview Questions
After editing, there were 28 financial adviser questions as illustrated in Table 5-16. These
were supported by the interview checklist to assist in guiding the interview that was
expected to take thirty minutes or more. The financial adviser interviewees would be
encouraged to extend their responses where possible and to provide examples to support
their responses. Demographic information such as age, gender and location would also be
collected where possible to assist in analysing responses.
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Chapter 5: Methodology
Table 5-16 Interview questions: financial advisers
Question
Literature reference/s
How many years’ experience do you have as a financial
adviser?
What are your qualifications/professional memberships?
Bigel 1998
How long have you been at your current place of
employment?
Where are you employed? Is it a large organisation? (no. of
employees??) In what specific area of the business do you
work? (insurance, bank, independent FP, dealer group
etc.) (large vs. small firm)
Describe what the organisational culture is like where you
work.
Bigel 1998
Would you say that your organisation encourages you to
do extra things for your clients that the client may not pay
for or that is over and above the legal requirements?
How frequently do you do extra things for your clients that
maybe you won’t be rewarded for? Why/Why not?
Tell me a little bit about how you became a financial
adviser?
On average, how often do you interact with your clients? In
person? Via telephone? Via email? Via letters? Other?
Adapted from McAllister 1995 p.37-39
10
How would you classify your range of clients?
Frank 1998
11
How would you detect trust issues with a client? Have you
had many?
Moorman Zaltman and Deshpande 1992,
Crosby et al 1990 cited in Sharma and
Patterson 1999, Rotter 1980, Goldberg
1999, Mayer, Davis and Schoorman 1995
12
Sharpe et al 2007, McAllister 1995,
Johnson and Grayson 2005
13
Have your clients asked you about your qualifications of
professional memberships? Do you think it is important to
your clients - why or why not?
Does your organisation have a code of ethics?
14
Explain what ethical behaviour consists of to you.
Lewis and Weigert 1985, Rest 1994
15
Explain what trust means to you.
16
Do you think that behaving ethically always increases
trust? Why or why not?
What do you believe should be a financial adviser's
responsibilities for building ethical behaviour and trust?
Rempel, Holmes and Zanna 1985;
Christiansen and DeVaney 1998
Shockley-Zalabak, P., 2011; Fulmer &
Gelfand 2012
Brien 1998
1
2
3
4
5
6
7
8
9
17
18
Sharpe et al 2007
Rousseau et al 1998
Trevino 1986, Frank 1998, Rest 1984,
Carroll 1987, Christenson 2008,
Shockley-Zalabak 2011
Adapted from McAllister 1995 p.37-39
Zucker 1986, McAllister 1995, Johnson
and Grayson 2005
Lewis and Weigert 1985; Fulmer and
Gelfand 2012
Trevino 1986, Carroll 1987, Christenson
2008
Are you genuinely interested in the personal circumstances
of your clients?
Do clients often share issues about their personal life with
you? If so, can you tell me more about the types of things
they might share with you. Why do you think this might be?
Tell me about any experiences you can recall where clients
have been emotional.
Rempel, Holmes and Zanna 1985
21
Have you ever felt emotional when providing advice to
clients? If yes - can you give an example?
22
Explain how most of your clients reacted to the GFC.
Holmes 1978, Clark and Waddell 1985,
Rempel, Holmes and Zanna1985, ,
Holmes and Rempel 1989, McAllister
1995 p.29, Sharma & Patterson
1999,Williams 2007.
Fulmer and Gelfand 2012; Kim et al 2009;
Schoorman et al 2007
23
Explain how the GFC impacted you as an adviser.
24
What are your thoughts on the newly introduced FOFA
legislation and the more recent proposed amendments?
19
20
99
Zajonc (1968,1980), Frank 1998,
McAllister 1995, Gaudine and Thorne
2001
Zajonc 1980, Nooteboom 2002
Fulmer and Gelfand 2012 (Also Child and
Mollering 2003; Rao, Pearce & Xin 2005)
Chapter 5: Methodology
25
26
27
28
What are your thoughts on education requirements for
advisers?
Have you ever visited a financial adviser for your own
personal advice?
A survey recently conducted by myself revealed …… Why
do you think that might be?
Demographics –age, gender, location
5.7.3
Zucker 1986; McAllister 1995; Johnson
and Grayson 2005; Sharpe et al 2007
Crosby et al 1990; Moorman, Zaltman
and Deshpande 1992; Sharma and
Patterson 1999
N/a
N/a
Collection method
The interviews were recorded using a high quality digital recording device. Some
interviews were undertaken face-to-face but where this was not possible, a telephone
interview was undertaken. All participants signed the participant consent form (refer
Appendix C17) prior to the interview being conducted.
Details surrounding the interview topics and types of interview questions are discussed in
the previous section. Prior to the interview, the respondent was provided with a copy of the
types of interview questions that they could expect to be asked but it was made clear to the
respondent that the interview would be conducted in a semi-structured fashion similar to a
discussion.
Although the interviews were recorded, some field notes were also taken by the researcher
during and immediately following the interview to ensure any key themes were noted. On
some occasions, notes were also taken to improve the interview process with the next
respondent and to check if any questions needed amending or new questions needed to be
asked.
Interviews were transcribed verbatim and care was taken to maintain anonymity of
participants by creating code names. A separate file relating code names to real identities
was maintained and stored on a separate computer system in the case that transcripts may
need to be related back to original respondents at a later date. Interview transcriptions were
labelled with the date and time and returned to the interviewee to check for accuracy before
being used for data analysis. A full transcript of one client interview is included in
Appendix C23.
An interview log was kept for all participants that recorded contact dates, contact methods
(for example, email, post or telephone), interview dates, interview locations and any
additional information that may be relevant (for example where a secretary may have taken
a message to relay to a participant). An additional record was kept for each interview
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Chapter 5: Methodology
participant where brief notes were taken during or immediately after the interview to note
any key themes emerging from the interview or any new questions that needed to be
replicated for future participants.
5.7.4
Method of Data Analysis
The interview data were subjected to content analysis, with assistance from computer aided
software. A four stage process was used as outlined in Figure 5-4 below.
Stage 1
Manual flagging of themes
Stage 2
Leximancer mapping of concepts
and themes
Stage 3
Manual confirmation of
Leximancer map
Stage 4
Manual interconnection of
concepts and overarching themes
Figure 5-4 Four stage content analysis
The transcribed interview data were primarily analysed using qualitative procedures which
began as a manual process. The transcribed interviews were initially presented in Microsoft
Word format and read in light of the conceptual framework and research questions
provided in chapter 4 to ‘flag’ or discover emergent themes. The ‘comments’ function was
invoked to include any notes and text was highlighted in different colours to represent
different themes. The qualitative analysis then moved to a more automated process by
using computer-aided qualitative data analysis through the use of software program
Leximancer.
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Chapter 5: Methodology
Leximancer is a software tool that provides a form of automated analysis based on the
statistical properties of texts (Sotiriadou, Brouwers and Le, 2014) and was used to search
for major themes and concepts using word associations found in the transcripts. The
resulting information is displayed visually in the form of a conceptual map where concepts
are organised into thematic clusters, represented by coloured circles. The significance of
each theme on the semantic landscape is represented by the size of the circle and the
location of individual concepts illustrates the closeness of their semantic relationship to
other concepts.
Before importing data into the software program, dialogue markers were inserted in the
Microsoft Word transcriptions to distinguish between questions and answers and to allow
the program to identify between different speakers. Speakers included the ‘Interviewer’ as
well as various ‘Interviewees’; each given their own unique ‘speaker label’, for example,
I101. Transcripts were also checked for accuracy, including spelling, and corrected where
required. Unnecessary lines or spaces were removed to prepare the transcripts for
importing to Leximancer. The process outlined in Table 5-17 was then adopted.
Table 5-17 Twelve step process undertaken for Leximancer analysis
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Step 7
Step 8
Step 9
Step 10
Step 11
Step 12
Set-up client and adviser folders in Leximancer to allow for folder and file tagging
Apply dialogue tags
Ensure correct settings for prose (e.g. zero for spoken language)
Group together singular and plural words; upper and lower case forms of the same word as
single concepts (e.g. adviser, advisers)
Conduct raw first cut analysis for pure discovery
Examine raw results and explore data in initial run to understand data and compare with
manual analysis
Explore thesaurus and links to data
Look for concepts to compound or merge (e.g. adviser, advisor, planner) and remove
irrelevant concepts (e.g. look, probably). Utilise ‘Kill Concept’ option to remove interviewer
questions from analysis
Run project and view concept map, adjusting visible concepts and theme size to aid analysis
Re-cluster map several times and inspect map on each occasion to ensure the cluster map is
representative and revise parameters where required.
Examine themes, concepts and connectivity and conduct further analysis through pathways
and queries in map explorer.
Find appropriate evidence through quotations to support themes and concepts.
The software produced a visual map of the main themes and concepts which clustered
concepts according to the relationship between them. This visual map enabled important
factors to be uncovered to assist in answering the research questions and also to discover
any emerging themes. The map showing emerging themes and concepts was compared
with the manual analysis and analysed in context with the research. The results from this
visual map are in Chapter 6.
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Chapter 5: Methodology
5.8
Ethics Approval and Confidentiality of Participant Information
The researcher acknowledges the moral and professional obligation to conduct research
ethically. This includes respecting and valuing the rights of those involved in the study and
carefully balancing this with the value of advancing theory and knowledge. As a result,
ethics approval was sought for the study, participation was voluntary and participants were
provided with information about the study before providing informed consent. In addition,
participant’s details were kept private, their identity was protected by anonymity where
possible and all information collected was protected by confidentiality. Further detail about
ethics approval and confidentiality of participant information follows.
Ethics approval
The first client questionnaire (pre-GFC) was granted ethics approval on 4 December 2008
by the University of Wollongong Human Research Ethics Committee, and given ethics
number HE08/321. Further ethics approval was provided on April 3, 2012 for the second
client questionnaire (post-GFC), financial adviser questionnaire and interviews via the
National Ethics Approval Form (NEAF) and given ethics number H9490 by the University
of Western Sydney Human Research Ethics Committee.
Further amendments to H9490 were notified and approved as follows:
1. Financial Adviser Questionnaire: sampling method varied to include use of the publicly
available ASIC Professional Register of financial advisers rather than locating participants
via member listings from professional/industry bodies. In addition, collection method
varied from an on-line survey using Survey Monkey to a mail-based paper questionnaire.
Advice to Human Research Ethics Committee (HREC) on 30/4/2012 and approved
10/5/2012.
2. Client Questionnaire: recruitment method varied to include recruitment through
“snowballing”. Advised to HREC 24/12/12. Approved 18/01/2013.
Permission to use DIT1
Copyright approval was sought from the University of Alabama Office for the Centre of
Ethical Development to incorporate Rest’s (1979) DIT 1 questionnaire into the financial
adviser questionnaire. The permission conditions required that the words ‘Copyright, 1979,
James Rest. All rights reserved’ be included in this part of the questionnaire and they were
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Chapter 5: Methodology
included on page 4 (see Appendix C15).
Confidentiality of participant information
The information collected from all three questionnaires are non-identifiable on their own.
However, it is possible that the information collected from client questionnaire 1 and the
financial adviser questionnaire could be re-identifiable as codes were used to track
documents for non-responses. The coding sheet and questionnaire forms have not been
stored together. All information from client questionnaire 2 is anonymous.
In order to conduct interviews with participants, it was necessary for the participant to
initially reveal their identity. However, the information collected from interviews used
pseudonyms to protect the identity of the participants. The information collected was reidentifiable as the interviewees were required to be contacted by the researcher for
validation of the interview transcript or for further clarification. Details matching
pseudonymns with participants were not stored together with the interview transcripts or
recordings.
All research data is held in confidence and is not presented in a way that allows specific
individuals to be linked to responses.
Participant Consent
All participants were provided with a participant information sheet (see Appendix C2,
Appendix C6, Appendix C16). Participants were required to provide their informed
consent to participate in an interview and also consent for the interview to be recorded.
This was done in writing via a participant consent form (refer Appendix C17) and also
verbally at the commencement of the interview.
Participants were given the opportunity to withdraw from the study at any time.
5.9
Summary
This chapter has discussed, and provided justification for, the methodological approach used
in the research which includes mixed methods to provide quantitative and qualitative data to
answer the research questions. Details of the sample selection process, design and structure
of the research instruments, collection methods and methods of data analysis along with
ethical considerations were provided.
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Chapter 5: Methodology
Chapter 6 of the thesis will now discuss the results of the data analysis and testing
conducted using the methodology outlined in this Chapter.
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Chapter 6: Results
Chapter 6: RESULTS
6.1
Introduction
The previous chapter examined the research design, including the sample selection process
and data collection methods and methods of data analysis that were used to address the
research questions in this study. This chapter reports on the results obtained from analysing
the data using a mixed methods approach.
Quantitative analysis of the data using statistical package SPSS provided results from
separate surveys for client and financial adviser cohorts, including demographics and other
descriptive data as well as statistics on usefulness of financial advice, organisation types,
remuneration method, financial adviser behaviour, trust factors and trust judgements.
A qualitative analysis of the open-ended comments from the survey data and the interview
data revealed greater insight and a deeper understanding of the main themes identified in
the survey questions. The results from the qualitative analysis explained a great deal about
the role of trust in the client-adviser relationship and uncovered some of the fallacies of
personal financial planning that may be partly attributable to reports in the media. For
example, the results indicated that remuneration type was not important for the
development of trust in a relationship.
Other significant findings from the study that are presented in this chapter include:
•
that there is a link between behavioural skills of financial planners and trust, as
measured by the Financial Adviser Behaviour Score (FABS);
•
that advisers self-rated their behavioural skills higher than clients did, and
•
that the ethical development of financial planners, as measured by the Defining
Issues Test (DIT) is lower in Australia than in the United States.
The use of multiple data sources and data analysis methods assisted in finding a broader
range of results than would have been found had only one method been adopted. These
results contribute to academic literature on trust, interpersonal relationships in business and
the wider ethics literature. The findings also make practical contributions to adviser
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Chapter 6: Results
behaviour, consumers, educators, the profession and the regulators.
The specific results of the research are presented in this chapter, starting with client
questionnaire 1; then client questionnaire 2; followed by the financial adviser
questionnaire; client and adviser interviews; and a concluding summary.
The results presented in this chapter are further discussed and used to answer the research
questions in the proceeding chapter (Chapter 7) on page 215.
6.2
Client questionnaire 1
6.2.1 Response Rate
One thousand surveys were mailed out in April 2009, with 3 per cent of these not reaching
the respondent (‘returned to sender’). Frankfort-Nachmias and Nachmias (1992) view 20 to
40 percent as an acceptable response rate for post-based questionnaires while Dillman
(2007), supported by Herberlein and Baumgartner (1978) estimates that response rates for
mail based surveys for general public populations are 10 per cent lower than for specialised
populations.
The response rate was 21 per cent which is higher than that of the Jackling and Sullivan
(2007) study and is typical for a postal survey conducted across a general public
population. Other factors affecting the response rate include saliency of the topic,
frequency of contact, length of the questionnaire and the general increase in the demand for
survey research which has contributed to diminishing response rates. Porter (2007) has
indicated that refusals to participate in surveys has been increasing, possibly due to
changing cultural norms and an increase in academic and marketing surveys.
There is no reason to believe that there is any particular bias in those who elected to
respond, although it has been acknowledged that non-responses are usually from those who
are less educated and older (Porter, 2004; Dillman, 2007).
All sample surveys are subject to a margin of statistical error. The margin of error, or
confidence intervals for this sample size is considered to be as outlined below (Veal, 2005)
in Table 6-1.
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Chapter 6: Results
Table 6-1 Sample Size and Confidence Intervals
Finding from this survey
(N=179)
95% confidence interval
50%
±7.4%
40/60%
±7.2%
30/70%
±6.8%
20/80%
±5.9%
10/90%
±4.4%
5/95%
±3.2%
Source: Adapted from Veal, 2005, pp. 331 & 336
This means that if 40 per cent of the sample are found to have a particular average
response, there is an estimated 95 per cent chance that the true population percentage lies
in the range of this average ±7.2 per cent (Veal, 2005, p.331).
6.2.2 Descriptive statistics and frequency distribution
The first of the descriptive analysis involved examining the frequency distribution for
demographic questions relating to age, gender, occupation group and location (by state).
These demographic categories are discussed below and are used further to assist in
answering the study’s research questions.
Age
All but nine of the 179 respondents provided their age and these ages were recoded into
five-year age groupings according to the ABS Age Standard (2014a), as displayed in
Figure 6-1 below. The 30-34 and 45-49 year age groups had the highest number of
responses (23.4%) and the 15-19 and 75-79 year age group had the lowest number of
responses (only 1 response each). These results were reflective of the intended population
as only respondents over the age of 18 were invited to participate and the topic would be
more salient to those aged 30 or older who are also more likely to have sought financial
advice. Demographic information from the ABS (2010) indicates that 57.75 percent of the
Australian population over 19 are aged between 20 and 49 which compares to 57.4 percent
in this sample of the study. The sample is representative of the Australian population.
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Chapter 6: Results
Figure 6-1 Age range of respondents: client questionnaire 1
Gender
The split of respondents (after allowing for 8 ‘missing’ entries, and one ‘queer’ response
treated as missing) were 40 percent male and 60 percent female. This differs from the
general gender distribution of the Australian population over age 19 (49 percent male, 51
percent female), however it reflects the higher proportion of females who are not
participating in the workforce (61 percent, ABS, 2014b) and thus have more time available
to complete and return the survey. There is however a risk of possible bias of results as the
female population is over-represented.
Occupation
The raw survey results for client questionnaire 1 showed thirty-four different occupations.
Due to the small numbers in several of these categories, and to make the data more
manageable and meaningful, the occupational categories were re-coded into twelve ‘major’
occupational groups. These ‘major’ groups were based on the classification of occupations
by the Australian Bureau of Statistics (ABS) (2013) along with codes for ‘retired’, ‘home
duties’, ‘not specified’ and ‘farmer’. The ABS ‘manager’ category was combined with
‘professionals’. Details of the re-coding of the occupational categories are in Appendix C4.
The majority of respondents were categorised as ‘professionals’, encompassing the
following areas:
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Chapter 6: Results
•
Arts and Media Professionals
•
Business, Human Resource and Marketing Professionals
•
Design, Engineering, Science and Transport Professionals
•
Education Professionals
•
Health Professionals
•
ICT Professionals
•
Legal, Social and Welfare Professionals
The proportion of professional workers (incorporating managers) was around fifteen
percent greater than that represented by the Australian population at the time (ABS 2014c)
which compensated for the proportion represented by sales workers and labourers which
was considerably lower. All other occupation categories closely reflected those of the
Australian population in general. A higher incidence of professional workers responding to
the survey was expected as they have been shown to be more likely to seek financial advice
and find the topic more relevant to their situation while labourers are less likely to be
interested in financial advice. It is also possible that some sales workers (which include
real estate agents and insurance agents) may have self-reported as ‘professionals’. There is
a risk of bias in that the sample population may over-represent professional workers and
under-represent labourers.
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Chapter 6: Results
Figure 6-2 Respondents by occupation: client questionnaire 1
State of residence
Respondents represented every state of Australia, with New South Wales providing the
highest number of respondents (29.6%) and Victoria following closely behind (24.1%).
The proportion of respondents from the other states follow the distribution as per post
office delivery points discussed in chapter 5, except for South Australia which had a higher
representation than expected (15% versus 8%) and Western Australia with a lower
response (8% versus 11.5%). There were a higher number of missing values (9.5%) for this
question that asked for residential postcodes, possibly because respondents were conscious
of keeping their anonymity (noting from chapter 5 that client questionnaire 1 was posted to
specific addressees unlike client questionnaire 2). The state of residence categories of
respondents are shown below in Figure 6-3.
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Chapter 6: Results
Figure 6-3 Frequency of respondents by state: client questionnaire 1
Frequency tables for a range of other variables assisted in answering the research questions
surrounding trust in the financial planning environment and are discussed below.
If/when respondents have sought financial advice
Question five assisted in establishing the proportion of respondents who had sought advice
and those who had not. Table 6-2 indicates that 48.3 percent of the respondents who
answered this question had received financial advice prior to the GFC. Of the 84
respondents who had sought financial advice, 74 provided the year they last sought advice.
This ranged from 1990 to 2009, with almost 50% of these respondents seeking advice in
2008-2009, just prior to the GFC.
Table 6-2 Number of respondents who have sought financial planning advice (preGFC)
Sought Advice
No
Valid
Yes
Total
Missing
99
Total
Frequency
90
84
174
5
179
Percent
50.3
46.9
97.2
2.8
100.0
Valid Percent
51.7
48.3
100.0
Cumulative Percent
51.7
100.0
The chart below (Figure 6-4) shows the distribution of years that clients had last sought
advice. It was expected that the frequency would begin to increase from 2001 (the
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Chapter 6: Results
commencement of financial services reform) up to 2009, considering that logically the
most recent advice would be in later years than in earlier years. However, it should be
noted that the survey was administered in April of 2009, just prior to the GFC. Converting
the 2009 figure to an annualised figure of 42 would result in the trend continuing in an
upwards direction. It is expected that economic conditions at the time would have also led
to an increase in financial advice being sought.
Note: 2009 figure represents only 4 months (January-April); annualised figure = 42.
Figure 6-4 Year respondents last sought advice – pre GFC
The 51.7 percent (N=90) of respondents who indicated they had not received financial
advice prior to the GFC were asked to provide one or more reasons as to why they had not
sought advice. The results of this question are shown graphically in Figure 6-5 below. The
most common response was that the respondents felt they did not have enough money to
invest (41% of respondents), followed by the response that they simply did not need advice
(33%). This compares to a report commissioned by CPA Australia (2005) where 35% of
respondents stated that they did not seek the advice of an investment adviser as they did not
have enough money to invest.
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Chapter 6: Results
Figure 6-5 Reasons why respondents have not sought financial advice – pre GFC
Just over 21 percent of respondents indicated that they have not sought advice as they do
not trust advisers. This highlights the lack of initial trust in advisers and the importance
placed on trust when considering whether to seek financial advice. This is further
supported by previous research that found of those not seeking financial advice, 13% did
not trust investment advisers and 17% believed that investment advisers were not
independent of products (CPA Australia, 2005).
Organisational structure
Clients provided the type of organisational structure that their financial adviser/planner
operated within. The pie chart below (Figure 6-6) indicates that banks were the most
common (30%), followed closely by dealer groups (26%).
However, it is possible that not all clients had the knowledge to differentiate between
different types of organisations as in some cases an ‘independent’ financial adviser may in
fact be aligned to a bank or dealership. ASIC has commented on the practice of re-branding
aligned financial advisers stating that 'consumers might not appreciate that they are getting
advice from an adviser that is owned by a product manufacturer' (Commonwealth of
Australia 2009, p. 79). This is further supported by MLC’s statement to the PJC that
“...there is a significant number of payments moving between parties in the industry that
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Chapter 6: Results
the client has no chance of being able to understand so they think that they might be getting
an independent outcome when, in fact, they are not” (Ibid., p.85). These issues will be
discussed more fully in the next chapter.
Figure 6-6 Financial adviser organisation type – client questionnaire 1 (pre-GFC)
Remuneration
Financial advisers are paid by clients through a variety of remuneration models, including
fee-for-service, commissions and bonuses. Fee-for-service charges may be an hourly rate, a
flat fee or a proportion of funds under management (FUM). Commissions were paid by
product manufacturers to advisers and since 2002 legislation has required all commissions
to be disclosed to clients.
Respondents who had sought financial advice were asked to indicate how they paid their
financial adviser. The results in Figure 6-7 indicate that at least 50% of respondents
selected the response ‘no payment required’ for financial advice they received between
1990 and 2009. However, it is possible that many of these respondents believed they were
not making any payment if no upfront payment was required but they may have paid their
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Chapter 6: Results
adviser indirectly through commissions on products (whether the respondent was aware of
it or not). As ASIC stated in a submission to the PJC “most financial advisers tend to
charge low or zero fees for service, in order to encourage business. They then get
remuneration indirectly by receiving commissions from product manufacturers on the
funds invested by retail investors” (Commonwealth of Australia, 2009, p.17).
Thirty-one percent of respondents indicated that they paid for advice through commissions
(noting client questionnaire 1 was administered in April 2009, prior to the FOFA reform
banning commission payments on new clients). In 2009, trailing commissions were cited as
the main remuneration method for financial planners (Ibid.). The least common payment
method identified by respondents was calculated as a percentage of funds in the portfolio
while flat fees (more likely to be paid by affluent clients) were paid in just over six percent
of respondent cases.
Figure 6-7 Remuneration provided to financial advisers 1990-2009: client
questionnaire 1
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Chapter 6: Results
To establish respondent views with regards to commission payments as a form of adviser’s
remuneration, respondents were asked to provide a five-point Likert scale response to the
question:
In your opinion, is financial advice influenced by the commissions a financial
planner/adviser may receive from investment products?
Of the 165 responses to this question, including those who had sought advice as well as
those who had not, 60 percent of respondents agreed with the statement, 30 percent were
indifferent and only 10 percent disagreed. Table 6-3 (below) provides details of the Likert
scale responses. Descriptive statistics indicated a median result of 4.00 out of 5.
Table 6-3 Client responses to the influence of commissions on financial advice (preGFC)
Frequency
Valid
Missing
Strongly Disagree
Disagree
Neutral
Agree
Strongly Agree
Total
99
System
Total
Total
Percent
3
14
50
57
41
165
13
1
14
179
1.7
7.8
27.9
31.8
22.9
92.2
7.3
.6
7.8
100.0
Valid Percent
1.8
8.5
30.3
34.5
24.8
100.0
Cumulative Percent
1.8
10.3
40.6
75.2
100.0
Regulation of advice
The Financial Services Reform Act (FSRA) as part of the Corporations Act 2001 mandated
that from 2002 all financial advisers were to provide clients with their Australian Financial
Services Licence (AFSL) number (as issued by ASIC) and a Financial Services Guide
(FSG). To identify where regulatory requirements had been adhered to, respondents were
asked if their advisers had provided them with an AFSL number and FSG. The results for
respondents who received advice after the introduction of the FSRA are provided in
graphical format in Figure 6-8 below. These results indicate that an AFSL number was
provided in only 29% of cases and an FSG in 41% of cases. However, a large number of
clients could not recall whether they had received an AFSL (44%) or FSG (25%). This may
reflect the importance that clients place on this type of information.
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Chapter 6: Results
35
32
No. of respondents
30
30
25
25
21
20
20
18
Provided
15
Not provided
10
Don’t Know
5
0
AFSL (Australian Financial
Services Licence)
FSG (Financial Services
Guide)
Information provided
Figure 6-8 AFSL and FSG provided (post FSRA) – client questionnaire 1
Usefulness of Statement of Advice
Of all the respondents who sought financial advice from 1990 - 2009, sixty-eight percent
received a statement of advice (SOA). Sixty-six percent of those who received advice after
FSRA implementation in 2002 received a SOA. Section 946A of the Corporations Act
2001 (Cwth) generally requires that financial advisers give a Statement of Advice (SOA) to
retail clients who receive personal financial advice (as opposed to general advice) 2. This
requirement is designed to ensure retail clients are given enough information for them to
understand the personal advice given to them and decide whether or not to rely on it (ASIC
Regulatory Guide 175, 2013). Respondents reported on the perceived usefulness of their
SOA and results (refer Figure 6-9 below) indicated that 70.8 percent of those who received
one thought that their SOA was both useful and relevant. Only 6.25 percent perceived that
their SOA was useless.
2
“…advice given to a person is personal advice where the person giving the advice has considered one or more of the
client’s objectives, financial situation and needs, or a reasonable person might expect the person giving the advice to have
considered these matters. All other financial product advice is general advice.” (ASIC 2013, RG175.43). Further
information outlining the difference between personal advice and general advice is provided in RG175.44 – RG175.63.
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Chapter 6: Results
Figure 6-9 Usefulness of Statement of Advice – client questionnaire 1
Behavioural Skills
A total score out of a possible 75 (known as the financial adviser behaviour score or
FABS) was calculated by adding the scores for all fifteen behaviours (as previously
discussed in sections 5.3.2 and 5.3.4 and identified in Table 6-5 below). The lowest FABS
was 15 and the highest was 75, with a mean FABS of 54.23, as shown in Table 6-4.
Table 6-4 Financial Adviser Behaviour Score (FABS): client questionnaire 1
N
FABS
Minimum
74
15
Maximum
75
Mean
54.23
Std. Deviation
12.009
Likert scale responses relating to financial adviser behaviour indicate that generally,
respondents agreed that financial advisers displayed the behaviours expected of a
competent financial adviser. The median result for all behaviours was a convincing four
out of five, except for empathy and marketing oneself which both had a median result of
three. The mean responses indicated that ‘professional’ behaviour ranked the highest
(4.01), followed by ‘friendly’ (3.80) and ‘responsible’ (3.77), with ‘marketing oneself’,
‘relationship building’ and ‘empathy’ showing the lowest mean scores, closer to the neutral
score of 3. The means and medians for each type of ranked behaviour are shown in Table
6-5.
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Chapter 6: Results
Table 6-5 Financial adviser behaviour: client questionnaire 1
N
Behaviour
Mean
Median
Valid
Professional
80
4.01
4.00
Friendly
81
3.80
4.00
Responsible
79
3.77
4.00
Patient
79
3.76
4.00
Listening
80
3.73
4.00
Honest
80
3.70
4.00
Flexible
80
3.66
4.00
Reliable
80
3.65
4.00
Communicative
80
3.63
4.00
Trustworthy
79
3.62
4.00
Tactful
79
3.54
4.00
Caring
80
3.50
4.00
Relationship Building
80
3.34
4.00
Empathy
79
3.41
3.00
Marketing Oneself
78
3.19
3.00
6.2.3 Cross-tabulation and statistical tests
Usefulness of financial advice and demographics
Demographic data such as occupation, age, gender and geographical location were crosstabulated with the usefulness of SOAs provided. The results (as provided in Appendix D1)
showed no relationships between various demographic groupings and the usefulness of
advice provided in an SOA that warranted additional investigation.
Usefulness of financial advice and organisation type
The type of organisation providing financial advice was cross-tabulated with the usefulness
of the SOA. This cross-tabulation in Table 6-6 shows that clients found SOAs provided by
superannuation funds (85.7%) and dealer groups (81.3%) were more useful and relevant
than those provided by banks (75%) and independent financial planners (60%). This is also
demonstrated in graphical form in Figure 6-10.
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Chapter 6: Results
Table 6-6 Organisation type and usefulness of SOA: client questionnaire 1
Figure 6-10 Usefulness of SOA by organisation type: client questionnaire 1
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Chapter 6: Results
Remuneration and organisation type
The remuneration methods used to pay for advice were cross-tabulated against the various
organisational structures as provided in Table 6-7 to discover the most common payment
method for each organisation type and to discover where similarities and differences exist.
Results indicated that at least 50% of financial advice that was provided to respondents was
provided free of charge. Noting that client questionnaire 1 was administered prior to
FOFA, the most common form of payment for advice was through commissions. The least
common payment method was calculated as a percentage of funds in the portfolio and flat
fees were paid in just over six percent of respondent cases.
Dealer groups were more likely to charge commissions while banks were reported to be
more likely to offer advice free of charge. Independent financial advisers had a range of
remuneration methods but were mostly split between commissions and no payment
required. However, it is possible that client respondents who reported ‘no payment
required’ were unaware that they were paying trailing commissions to advisers.
Table 6-7 Remuneration by organisation type
Remuneration and usefulness of advice
Cross-tabulations were also conducted to determine the relationship of payment methods
on the usefulness of financial advice provided, in both a real and perceived perspective. As
a result, payment methods were compared with the usefulness of advice received (refer
Table 6-8) and were also compared (refer Table 6-9) with the following five-point Likert
scale question asked of all respondents:
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Chapter 6: Results
In your opinion, is financial advice influenced by the commissions a financial
planner/adviser may receive from investment products?
Results showed that in cases where no payment or a flat fee was required to obtain
financial advice, one-third of respondents found the advice provided was not relevant to
them. For those who paid for advice through commissions, the advice they received was
both useful and relevant in over 82% of cases. For those who paid a retainer or a
percentage of funds in the portfolio, the advice received was useful and relevant in 100%
of cases. Two respondents were unsure of how they paid for their financial advice and none
of these respondents found the advice they received was both useful and relevant.
Table 6-8 Payment type and usefulness of financial advice
Respondents to the Likert scale question on the influence of commissions on financial
advice indicated varied responses. Of those who did not pay for their advice, just over 50%
agreed that commissions would influence the advice provided while 64% of those who
paid for their advice with commissions believed that their advice would be influenced by
the commissions they paid. Only one respondent who paid a retainer believed that advice
would be influenced and 80% of those paying a flat fee agreed.
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Chapter 6: Results
Table 6-9 Payment type and perception of commissions on advice
Behavioural Skills
Each behavioural skill was cross-tabulated with organisation type as found in Appendix
D2. The table indicates that clients viewed the behavioural skills from different
organisations at similar levels. However banks were observed to have a lower median score
(3 out of 5) for the behavioural skills of caring, flexible, trustworthy, listening, empathy,
tactful and relationship building when compared to all of the most popular organisation
types (N>5) such as dealer groups, independent advisers and superannuation funds which
reported a median score of 4 out of 5. Superannuation funds (𝑥� = 4) and banks (𝑥� = 3.5)
scored more highly for the behavioural skill ‘Marketing Oneself’ than independent advisers
and dealer groups (𝑥� = 3).
Cross-tabulation of the financial adviser behaviour score (FABS) and usefulness of SOA
(see Table 6-10) showed a higher FABS for SOAs found to be useful and relevant (60)
than SOAs that were useless or not relevant (54). These results suggest the behavioural
skills of an adviser may influence the usefulness of the SOA and thus the quality of advice
provided. This is discussed further in the next chapter.
Table 6-10 Cross-tabulation of FABS and usefulness of SOA: CQ1
The FABS was also cross-tabulated with organisation type, showing a higher FABS for
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Chapter 6: Results
dealer groups and independent financial advisers (59) than for banks and superannuation
funds (54.5) (refer Table 6-11).
Table 6-11 FABS and organisation type: CQ1
To determine whether the mean FABS of banks was significantly different to the other
organisation types, a one-sample t test was conducted after excluding organisations where
the number of cases was equal to or less than 5. The result was statistically significant at
the 0.035 level, t (63) = 2.16, p = 0.035, as indicated in Table 6-12. This indicated that the
mean FABS of banks (𝑥̅ = 51.65) was significantly lower than the mean for all other
organisation types providing financial advice (𝑥̅ = 54.98). A small to medium effect size
(Chen’s d = 0.27) was evident in the mean difference of 3.33, 95% CI [0.24, 6.43].
Table 6-12 FABS One-Sample Test: CQ1
6.2.4 Open-ended comments
A total of forty-four respondents provided usable open-ended comments in client
questionnaire 1 in response to question 16. This optional question asked respondents to
‘please use the space provided to add any additional information you feel is relevant to the
questionnaire’ (refer Appendix C1). As outlined in section 5.4.4 on page 74, these
comments were analysed through Leximancer to reveal the main themes and concepts
raised by respondents.
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Chapter 6: Results
Main themes
Figure 6-11 presents a map of concepts and themes emerging from the grounded analysis
of the open-ended comments along with each ranking for financial adviser
‘trustworthiness’ positioned within the semantic terrain described by the map. The location
of individual concepts illustrates the closeness of their semantic relationship to other
concepts as well as their closeness to a particular ranking of trustworthiness. The closer a
concept is to the rankings, the more it is associated with that ranking. Closeness of
concepts and rankings does not imply a positive or negative relationship but merely that
they co-occur in the questionnaires.
Figure 6-11 Map of concepts and themes: CQ1 open-ended comments
The twenty-four concepts are organised into six thematic clusters, represented by circles.
The significance of each theme on the semantic landscape is represented by the size and
colour of the circle and numbered in order of significance in Table 6-13 .
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Chapter 6: Results
Table 6-13 Themes by significance: CQ1
Order of
significance
1
Theme
Money
2
Qualifications
3
Cost
4
Investments
5
Husband
6
Trust
The most prominent theme is Money (100% connectivity) with its most important concept
of money connected to a large number of other concepts such as research, paid, reliable,
bad, self, investment, products, feel, payment, investments, bank and cost. Two relevant
examples from the comments are as follows:
Available funds earned the hard way so feel capable enough to manage the funds
through self- research. Subscribe to the saying if you want to hold on to your
money, look after it yourself. [Client 189]
They want to gamble with your money and get paid to do it (by fees 3) but accept no
responsibility if their information 4 proves wrong. [Client 584]
A closer examination of the textual component of this thematic cluster indicates that there
are more negative comments than positive ones. Respondents associated losing money with
bad advice, poor research, high costs, banks and advisers who put their own interests ahead
of their client’s interests. Positive comments surrounding the Money theme were mainly
associated with respondents managing their own investments and self-research.
All comments associated with the second theme, Qualifications (52% connectivity),
suggested that financial advisers should be more qualified:
Financial planners/advisers should be required by legislation to gain some
recognised accreditation (similar to a CPA )- FRANKLY [client’s capitalisation]
some the one's I deal with are at best basically incompetent and the majority have
difficulty with basic concepts such as simple addition. [Client 203]
3
Fees was merged with Payment in the thesaurus definition through the concept seed editor
4
Information was merged with Research in the thesaurus definition through the concept seed editor
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Chapter 6: Results
Financial advisers are generally not of the same quality and do not have the same
level of qualifications as say doctors, lawyers, accountants. [Client 185]
The third theme Cost was referred to comments about the high cost of advice:
I think a lot of (people) don’t seek financial advice for (fear) of high costs and
being ripped off. [Client 796]
I did approach my financial institution re my super fund, recently with the scare. I
did not come away feeling positive, especially when told how many hundreds it
would cost. [Client 507]
The theme Investments was connected with the concepts professional, bad and retirement
where respondents have indicated that the best investments are those they have made
themselves for their retirement while bad investments are associated with poor advice or
gambling, with one respondent [Client 172] commenting that ‘expecting a financial planner
to know all the bad investments would need the ability of God’.
Although it seems out of context, the theme Husband was associated with the concept
superannuation. Respondent comments suggest the belief that financial advice is not
required where ‘husband has always attended to financial needs’ [Client 694] or where
‘husband and myself receive [named fund] super and financial advice not needed’ [Client
194].
Trust also showed as a significant theme with direct comments about trust referring to a
lack of trust in an adviser or advisers in general:
Being a single female is even more reason not to trust a financial adviser. [Client
789]
However, there were some comments that indirectly associated trust with a positive
experience through using terms associated with trust such as reliable and confidence:
Paid advice is clean and reliable upfront. [Client 256]
Previous advice (from [named fund]) had positive outcomes …continued support;
and financial consultants reflect an interpretation of my application which inspires
confidence in advice given. [Client 687]
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Chapter 6: Results
Trustworthiness rankings and concept points
For a deeper look at the semantic relationship between the concepts raised in the openended comments and how trustworthy a respondent found their adviser, the responses to
question 13 (h) (which ranked the trustworthy behaviour of the adviser on a five-point
Likert scale) were selected to form part of the Leximancer map (see methodology section
5.4.4 on page 74 for explanation of mapping process). This resulted in seven rankings of
trustworthiness: the Likert scale rankings (Strongly Disagree, Disagree, Neutral, Agree,
Strongly Agree); Missing entries, and those where the respondent did not obtain financial
advice (coded as No Advice). These trustworthy ranking categories (marked in red in
Figure 6-11 above) are associated with different parts of the concept space.
The concept points for the two trustworthy rankings ‘Disagree’ and ‘Strongly Disagree’ are
relatively close together, indicating an overlap in comments made by clients who believe
that their adviser is not trustworthy. These comments are closely connected to the theme
Trust. On closer examination of the text, the word trust was used in a negative way as
evidenced by clients commenting that they did not trust their adviser. For example:
The way he treated us was very bad, I don’t trust him never did so I won’t go to any
others because of him either. [Client 473]
Connections between the two rankings ‘Disagree’ and ‘Strongly Disagree’ and other
concepts (see Table 6-14 below) show that clients who ranked advisers as untrustworthy
shared a connection with concepts such as trust, bank, and qualifications. Analysis of the
textual content reveals that untrustworthiness is associated with poor qualifications and
with banks. Furthermore, the comments support the quantitative results in the previous
section (refer Table 6-10 and Table 6-11) where banks were found to have a lower median
score than other organisation types for trustworthiness and a lower mean FABS. For
example:
Institute advice (i.e. bank) are useless and one must remember professional
advisers first and foremost are for themselves. [Client 20]
Financial advice is a farce. Most run off at the lip with their own views - and
products that will give them a return - BANKS ARE WORST [client’s
capitalisation]. [Client 492]
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Chapter 6: Results
Table 6-14 Concept connections and trust rankings: CQ1
Concept
Ranking
1
2
3
4
5
6
7
8
9
10
11
12
13
Strongly
Disagree
salesman
Bad
Trust
investments
Bank
qualifications
Cost
Disagree
trust
products
bank
qualifications
Neutral
specific
superannuation
husband
professional
paid
reliable
qualifications
research
cost
self
payment
bank
money
Agree
deliver
products
salesman
specific
payment
bank
feel
money
self
qualifications
research
cost
Strongly Agree
Professional
investments
cost
Only four clients who ‘strongly agreed’ that their adviser was trustworthy provided openended comments. Of these, three were usable. One stated their adviser was polite and
provided good advice, one indicated that they had moved from a bank to an individual
adviser and the third stated he had his own practice. There were no strongly connected
themes.
Eleven comments were provided by clients who ‘agreed’ that their adviser was
trustworthy. However, over half of these comments were negative in sentiment where
clients used the free response area to express their concerns about financial advice. The top
five ranked themes listed in Table 6-14 as provided by Leximancer reflect this sentiment.
For example, the deliver concept was used to express disappointment about the expected
level of service and also used to express concern that advisers have a reputation that they
recommend products that advantage themselves:
I only sought SMSF advice from the Accountant. However the bank officer simply
did not deliver. All my friends say financial advisers are salesmen flogging
products that deliver them highest commissions and trailing commissions. [Client
811]
Many of the comments expressing negative sentiment seemed to indicate that although
clients found their own adviser trustworthy, they felt that their adviser could have provided
better advice had it been more specific to their individual needs and had payment (fees,
commissions, trailing commissions) been more adequately disclosed and clarified. One
client also stated that ‘there should be more follow up from them to see how things are
going later on’ [Client 363].
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Chapter 6: Results
The concept point for clients who were ‘Neutral’ in their ranking of trustworthiness was in
close proximity to the concept point for respondents who had not sought advice, indicating
similar concepts in the open-ended comments. However, respondents who had not obtained
financial advice were more likely to provide comments. These comments sat within the
main theme of money and provide insight as to why advice was not sought. Concepts such
as paid, reliable, research, investment rated highly. Many of the comments suggested that
an adviser was not sought as the respondent (or their husband) had invested successfully
themselves and/or obtained reliable information themselves for free by researching the
internet, books and articles. Some comments also mentioned that high costs were a
deterrent to seeking advice. For example:
We have been lucky to date in property investments. Good financial advice
certainly would have benefitted us but the costs were a bit off putting. [Client 870]
The open-ended comments support and explain the quantitative results in section 6.2.3. In
addition, although the comments in client questionnaire 1 discussed above were made prior
to the GFC and prior to FOFA reform, the major themes such as Money, Qualifications and
Costs raised through these comments support a number of the main concerns highlighted in
the Ripoll Report (Commonwealth of Australia, 2009) and addressed in the FOFA
legislation (Commonwealth of Australia, 2010, 2011). The comments also provide insight
into understanding the role of trust in the client-planner relationship as well as the
antecedents and sources of this trust.
6.3
Client questionnaire 2
6.3.1 Response Rate
The response rate for client questionnaire 2, which was administered post-GFC was much
lower than that for the first client questionnaire. This was mainly attributable to a change in
the mailing system from normal addressed mail (in conjunction with a purchased mailing
list) to relatively inexpensive unaddressed mail (no mailing list required).
Preparation of mailing documents for the second client questionnaire (post-GFC) took
place in August 2012. A total of 1,498 were distributed as outlined in section 5.5.3 of
chapter 5, with only 30 usable questionnaires returned. It was not possible for each
individual article involved with UMS to be tracked; the extremely low response rate (2%)
seems to indicate that it was possible that the majority of items were not delivered as
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requested. Other reasons for the low response rate include that the mail was not addressed
to a specific person but instead ‘to the householder’; and that a mail-out from ASIC took
place in the same month warning consumers to be cautious of organisations contacting
them about their finances.
6.3.2 Descriptive statistics and frequency distribution
A descriptive analysis was conducted using SPSS for Windows (Version 22) to examine the
frequency distribution for demographic questions relating to age, gender, occupation group
and location (by state). These demographics assisted in checking for non-response bias and
were able to be compared to the demographic results from CQ1.
Age
The age ranges of respondents of client questionnaire 2 are provided in Figure 6-12 below.
The age range 60-64 represents 20.7 percent of respondents; almost double that in client
questionnaire 1, and almost fifteen percent higher than the general Australian population
aged over 19. The age group 20-24 years is not represented in this sample, although
approximately 10% of the Australian population aged over 19 are in this age group (ABS
2010). This younger age group would be less likely to be interested in the questionnaire
topic due to their life stages and the other age groups are fairly representative of the
Australian population. However the much lower response rate resulting in lower
frequencies makes comparisons between small numbers difficult in this regard.
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Chapter 6: Results
Figure 6-12 Age range of respondents: client questionnaire 2
Gender
The split of respondents were 47 percent male and 53 percent female which is close to the
general gender distribution of the Australian population over age 19 (49 percent male, 51
percent female).
Occupation
The raw survey results for client questionnaire 2 showed seventeen different occupations.
Due to the small numbers in several of these categories, and to make the data more
manageable and meaningful, the occupational categories were re-coded into the ‘major’
occupational groups. These ‘major’ groups were based on the classification of occupations
by the Australian Bureau of Statistics (ABS) (2013) along with a code for ‘retired’. Details
of the re-coding of the occupational categories are in Appendix C9. The results of the
seven major occupational categories reported in this questionnaire can be seen in Figure
6-13 below.
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Figure 6-13 Respondents by occupation: client questionnaire 2
The majority of respondents were categorised as ‘professionals’, encompassing the areas as
outlined in section 6.2.2. As with client questionnaire 1, the proportion of professional
workers (incorporating managers) was greater (by approx 11%) than that represented by
the Australian population (ABS 2014c) as for reasons previously discussed. This overrepresentation compensated for the proportion represented by machinery operators/drivers
(nil in this sample) and labourers which was considerably lower. All other occupation
categories closely reflected those of the Australian population in general. There is however
a risk of bias in that the sample population may over-represent professional workers.
State of residence
Respondents of client questionnaire 2 represented only three states of Australia, with New
South Wales providing the highest number of respondents (80%), then Queensland (13%)
and South Australia (7%). Although the mailing distribution was made in proportion with
post office delivery points throughout every state (as discussed in chapter 5) for reasons as
outlined in Appendix C12, it was possible that questionnaires were not actually delivered
to mailboxes in every state. As a result, the data does not fairly represent financial advice
provided in every state. There were no missing values, possibly because this questionnaire
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was not addressed to any individual and thus was viewed as keeping the respondent’s
anonymity intact.
If/when respondents have sought financial advice
Table 6-15 below indicates that 73.3 percent of the respondents had received financial
advice, as compared to only 48.3 percent in client questionnaire 1. Twenty-nine percent of
those who sought advice had last done so prior to the GFC, with 71% seeking advice postGFC. The year they last sought advice ranged from 1960 to 2013.
Table 6-15 Number of respondents who have sought financial planning advice: pre
and post-GFC
The chart below (Figure 6-14) shows the distribution of years that clients had most recently
sought advice. It was expected that the frequency of the most recent advice would be in
later years rather than in earlier years. However, likely due to economic conditions
surrounding the GFC, there was a spike in those that last sought advice in 2009.
Note: 2013 represents only 4 months (January-April); annualised figure = 3.
Figure 6-14 Year respondents last sought advice: client questionnaire 2
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Chapter 6: Results
The 27 percent of respondents (N=8) who indicated they had not received financial advice
were asked to provide one or more reasons as to why they had not sought advice as shown
in Figure 6-15 below. The response with the highest frequency was ‘don’t need advice’,
followed by ‘not enough money to invest’ which had the highest response in CQ1 and ‘too
expensive’.
Frequency of response
5
4
3
2
1
0
Have not
thought
about it
Not
Dont know
Not
Too
Don't need Dont trust
enough how to find enough expensive advice
them
time
one
money to
invest
Reason why advice not sought
Figure 6-15 Reasons why respondents have not sought financial advice: client
questionnaire 2
Organisational structure
The pie chart below in Figure 6-16 shows the organisational structure that clients indicated
in CQ2 that their financial adviser/planner operated within. Although 45% of respondents
indicated that their planner operated independently, it is possible that many of these
planners are actually tied to a dealer group as indicated in the Ripoll Report
(Commonwealth of Australia 2009, p. 79) and previously discussed in section 6.2.2.
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Chapter 6: Results
Figure 6-16 Financial adviser organisation type – client questionnaire 2
Remuneration
As in client questionnaire 1, respondents who had sought financial advice were asked to
indicate how they paid their financial adviser. The results are displayed in Figure 6-17
below. A smaller proportion of the CQ2 sample (18%) than the CQ1 sample (49%)
indicated that there was no payment required for advice sought while a larger proportion
indicated that they were required to make a flat fee payment (CQ2: 36% vs CQ1: 15%).
This may reflect the draft legislative provisions being put forward by the Ripoll Report
(Commonwealth of Australia 2009) calling for a ban on commissions.
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Chapter 6: Results
Figure 6-17 Remuneration provided to financial advisers: client questionnaire 2
In addition to how the respondents paid for advice, CQ2 included two additional questions
(refer Appendix C8: 1g, 1j) pertaining to financial adviser remuneration that were not
included in CQ1. All respondents (that is those who sought advice as well as those who
had not) were asked to respond on a five-point Likert scale ranging from Strongly Disagree
to Strongly Agree.
With a median score of 5 out of 5, over 93% of respondents indicated (with a response of
Agree or Strongly Agree) that they would prefer to pay a flat fee for advice. Fifty-seven
percent of respondents, agreed that government legislation banning commissions makes
financial planners more trustworthy (𝑥� = 4). The results from these questions are presented
in Figure 6-18 and Figure 6-19 below.
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Chapter 6: Results
Figure 6-18 Preference to paying a flat fee for advice
Figure 6-19 Government banning of commissions and trustworthiness of financial
planners
Regulation of advice
As in CQ1, respondents were asked if their advisers had provided them with an AFSL
number and FSG. The results for respondents who received advice after the introduction of
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Chapter 6: Results
the FSRA are provided in graphical format in below and show a higher incidence of the
required information being provided. These results indicate that an AFSL number was
provided in 56% of cases and an FSG in 61% of cases. However, as in CQ1, a large
number of clients could not recall whether they had received an AFSL (33%) or FSG
(28%). The possible reasons for this are further discussed in the next chapter.
12
No. of respondents
10
11
10
8
6
6
5
No
4
2
Yes
2
2
AFSL
FSG
Don't Know
0
Information provided
Figure 6-20 AFSL and FSG provided (post FSRA) – client questionnaire 2
Usefulness of Statement of Advice
Of all the respondents in CQ2 who sought financial advice, 18 percent did not recall
receiving a statement of advice (SOA) (compared to 32% in CQ1). All of the respondents
who indicated that they did not receive an SOA had received advice after FSRA
implementation. Respondents reported on the usefulness of their SOA and results (refer
Figure 6-21 below) indicated that 50 percent of those who received one thought that their
SOA was both useful and relevant. This is a much lower proportion than in CQ1 but may
also be attributable to a smaller sample. Twelve and-a-half percent reported that their SOA
was useless.
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Chapter 6: Results
Figure 6-21 Usefulness of financial advice – client questionnaire 2
Behavioural Skills
A total score out of a possible 75 (known as the financial adviser behaviour score or
FABS) was calculated including the same 15 behaviours identified in CQ1.
The lowest FABS was 43 (much higher than CQ1, 15) and the highest was 75 (as in CQ1),
with a mean FABS of 56.59 (CQ1, 54.23), as shown in Table 6-16 below.
Table 6-16 Financial Adviser Behaviour Score (FABS): client questionnaire 2
N
FABS
Minimum
17
43
Maximum
75
Mean
56.59
Std. Deviation
9.754
Likert scale responses relating to financial adviser behaviour indicate that generally,
respondents from CQ2 agreed that financial advisers displayed the behaviours expected of
a competent financial adviser. The median result for most behaviours was four out of five,
except for caring and flexible (3 out of 5); empathetic and relationship building (3.5 out of
5). The mean responses indicated that ‘professional’ behaviour ranked the highest (4.21)
followed by ‘friendly’ (4.11) which were also the highest mean responses in CQ1. Being
flexible, ‘marketing oneself’, and empathetic behaviour had the lowest mean scores, with
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the last two supporting CQ1 results. The mean and median scores for each behaviour
measures in the FABS are reported in Table 6-17 below.
Table 6-17 Financial adviser behaviour: client questionnaire 2
CQ2 included five additional Likert scale questions on financial adviser behaviours to
those included in CQ1 (as outlined in section 5.5.2). The results of these additional
behaviours indicate that ‘nurturing’ and ‘benevolent’ behaviours scored much lower than
any of the behaviours and ‘integrity’ scored toward the higher end of the scale, matching
the results of ‘honest’ behaviour. ‘Ethical’ behaviour also returned a median result of 4 out
of 5. Details are provided in Table 6-18 below.
Table 6-18 Additional financial adviser behaviours included in CQ2
Standard of competence-based skills
In addition to the behavioural skills of advisers, seven Likert scale questions relating to the
competency of advisers were included in CQ2 as ‘competence’ was identified in the
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Chapter 6: Results
literature review as an important dimension of trust. The sample of respondents who had
sought advice ranked the verbal communication skills of their planner/adviser higher than
any of the other competence-based skills with no respondents ranking verbal skills or
numeracy skills as being of a poor or very poor standard. Problem solving skills had the
greatest percentage (32%) of responses observing a poor standard of skill.
Table 6-19 Financial adviser competence-based skills
Trust factors and trust judgements
As outlined in section 5.5.2, additional Likert scale questions were included in CQ2 (Q1)
to assist in understanding the role of trust since the GFC. A number of these also related to
various trust constructs found in the literature. Table 6-20 below indicates how strongly
respondents agreed or disagreed with statements about trust and financial planners. Results
indicate that the public reputation of a firm is a strong antecedent for trusting a financial
planner (𝑥� = 4, M = 4, x̄ = 4). This is also represented in Figure 6-22 below.
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Chapter 6: Results
Figure 6-22 The public reputation of a firm and trust
Seventy-three percent of respondents also indicated that they would need to agree with the
personal values of their financial adviser/planner in order to trust them (𝑥� = 4, M = 4, x̄ =
3.73) and 67% agreed that planners/advisers who are members of a recognised professional
body are more trustworthy (𝑥� = 4, M = 4, x̄ = 3.57). In addition, as mentioned earlier, 57 %
of respondents agreed that government legislation banning commissions makes financial
planners more trustworthy (𝑥� = 4, M = 4, x̄ = 3.57).
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Chapter 6: Results
Table 6-20 Likert scale results for trust factors: client questionnaire 2
Respondents clearly did not agree that large firms are more trustworthy than small firms
(see Figure 6-23 ). Ninety percent of respondents were neutral or disagreed that planners
with less than 10 years’ experience are more trustworthy and 97% were neutral or
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Chapter 6: Results
disagreed that the GFC increased their trust in financial planners. Furthermore, respondents
disagreed that more importance should be placed on competence than ethical values when
choosing a financial planner and suggested that qualifications do not make a financial
planner more trustworthy (see Figure 6-24 and Figure 6-25 below).
Figure 6-23 Large versus small advice firms and trust
Figure 6-24 Technical competence versus ethical values in choosing a planner
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Chapter 6: Results
Figure 6-25 Qualifications and trustworthiness
Respondents who had sought financial advice were also asked in question 16 to make trust
judgements about their current financial planner/adviser using five-point Likert scale
responses (1=Strongly Disagree, 2= Disagree, 3= Neutral, 4=Agree, 5=Strongly Agree) to
statements about various dimensions of trust and their financial planner/adviser. Results
suggest that respondents found their planner to be reliable (𝑥� = 4, M = 4, x̄ = 3.55) and
consistent (𝑥� = 4, M = 4, x̄ = 3.8) and that their planner does a good job of explaining their
suggestions for achieving the client’s financial goals (𝑥� = 4, M = 4, x̄ = 4).
However, only 21% of respondents agreed that their planner/adviser would always be
willing to offer strength and support, even though times may change and 37% disagreed
(the remaining 42% neutral). This statement implies that change may negatively affect the
trust between client and adviser. This will be discussed more fully in the following chapter.
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Chapter 6: Results
Table 6-21 Trust judgements of financial planners/advisers
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Chapter 6: Results
Qualifications and professional membership
As the trust literature identified in chapter 3 identifies credibility as an antecedent to trust,
respondents who had sought advice were asked if they were aware of their adviser’s
qualifications or professional memberships.
The results showed that at least 50% of respondents knew their adviser’s qualifications and
58% reported that they knew of their adviser’s professional body membership. Client
respondents were required to write the name of the professional body in the place provided
on the questionnaire. Figure 6-26 indicates the professional bodies to which the advisers
were identified as being affiliated.
Figure 6-26 Professional membership of advisers as reported by clients
6.3.3 Cross-tabulation and statistical tests
Cross-tabulations and statistical tests were performed on the client questionnaire 2 data as
they were for client questionnaire 1. Commentary is provided in this section to confirm
results from client questionnaire 1 and to report any inconsistencies. However, the small
sample size of client questionnaire 2 has provided some limitations as to the
generalizability of the data. This section also reports results of the additional questions that
were included in client questionnaire 2 where data patterns assist in answering the research
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questions.
Usefulness of financial advice and organisation type
Independent financial planners were reported to more frequently provide financial advice
that is both useful and relevant than that of any other organisation type while CQ1 reported
superannuation funds and dealer groups to be more useful and relevant. However, there
was only one respondent in the CQ2 sample who had sought advice from a dealer group
and three from a superannuation fund.
Remuneration and organisation type
The remuneration methods used to pay for advice showed a difference in CQ2 compared
with CQ1, with commissions being less likely to be charged (CQ2: 18%; CQ1: 31%) and
fees being more likely to be paid (CQ2: 36%; CQ1: 18%) for all organisation types except
banks. In addition, CQ2 reported only 18% of financial advice being provided free of
charge, compared with 50% in CQ1. While these results reflect the introduction of FOFA
and the banning of commissions, it is also possible that advice previously reported by
clients as ‘free’ may have in fact involved trailing commissions. The biggest inconsistency
can be seen with banks where there is a greater proportion of commissions being paid in
CQ2 (CQ2: 40%; CQ1: 17%) and a lower proportion of advice provided free of charge
(CQ2: 20%; CQ1: 74%). This is further discussed in the following chapter.
Remuneration and usefulness of financial advice
Only advice requiring no payment or paid via fees was found to be useful and relevant in
CQ2. One hundred percent of advice requiring no payment was found to be both relevant
and useful in CQ2, compared with one-third of this advice being useful but not relevant in
CQ1. The usefulness and relevant of advice paid via fees in CQ2 was consistent with that
reported in CQ1, at around 80%.
No advice paid via commissions was found to be both useful and relevant in CQ2, although
82% of this advice was reported to be both useful and relevant in CQ1.
Behavioural skills cross-tabulations
Results from CQ2 cross-tabulating the FABS with organisation type showed the FABS to
be lower than CQ1 for all organisation types, except superannuation funds which was
much higher (CQ1: 54.5; CQ2: 74). Ranking of FABS was consistent with CQ1, with
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independent financial planners reporting the highest FABS (53.5) and banks reporting the
lowest (52).
Consistent with CQ1, advice which was both useful and relevant received a higher FABS
than advice which was useless or not relevant.
Client questionnaire 2 also included five additional behaviours to CQ1 which were crosstabulated with organisation type. Ranked on a Likert scale (1 = Strongly Disagree, through
to 5 = Strongly Agree), superannuation funds received the highest median score (𝑥� = 5) for
all five behaviours (ethical, integrity, dependable, nurturing and benevolent) while dealer
groups received the lowest median scores, for nurturing and benevolent behaviour (𝑥� = 2).
Banks received a median score of 3 for all five behaviours while independent advisers
received a score of 4 for integrity and 3.5 for ethical and dependable behaviour.
Competence-based skills
Client questionnaire 2 included a number of additional questions about competence-based
skills of financial advisers that were not included in CQ1. These seven competence-based
skills (time management, verbal, written, problem solving, technical, numeracy,
social/ethical awareness) were cross-tabulated with remuneration method, organisation
type, usefulness of financial advice provided, qualifications and professional membership
and results are discussed below.
Results from the cross-tabulation of competence-based skills and remuneration type
showed the highest median results for all competence-based skills for advisers who
charged a fee for advice service. Specifically, those charging a fee for advice received a
median score of 4 out of 5 for social/ethical competence, being the highest score for all
payment types. Those charging commissions received the lowest median scores for all
categories except for numeracy which received the highest score for all payment types
(𝑥� = 4).
When cross-tabulated with organisation type, superannuation funds reported a median
score of 5 out of 5 for all seven competence-based skills while no other organisation type
received a median score of 5 for any of the same skills. Independent financial advisers
were reported to have median scores of 4 for verbal, written and numeracy skills and a
score of 3.5 for technical skills with 3 for all other skills. For both banks and dealer groups
only verbal skills received a median score higher than 3 out of 5 (banks 𝑥� = 4, dealer
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Chapter 6: Results
groups 𝑥� = 3.5). Some poor results were obtained for dealer groups, who received a
median result of 2 out of 5 for three competency-based skills, being technical skill,
problem solving and social/ethical awareness.
As was expected, the SOAs that were both useful and relevant also reported advisers with
higher median competence-based skills. Common to SOAs that were less useful or useless,
was that problem solving skills and social/ethical awareness both received a median less
than 3 out of 5.
Clients who knew the qualifications of their financial adviser also ranked their adviser’s
competence-based skills higher than those who did not. Furthermore, advisers who were
an FPA member were ranked higher across all competence-based skills than those who
were a member of the ICAA or CPA Australia. However, caution must be taken not to
generalise these results due the small sample involved. Nonetheless, it does suggest that
further research in this area is warranted.
Trust factors
Where results from cross-tabulations of trust factors included in CQ2 against potential
antecedents such as remuneration type, organisation type, number of years with planner
and professional membership indicated further discussion may be warranted, they are
reported in the table below.
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Chapter 6: Results
Table 6-22 Cross-tabulation of trust factors and trust antecedents
Trust factor statement
‘Qualifications such as a university
degree make a financial planner more
trustworthy.’
‘Government legislation banning
commissions makes financial planners
more trustworthy.’
‘More importance should be placed on
technical competence than ethical
values when choosing a financial
planner.’
A financial planner with less than 10
years of experience is more trustworthy
than one with more than 10 years of
experience.’
‘The Global Financial Crisis (GFC)
increased my trust in financial
planners.’
Independent
Variable
Professional
body
Organisation
type
Remuneration
method
Years with
planner
Year client last
sought advice
Years with
planner
Years with
planner
Results
(1 = strongly disagree; 5= strongly
agree)
Clients with FPA advisers rated this lower
(𝑥� = 2) than advisers with CPA (𝑥� = 3.5) or
ICAA (𝑥� = 4) membership.
All types of organisation types 𝑥� < 3 except
for super funds (𝑥� = 4) .
Only clients who remunerated their FPs
with trailing commissions disagreed.
Clients who were with their FP for more
than 10 years disagreed (𝑥� = 2) but those
with their FP for less than 10years agreed
(𝑥� = 4).
Fifty percent of those who last sought
advice prior to 2009 (GFC) agreed with this
statement compared with only 13% of
those who had sought advice since 2009.
Clients who were with their FP for more
than 10 years disagreed (𝑥� = 2) but those
with their FP for less than 10 years were
more neutral with their answer (𝑥� = 3).
Clients who were with their FP for more
than 10 years were neutral (𝑥� = 3) but
those with their FP for less than 10 years
disagreed (𝑥� = 2).
Trust judgements
Cross-tabulations of trust judgements made by clients of their financial planners and a
range of potential antecedents such as remuneration method, organisation type, years with
planner and professional memberships were conducted.
Advisers who were remunerated by fees and employed by superannuation funds, received
higher median scores (4 and 5 respectively) than others for the statement ‘I have found that
my adviser is dependable, especially in helping meet my goals’.
Furthermore, only the superannuation fund organisation type received a median score of
greater than 3 (𝑥� = 5) for the statement ‘I am certain that my adviser would not be
involved in fraudulent activities’. The dealer group organisation type scored poorly across
all trust judgements.
The general pattern of the results indicated that clients who had been with their adviser for
greater than 10 years or new to using their current adviser (1-2yrs) judged their advisers to
be more trustworthy than those who had been with their adviser for 3-9 yrs. Possible
explanations for this are raised in the discussion in the next chapter.
There was also a pattern that indicated those who last sought advice in 2010 rated the
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Chapter 6: Results
trustworthiness of their adviser higher than those who sought advice in all other years. It is
possible that the impact of the GFC provided advisers with an opportunity to prove
themselves to clients and hence increase the trust that clients had in them. The crosstabulated results also indicated that those who last sought advice prior to the GFC (2009)
have lower trust judgement ratings of their adviser which may explain why these clients
have not sought advice again – possibly a result of the adverse impact of the GFC. In fact,
only 6 of the 16 trust judgement statements were given a positive classification where
advice was last sought prior to 2009, compared to 16 out of 16 for advice provided since
2009. For example, dependability, reliability and confidence are all ranked higher in the
years 2010-2013 than in 2009 and prior (see Figure 6-27, Figure 6-28 and Figure 6-29
below).
In terms of professional body membership, FPA members showed higher scores on trust
judgements relating to dependability, reliability, confidence and care than other known
professional memberships.
Figure 6-27 Dependability of adviser 1992-2013: ‘I have found that my adviser is
dependable, especially in helping meet my goals’.
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Chapter 6: Results
Figure 6-28 Reliability of adviser: 1992-2013: ‘I can rely in my adviser to do the
things he/she has promised to do’.
Figure 6-29 Confidence in adviser 1992-2013: ‘When my adviser explains things that
may seem rather unlikely, I am confident that he/she is telling the truth’.
Results reported in this section will be discussed further in the next chapter.
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Chapter 6: Results
6.3.4 Open-ended comments
Thirteen respondents provided open-ended comments to question 22 which asked
respondents to ‘please use the space below to add any additional information you feel is
relevant to the research’ (refer Appendix C8). As outlined in section 5.4.4 on page 74,
these comments were analysed through Leximancer to reveal the main themes and concepts
raised by respondents.
Main themes
A grounded analysis of the open-ended comments in client questionnaire 2 revealed ten
primary concepts (represented by grey circles) which were organised into five thematic
clusters (represented by coloured circles) as presented below in Figure 6-30.
Figure 6-30 Map of concepts and themes: CQ2 open-ended comments
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Chapter 6: Results
The location of individual concepts to other concepts on the map shows the closeness of
their semantic relationship. Table 6-23 shows each theme on the semantic landscape in
order of significance, or connectivity with the main concepts.
Table 6-23 Themes by significance: CQ2
Order of
significance
1
Theme
People
2
3
4
5
Salesman
Qualifications
Money
Whole
The theme most connected (100% connectivity) with the main concepts raised in the
comments is People. The term People in the Leximancer analysis was merged with Client/s
as the terms as used in the comments were of the same meaning. The theme People was
connected with concepts such as people, commissions, bank and greed. An examination of
the textual component of this thematic cluster revealed negative sentiment with regards to
how people (or clients) are treated by their financial adviser. For example:
…Great says the "financial planner" - here's another sucker!! I’ll bleed him for
everything I can squeeze out of him and I’ll never see them again but I’ll set him up
for anything from which I get a trailing commission - until he dies I am on a
winner and I don’t have to front him again. It is a culture of greed sponsored and
glorified by the insurance companies and banks sucking money by stealth out of old
people pockets. [Client 07]
Similar negative comments were found supporting the second theme; Salesman (59%
connectivity) which was associated with concepts such as salesman, driven, con and
commissions:
You don’t realise so called Financial Planners - are in the main uneducated, lazy
salesman - male or female - they are driven by ego - they can’t spell ‘ethics’.
[Client 07]
We find most financial advisers act with more self-interest in products offered and
are rarely proactive in advising market trends. [Client 18]
Qualifications (21% connectivity) was also a major theme to be raised in client
questionnaire 2, (supporting themes and comments provided in the first client
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Chapter 6: Results
questionnaire) and was associated with concepts such as qualifications and accountants.
Comments suggested that financial advisers did not have appropriate qualifications:
90% have no formal qualifications whatsoever…Accountants nurture clients for
years – families of 2-3 generations. Financial Planners- hit and run. [Client 07]
The fourth theme, Money was also raised in both client questionnaires and had similar
sentiments with regards to relatively high costs of advice and to clients managing
investments themselves/conducting self-research:
I can deal with my own investments without paying someone else to lose my money.
[Client 08]
Fees are very high. Banks appear to have wider knowledge of investment
opportunities but expensive. [Client 05]
I'm self-funded retired. Financial info from press and internet brokers. [Client 04]
The final theme, Whole (0.07% connectivity) represents comments pertaining to the
industry as a whole. An examination of such comments uncovered a negative perception of
the industry:
Their engagement process and advice has given me a high distrust of the industry
as a whole. [Client 30]
Trustworthiness and concept points
Of the thirteen respondents to the open-ended comments, only one provided a positive
comment and two were relatively neutral while all others were negative. As expected, the
respondent providing the positive comment also found financial planners to be trustworthy
as indicated by their ranking of ‘Agree’ on a five point Likert scale for both the generalized
statement ‘Financial planners are trustworthy’ (question 1(a)) and when ranking the
trustworthiness of their own financial adviser (question 12(h)). The positive comment
provided was:
The advice I have received from my planners has left me in a quite comfortable
position. [Client 03]
All of the respondents providing negative comments ranked the generalized statement
‘Financial planners are trustworthy’ in question 1 (a) as ‘Neutral’ or ‘Disagree’ on a five
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Chapter 6: Results
point Likert scale. Three of the ‘Neutral’ respondents however, provided a ranking of
‘Agree’ when asked to rank the trustworthiness of their own financial adviser. The negative
comments these respondents provided seemed to indicate that while they could not commit
to trusting financial planners generally, they were able to find an adviser that they could
trust. For example:
It has taken time to pluck up courage to see a Financial Planner. Stories friends
told us previously put us off seeking advice. [Client 02]
The information provided only (as requested) pertains to my current financial
adviser. My previous financial adviser was responsible for very bad financial and
professional advice. Their engagement process and advice has given me a high
distrust of the industry as a whole. [Client 30]
These comments also indicate that previous bad experiences, including those retold by
friends have an impact on trust levels of financial planners generally.
One respondent (client 07) who disagreed with the statement ‘Financial planners are
trustworthy’ provided a very lengthy open-ended comment containing forty-six sentences,
even including a sentence saying ‘Please read my comments’, suggesting that they felt
strongly about conveying their opinions and contributing to the research. As most
respondent comments are only one to two sentences in length, it is possible that this
respondent’s comments may have skewed the results contained in Figure 6-30. The same
client chose not to provide a trustworthy ranking for their own adviser’s behaviour.
Some of the more neutral comments also provided an insight into trust in personal financial
planning, even though they may not have been closely linked to the main themes:
Don’t care about relationship building or nurturing or benevolence in Q12. [Client
16]
The role of ASIC and APRA as regulatory bodies. [Client 13]
The open-ended comments assist in explaining the quantitative results in section 6.3.3 and
when combined with those in the first questionnaire, provide further insight into
understanding the antecedents and sources of trust in personal financial planning in order
to answer the research questions.
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Chapter 6: Results
6.4
Financial adviser questionnaire
6.4.1 Response Rate
The financial adviser questionnaire was administered to an initial 1500 AFSL holders
randomly selected from the ASIC professional register (as outlined in Chapter 5) with an
additional 200 questionnaires administered due to the large number of questionnaires
‘returned to sender’. Details surrounding the response pattern can be found in Chapter 5,
Table 5-14. A summary of the response rate is provided below in Table 6-24.
Table 6-24 Response rate: financial adviser questionnaire
Sent
st
1 Mail
2
nd
Mail
Total
Completed
Returned to
Sender
Response
Rate
1500
60
222
4.7%
200
16
14
8.6%
1700
76
236
5.2%
A total of 76 usable financial adviser questionnaires were received, providing a response
rate of 5.2%.
6.4.2 Descriptive statistics and frequency distribution
SPSS for Windows (Version 22) was used to undertake statistical analysis of the
questionnaire responses. Descriptive analysis through an examination of response
frequencies was conducted on questions relating to age, gender, education, professional
designations and work experience to assist in answering the research questions.
Age and Gender
The age of respondents to the financial adviser questionnaire ranged from 27 years to 84
years old, with the mean age being 49 years old, as shown in Figure 6-31 below. This
compares to the average age of financial advisers in Australia of 55 years old (Taylor,
2012) and closely reflects the research conducted in the United States by Cerulli (Financial
Advisor, 2014) where the average age of financial advisers is 50.9 years.
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Chapter 6: Results
Figure 6-31 Age of respondents: financial adviser questionnaire
Eighty-three percent of respondents were male and 17% were female. This supports the
general make-up of the financial advising population which is known to be male
dominated, with females making up approximately 20% of the advice industry (HartgeHazelman, 2014).
State of residence
The distribution of respondents to the FAQ by state are shown in figure below, with all
states being represented. New South Wales and Queensland had the highest frequency of
response at 29% and 30% respectively.
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Chapter 6: Results
Figure 6-32 State of residence: financial advisers
Provision of Advice
Of the 76 respondents to the financial adviser questionnaire, 65 respondents (86%) had
provided financial advice. Of these, ninety-two percent most recently provided advice in
2013 (the year the questionnaire was administered), six percent in 2012 and one respondent
last provided advice in 2008.
Organisational structure
Respondents who had provided financial advice indicated the organisational structure of
their employer. As indicated in Figure 6-33 below, almost 62% of respondents worked for
a dealership and 14% for an accounting practice aligned with a dealership. Twenty-five
percent stated that they were an independent planner/adviser.
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Chapter 6: Results
Figure 6-33 Financial adviser organisation structure
Remuneration
As indicated in Figure 6-34, financial adviser respondents indicated their primary
remuneration came from a fee-for-service, closely followed by a combination of a fee-forservice and commission.
Figure 6-34 Financial adviser remuneration method
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Chapter 6: Results
In 2008, prior to the Ripoll Report and proposed FOFA changes, only 16 per cent of total
financial adviser revenue came from fee-for-service charges (Commonwealth of Australia,
2009, p. 17). Fifty-nine percent of respondents who completed the survey in 2013 agreed
that they would support a fee-for-service model rather than one that is commission based;
almost half of these had ‘strongly’ agreed. The results are provided in Figure 6-35 below.
Figure 6-35 Support for a fee for advice model: financial adviser questionnaire
Behavioural Skills
The behavioural skills as self-rated by financial adviser respondents reported a higher mean
FABS (65.05) than CQ1 (54.23) and CQ2 (56.59). The lowest FABS was 54 which was
also much higher than CQ1 (15) and CQ2 (43). The results are shown in Table 6-25 and
suggest that financial advisers self-rate their behavioural skills more highly than do clients.
However, the standard deviation for the FABS in the financial adviser questionnaire is
much lower than in both the client questionnaires, suggesting that the financial adviser
respondents are generally in agreement in terms of how they perceive their own
behavioural skills.
Table 6-25 Financial Adviser Behaviour Score (FABS): financial adviser
questionnaire
N
FABS
Minimum
64
54
164
Maximum
75
Mean
65.05
Std. Deviation
5.187
Chapter 6: Results
The Likert scale responses in Table 6-26 indicate that financial advisers considered
themselves to display the behaviours of a competent financial adviser with the median
result for all behaviours, rating as a 4 or 5, out of 5, except for ‘marketing oneself’ (𝑥� = 3).
Furthermore, the mean score for all behaviours, except ‘marketing oneself’ was higher
when self-rated by financial advisers than in both client questionnaires. ‘Trustworthy’
behaviour received the highest self-rated mean of 4.72 out of 5, compared with client mean
ratings of 3.62 (CQ1) and 3.63 (CQ1). Advisers also self-rated ‘empathetic’ behaviour (𝑥� =
4.40) and ‘relationship building’ (𝑥� = 4.31) considerably higher than did clients with the
median for empathetic behaviour at 3.41 (CQ1) and 3.56 (CQ2) and median for
relationship building 3.34 (CQ1) and 3.72 (CQ2).
These results are further analysed and discussed in the next chapter.
Table 6-26 Financial adviser behaviour: financial adviser questionnaire
The additional five financial adviser behaviours included in the questionnaire highlighted
that financial advisers ranked their integrity highest, followed by ethical behaviour. Table
6-27 (below) shows the ranking of behaviours. All five of these self-rated behaviours
received a higher mean and median result than CQ2, however when placing the skills in
ranked order the order was identical when rated by both advisers and clients.
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Chapter 6: Results
Table 6-27 Additional financial adviser behaviours: rated by financial advisers
Standard of competence-based skills
Advisers self-rated all of their competence based skills higher than clients did. However,
the standard variation for some of these skills was high as some advisers also rated
competencies such as ‘time management’, ‘written’ skills and ‘social/ethical awareness’ as
‘poor’. The self-ratings in Table 6-28 indicate that advisers ranked the skill of ‘problem
solving’ the highest of all other competence-based skills (𝑥̅ = 4.48) in the questionnaire,
compared with clients who rated their adviser’s problem solving skills lowest (𝑥̅ = 3.26).
Table 6-28 Financial adviser self-rated competence based skills
Trust factors
The financial adviser questionnaire asked how strongly financial advisers agreed or
disagreed with statements about trust, the GFC and financial planners. Results are
presented in Table 6-29. Financial adviser respondents agreed that the public reputation of
a firm is important to clients when choosing a financial planner they can trust (𝑥� = 4, M =
4, 𝑥̅ = 4.07). As with the client questionnaire, this statement had the highest mean.
Financial planners also agreed that financial planners were trustworthy (𝑥� = 4, M = 4, 𝑥̅ =
3.71) but clients generally did not agree with this statement (𝑥� = 3, M = 3, 𝑥̅ = 2.83).
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Chapter 6: Results
Table 6-29 Likert scale responses for trust factors: financial adviser questionnaire
Financial advisers disagreed that ‘government legislation banning commissions makes
financial planners more trustworthy’ (𝑥� = 2, M = 2, 𝑥̅ = 2.55) but client respondents (refer
section 6.3) agreed with this statement (𝑥� = 4, M = 4, 𝑥̅ = 3.57). The Likert scale results for
167
Chapter 6: Results
financial adviser responses to the banning of commissions are shown in Figure 6-36 below.
Figure 6-36 Government legislation banning commissions and trustworthiness:
financial adviser questionnaire
In addition, financial advisers, like clients did not agree that more importance should be
placed on competence than ethical values and 54% (CQ2: 60%) did not agree that
qualifications such as a university degree make a financial planner more trustworthy.
Trust judgements
To assist in addressing the research questions, financial adviser respondents were asked to
make judgements about various dimensions of trust in their dealings with clients using a
five-point Likert scale (1 Strongly Disagree to 5 Strongly Agree). Results in Table 6-30
below indicate that advisers have a strong view of themselves as trustworthy (𝑥̅ = 4.66,
(𝑥� = 5), reliable (𝑥̅ = 4.57), and caring (𝑥̅ = 4.48) toward their clients. Furthermore,
financial adviser respondents strongly agreed that clients would feel comfortable sharing
personal information with them (𝑥̅ = 4.60). The financial adviser responses to trust
judgement statements were ranked much higher than the client responses. For example,
clients provided a median of only 3 out of 5 and a mean of 2.90 for the trustworthy
statement (refer Table 6-21 on page 148).
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Chapter 6: Results
Table 6-30 Trust judgements made by financial advisers in dealing with clients
Education
Financial adviser respondents were asked to provide their education details. There was a
range of educational qualifications provided, with the lowest educational level being Year
10 of high school and the highest being a master degree. Thirty-six percent of adviser
respondents held a bachelor degree and a further 38% held a diploma or advanced diploma.
Eight percent of respondents did not meet the benchmark level of holding a diploma.
Further analysis revealed that 56% of advisers who had completed a bachelor degree or
higher had previously held a Certificate III/IV, Diploma in Financial Services or Advanced
Diploma in Financial Services. A breakdown of the highest educational level achieved by
financial adviser respondents is provided in Figure 6-37 below.
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Chapter 6: Results
Figure 6-37 Highest level of education: financial adviser questionnaire
Professional designation
Respondents provided a wide range of responses for professional designations in response
to Part B, question 1 in addition to the five provided for selection. However, upon further
investigation, a number were not genuine designations but simply professional
memberships or educational courses that had been completed (e.g. Diploma of Financial
Services). The data was cleaned to exclude any responses that were not genuine
professional designations and where there was no other professional designation provided,
it was assumed that the respondent did not have a professional designation. Only 5
respondents did not answer this question and these responses were treated as missing. The
results are presented in Figure 6-38 below.
Fifty-one percent of respondents did not have a recognised professional designation while
30% held the FPA’s Certified Financial Planner (CFP) designation and 6% were a
Certified Practising Accountant (CPA).
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Chapter 6: Results
Figure 6-38 Professional designations: financial adviser questionnaire
Work experience
Sixty-five of the 74 financial adviser questionnaire respondents have worked as a financial
adviser and 63% of these have worked in this role for ten years or more. A small
proportion of advisers (4.6%) are relatively new to the role, having only 1-2 years of
experience. Figure 6-39 (below) shows the breakdown of years of work experience.
Respondents also provided the number of employers they have worked for in their role as a
financial adviser and results showed that financial advisers are generally loyal to their
employer with 48% have only worked for one employer. Twenty-three percent have
worked for two employers; 13% have worked for three employers and 16% have worked
for four or more employers. The relationship of work experience and trustworthiness will
be discussed further in the next chapter.
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Chapter 6: Results
Figure 6-39 Years of work experience as a financial adviser
6.4.3 Cross-tabulation and statistical tests
Cross-tabulations and statistical tests were performed on the financial adviser questionnaire
data as they were for the client questionnaires. Results from the cross-tabulations and
statistical tests are provided below. Where appropriate, commentary is also provided to
compare results across variables and against results from client questionnaires.
Remuneration and organisation type
Financial advisers reported that a fee for service was more likely to be charged (38.5%) for
financial advice, with independent advisers (43.8%) and accounting practices (44.4%)
being more likely than dealer groups (35%) to charge a fee for service. This compares with
CQ2 where fees were more likely to be paid (36%) by all organisations other than banks.
Dealer groups were more likely to charge a combination of fees and commissions (37.5%)
and reported 12.5% of remuneration as commission-only. No statistical significance was
evident in the results.
Behavioural skills cross-tabulations
Cross-tabulating the FABS with organisation type showed the FABS (as self-rated by
advisers) to be lowest for independent advisers (64) and highest for advisers working
within an accounting practice (67). Except for superannuation funds (which were not
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Chapter 6: Results
represented in the FAQ), the FABS rated by advisers across organisation types was much
higher than the FABS ratings by clients in CQ1 and CQ2 (ranging from 48 to 59).
The FAQ included five additional behaviours that were also included in CQ2 which were
cross-tabulated with organisation type. Although not statistically significant, advisers from
dealer groups, accounting practices and independent advisers rated all five behaviours
(ethical, integrity, dependable, nurturing and benevolent) the same (𝑥� = 5, 5, 4, 4, 4
respectively) on a Likert scale (1 = Strongly Disagree, through to 5 = Strongly Agree)
except for those in an accounting practice who rated dependability higher (𝑥� = 4.5). These
scores were rated higher by advisers than clients. However, both advisers and clients rated
ethical behaviour and integrity higher than nurturing and benevolent behaviour.
Competence-based skills
Both FAQ and CQ2 included a number of additional questions about competence-based
skills of financial advisers. These seven competence-based skills (time management,
verbal, written, problem solving, technical, numeracy, social/ethical awareness) as rated by
advisers on a five-point Likert scale were cross-tabulated with remuneration method,
organisation type, and professional designation. Unless stated, test results are not
significant.
Remuneration method
Table 6-31 Competence-based skills by remuneration type of advisers
Remuneration
Type
Fee for
Service
Written
Problem
Solving
Technical
Numeracy
Social/
Ethical
Awareness
4.00
4.00
4.00
4.00
4.00
4.00
5.00
4.50
5.00
5.00
4.00
5.00
4.00
4
3.50
4.50
4.50
5.00
5.00
5.00
4.50
3
4.00
3.00
4.00
4.00
4.00
4.00
4.00
21
4.00
4.00
4.00
5.00
4.00
4.00
4.00
2
4.00
4.50
4.50
4.50
4.50
4.00
4.50
4
3.50
4.50
5.00
4.00
4.00
4.50
4.00
65
4.00
4.00
4.00
4.00
4.00
4.00
4.00
N
Time
Management
Verbal
25
4.00
Commission
6
% of FUM
Salary
Combination of
fee and
commission
Fee plus %
new business
Salary plus %
of FUM
Total
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Chapter 6: Results
Results from the cross-tabulation of competence-based skills and remuneration type (refer
Table 6-31) showed the highest self-rated median results for time management (𝑥� = 5) by
advisers who charged commissions while those who charged a percentage of FUM rated
themselves highest for numeracy skills (𝑥� = 5) and those on a salary plus percentage of
FUM rated their written communication skills higher than any other advisers (𝑥� = 5).
In comparison, client ratings in CQ2 were lower than self-rated ratings in FAQ, except for
fee for service advisers who matched their client ratings for 6 of the 7 competencies
(𝑥� = 4). Clients rated their problem solving skills lower (𝑥� = 3.5 𝑐𝑐 4).
Organisation type
Advisers from dealer groups self-reported their competency skills higher than advisers
from accounting practices and independent financial advisers although in comparison,
clients reported dealer groups as having the lowest standard of competency skills.
Independent advisers self-reported their competency skills similar to client ratings although
these advisers self-rated their problem solving skills higher (𝑥� = 4.5 𝑐𝑐 3).
Professional designation
Advisers who held the CFP, CPA and FPS designation rated themselves as ‘excellent’
(𝑥� = 5) for numeracy and problem-solving skills while only CFP and CPA designated
advisers self-reported technical skills as ‘excellent’. Only FPS advisers self-rated verbal
and written skills as ‘excellent’. All advisers (even those with no professional designation)
rated their technical skills as ‘good’ (𝑥� = 4) or better, except for CA and IPA designated
advisers. A Kruskal-Wallis nonparametric test showed a significant difference in technical
competency skills among professional designation groups; 𝜒 2 (4, 𝑁 = 54) = 10.464,
𝑝 = .033, 𝜂2 = 0.2. Posthoc comparisons between pairwise were conducted using the
Mann-Whitney test with the only significant difference between advisers with the CPA
designation and advisers with no professional designation, where all CPA designated
advisers self-rated a higher median score (𝑥� = 5) for technical competency than those with
no professional designation (𝑥� = 4).
When comparing the result to CQ2, clients rated FPA members highest across all
competence-based skills with similar rankings to those self-reported by CFP designated
advisers.
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Chapter 6: Results
Trust factors
Cross-tabulations of trust factors (measured on a five-point Likert scale) included in FAQ
against potential antecedents such as remuneration type, organisation type, years of
experience and professional designations were conducted. Trust factors were analysed
with a one-way analysis of variance (ANOVA), however where the Levene test showed
assumptions of normality and homogeneity of variance to be violated, Kruskal-Wallis tests
were used as a nonparametric alternative. Results are reported below.
Remuneration Type
No significant differences in trust factors were found by remuneration type. However,
advisers remunerated by a salary reported a higher median score (𝑥� = 4) than all other
remuneration types (∑ 𝑥� = 2), agreeing that ‘Government legislation banning
commissions makes financial planners more trustworthy’. A Kruskal-Wallis test showed
the significance to be at 0.059.
Organisation Type
A one-way ANOVA showed significant differences for three trust factor statements when
analysed by organisation type. Firstly, the statement ‘Large firms that offer financial advice
are more trustworthy than small firms that offer financial advice’ was statistically
significant at the 0.01 level, 𝐹(2, 62) = 4.993, 𝑝 = .01, 𝜂𝑝 2 = 0.14. Tukey HSD post hoc
comparisons revealed the most significant difference to be between independent advisers
and accounting practices (𝑥̅𝐷𝐷𝐷𝐷 = 0.993, 𝑝 = .029, 95% 𝐶𝐶 [0.09, 1.90]) with
independent advisers (𝑥� = 1.5) clearly disagreeing with the statement and accounting
practice advisers (𝑥� = 3) holding a neutral position.
The general trust levels for advisers (demonstrated by ‘most people can be trusted’
statement) from different organisation types were also statistically significant, 𝐹(2, 62) =
3.773, 𝑝 = .028, 𝜂𝑝 2 = 0.11. Tukey HSD post hoc comparisons revealed the most
significant difference to be between independent advisers and dealer groups (𝑥̅𝐷𝐷𝐷𝐷 =
0.663, 𝑝 = .032, 95% 𝐶𝐶 [0.05, 1.28]) with independent advisers (𝑥� = 3) holding a
neutral position and dealer groups agreeing with the statement (𝑥� = 4).
A one way ANOVA showed statistically significant differences existed by organisation
type for the statement ‘The GFC increased clients’ trust in financial planners’, 𝐹(2, 62) =
4.607, 𝑝 = .014, 𝜂𝑝 2 = 0.05 with Tukey HSD post hoc comparisons revealing the only
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Chapter 6: Results
significant difference to be between independent advisers and dealer groups (𝑥̅𝐷𝐷𝐷𝐷 =
0.786, 𝑝 = .027, 95% 𝐶𝐶 [0.07, 1.5]). Independent advisers disagreed (𝑥� = 2) with the
statement and dealer groups were neutral (𝑥� = 3).
Years of experience
The number of years of experience in a financial advising role was a statistically significant
variable for two trust factor statements. A Kruskal-Wallis non-parametric test showed
significance at the 0.015 level for the statement ‘A financial planner with less than 10
years’ experience is more trustworthy than one with more than 10 years’ experience’,
𝜒 2 (3, 𝑁 = 65) = 10.515, 𝑝 = .015, 𝜂2 = 0.16. Posthoc comparisons between pairwise
were conducted using the Mann-Whitney test with the only significant difference between
advisers with 6-9 years’ experience and those with more than ten years’ experience where a
higher median score was achieved in the 6-9 year age group, 𝑧 (𝑁 = 55) = 2.361, 𝑝 =
.018, 𝑟 2 = 0.1). Although both groups of advisers disagreed with the statement, those with
more than ten years’ experience more strongly disagreed (𝑥� = 2) with the statement than
those in the 6-9 year group (𝑥� = 2.5) which indicates that advisers with more than ten
years’ experience in an advising role believe themselves to be more trustworthy than
advisers with less experience than themselves.
The number of years of experience in a financial advising role was also a statistically
significant variable for the statement ‘Government legislation banning commissions makes
financial planners more trustworthy’. A one way ANOVA showed significance at the 0.003
level, 𝐹(3, 61) = 5.043, 𝑝 = .003, 𝜂𝑝 2 = 0.199, with Tukey HSD post hoc comparisons
revealing the only significant difference to be between advisers with 1-2 years’ experience
and those with more than 10 years’ experience,
𝑥̅𝐷𝐷𝐷𝐷 = 2.26, 𝑝 = .013, 95% 𝐶𝐶 [0.36, 4.16]. Advisers with more than ten years’
experience strongly disagreed (𝑥� = 2) with the statement while those with 1-2 years’
experience agreed that ‘Government legislation banning commissions makes financial
planners more trustworthy’ (𝑥� = 4). Pearson product-moment correlation showed a strong,
negative relationship between years of experience and agreement with the trust factor
statement to be significant, 𝑟(63) = −.39, 𝑝 < .001 (advisers with more experience in a
financial advising role were less likely to agree with the statement).
Professional designation
A Kruskal-Wallis nonparametric test showed a significant difference among professional
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Chapter 6: Results
designation groups for trust factor ‘Government legislation banning commissions makes
financial planners more trustworthy’, 𝜒 2 (4, 𝑁 = 66) = 14.731, 𝑝 = .005, 𝜂2 = 0.23.
Posthoc pairwise comparisons among the groups were conducted using the Mann-Whitney
test to determine between which pairs the significant difference exists. The test showed a
significant difference (𝑝 = .006) between CPA advisers (𝑥� = 4.5) and CFP advisers
(𝑥� = 2) demonstrating that CPA advisers clearly agree with the statement while CFP
advisers (mostly FPA members) disagree.
A Kruskal-Wallis nonparametric test also showed a significant difference among
professional designation groups for trust factor ‘Financial planners are more trustworthy
now than they were before the GFC’, 𝜒 2 (4, 𝑁 = 66) = 9.788, 𝑝 = .044, 𝜂2 = 0.15.
Posthoc pairwise comparisons using the Mann-Whitney test showed a significant
difference (𝑝 = .019) between CPA advisers (𝑥� = 4) and CFP advisers (𝑥� = 2)
demonstrating that CPA advisers agree with the statement while CFP advisers (mostly FPA
members) disagree.
Trust judgements
Cross-tabulations of trust judgements made by financial advisers (on a five-point Likert
Scale) with variables such as remuneration method, organisation type, years of experience
and professional designation were conducted. The only variable found to have statistically
significant results was years of experience.
As the Levene test showed assumptions of normality and homogeneity of variance to be
violated, the Kruskal-Wallis test was used as a nonparametric alternative with a significant
difference for advisers with differing years of experience for trust judgement ‘I have
proven to be trustworthy with my clients’, 𝜒 2 (3, 𝑁 = 65) = 9.078, 𝑝 = .028, 𝜂2 =
0.14. Posthoc pairwise comparisons using the Mann-Whitney test showed a significant
difference (𝑝 = .026) between advisers with 1-2 years’ experience (𝑥� = 4) and advisers
with more than 10 years’ experience (𝑥� = 5) demonstrating that those with less experience
are less likely to have had an opportunity to build trust with clients than those with more
experience as an adviser.
Defining Issues Test (DIT) and the ‘P’ score
As outlined in Chapter 5, Section 5.6.4 on page 90, the hand scoring and analysis
procedure as itemised in the DIT Manual (Rest, 1986) was used to compute the Principled
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Chapter 6: Results
morality score (the ‘P’ score) for financial advisers who completed Rest’s DIT (1979) in
Part B of the questionnaire. The P score is based on the relative importance given by the
respondent to items representing stages 5 and 6 and ranges from 0 to 95, with a higher
number representing higher moral development. The results are shown in Table 6-32
below.
Table 6-32 Financial adviser DIT P scores
N
Valid
Missing
Excluded (M>4)
Mean
Median
Mode
Std. Deviation
Minimum
Maximum
59
7
10
28.64
30.00
36.67
12.41
.00
56.67
The mean ‘P’ score for the sixty-six financial advisers completing this DIT was 28.6 which
is lower than the P score of 40 for adults in general and of 31.8 for senior high school
students (Rest, 1994, p. 14) . The mean P score was also lower than that of Certified
Financial Planners (CFPs) in the United States (P = 38.01) (Bigel, 1998). For comparison
purposes, the P score for CFPs in Australia in the current study was 33.15 (N = 19). In
both studies, CFPs had higher mean P scores than non-CFPs.
The lowest P score was zero and the maximum 57. Seven advisers did not complete the
DIT (coded as missing). Ten advisers who did complete it received an ‘M’ score greater
than 4 and were excluded from the sample as the M score ‘does not represent any stage of
thinking but rather a subject’s tendency to endorse statements for their pretentiousness
rather than meaning’ (Rest, 1986, p. 4.2). For example, in the Heinz story, it is irrelevant
whether Heinz is a professional wrestler, or has considerable influence with professional
wrestlers and hence selecting this as important does not represent any stage of moral
reasoning when considering whether Heinz should steal a drug from the pharmacist for his
dying wife. Excluding such cases improves face validity.
The DIT scores can be formed into four groups using quartiles with cut-off points on the
P% score as recommended by Rest (1986). These four groups as shown in Table 6-33
below, show comparisons between lower levels of development in moral judgement
(quartiles 1 and 2) and higher development (quartiles 3 and 4). Using these common cutoff points allows for comparison among studies when discussing different levels of moral
development (Rest, 1986, p.4.4).
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Table 6-33 Financial adviser DIT P score by quartile with recommended cut-off
points according to Rest (1986)
st
P Score
No. of cases
Percent of cases
1 Quartile
0-22
16
27.12%
2
nd
Quartile
23-34
23
38.98%
rd
3 Quartile
35-46
15
25.42%
th
4 Quartile
47 and higher
5
8.47%
A further analysis known as a ‘stage profile’ was conducted by taking each respondent’s
stage 2, 3, 4, 5A, 5B and 6 scores and computing means for each of the stages. This
analysis is shown graphically in Figure 6-40 and shows that financial advisers were highest
on stage 4 of the moral judgement development scale which represents ‘the morality of law
and duty to the social order’ (Rest and Narvaez, 1994, p. 5). It is likely that the increased
focus on compliance through the rigid regulatory framework imposed by the profession
and the government since the GFC has contributed to the high stage 4 scores. Items
representing stages 5A, 5B and 6 (stages of principled morality) needed to be ranked
higher (in terms of importance) to report a higher P score.
Figure 6-40 Stage profile: development of financial adviser moral judgement
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The P score did not show any significant differences to exist with any of the variables
tested. Cross-tabulations including one-way ANOVAs comparing the P score with
variables such as age, education, professional designation and years of work experience did
not show any significant differences. As the Levene test showed assumptions of normality
and homogeneity of variance to be violated for variables such as gender, organisation type
and remuneration type, the Kruskal-Wallis test was used as a nonparametric alternative and
also did not show any significant differences. These results support the study of investment
planners conducted by Bigel (2000) where no statistically significant results were found for
compensation source (remuneration type), age, career tenure (years of work experience) or
gender.
Although not significant, advisers with postgraduate qualifications had a higher P score
(30.34) than all other education levels. This is supported by Bigel (2000) who found a
statistically significant difference in P scores between investment planners with bachelor
degrees (P = 32.83) and those with postgraduate qualifications (P = 38.3). It should be
noted however, that a bachelor’s degree in the United States usually involves 4 years of
study compared with Australia where it is usually only 3 years.
Also, advisers with 6-9 years of work experience in an advising role had a higher P score
(30.91) than all others, including those with more than 10 years’ experience, as observed in
Table 6-34. This is supported by Ponemon (1990) and Bigel (1998, 2000) who found that
staff with longer career tenure had lower moral reasoning abilities. Furthermore, Bigel
(2000) found a similar pattern to this study in that the P score was higher for experienced
planners (6-9 years) than those new to the role (1-5 years) but was lower for established
planners (10 or more years).
Table 6-34 Years of experience and P score
Years of experience
(career tenure)
1-2 yrs
3-5 yrs
6-9 yrs
10 or more yrs
P score (this study)
28.33
22.00
30.91
27.58
P score (Bigel 2000)
38.98
39.31
33.94
6.4.4 Open-ended comments
The last question of the questionnaire (Part B, question 7 in Appendix C15) asked advisers
to ‘Please add any additional information you feel is relevant to the research’. Twentyseven advisers provided comments to this optional question which were analysed using
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Leximancer (as outlined in section 5.4.4 on page 74) to reveal the main themes and
concepts that advisers felt were relevant to the study.
A map of sixteen concepts, organised in to seven main thematic clusters emerged from the
grounded analysis of the adviser’s open-ended comments and is presented in Figure 6-41
below.
Figure 6-41 Map of concepts and themes: FAQ open ended-comments
The location of individual concepts (shown by the grey circles) shows the closeness of
their semantic relationship to other concepts. For example, the concepts ‘quick’ and ‘sales’
are closely located to one another in the Clients thematic cluster. The most relevant theme
to appear from the analysis was Clients (100% connectivity) which was the most
frequently occurring concept. This was closely followed by Trust (68% connectivity). The
themes arising from the analysis, in order of significance are presented in Table 6-35
below.
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Table 6-35 Themes by significance: FAQ
Order of
significance
1
2
3
4
5
6
7
Theme
Clients
Trust
Industry
Life
People
Feel
Relationship
The theme Clients is connected to concepts such as clients, sale, quick and planning. A
closer examination of the textual component of this thematic cluster reveals the concern
that advisers have for their clients and having their clients’ best interests at heart. For
example:
Acting in the best interests of clients is paramount. [Adviser 497]
Many like me receive no payment or recognition for ensuring that our aged clients
utility bills are paid, home insured and tax returns completed. [Adviser 1694]
Advisers also raised some concerns that there were a small number of advisers in the
industry that do not put their client’s interests first:
Honest people always put their clients first but as with any industry always small
proportion who don't. [Adviser 199]
We continuously are branded with the same stigma as those who have entered the
industry and wronged clients. [Adviser 1694]
These concerns were also supported by comments regarding the sales culture of some
advisers, for example:
Some current planners in the industry (who) have come across from a sales
background and are just in it for a quick sale ($) and are not really concerned
about the long term financial health of a client. [Adviser 327]
Comments associated with the second theme, Trust, indicate that advisers generally believe
that trust has an important role to play in the client-adviser relationship and that clients
trust their adviser. However, advisers also acknowledged that the behaviour of rogue
advisers may affect public perception of this trust:
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Generally I think clients trust their adviser. It takes one rogue adviser to bring
down a group through perceived association. The number one need in any
relationship is trust. [Adviser 12]
The role of trust has always been there between clients and advisers however
public perception is different. Advisers have an obligation of trust and should be
held accountable for breach of that trust. [Adviser 9001]
One adviser suggested that the ultimate test of trust may be the amount of referrals an
adviser receives:
Where were the questions regarding the amount of referrals you receive, surely the
ultimate test of trust? [Adviser 1167]
The first two themes also relate to the third theme, Industry, which was connected with the
concepts of industry and education. Adviser comments expressed the sentiment that the
industry has been given a bad reputation by the media and the government and that more
education is required to improve the industry’s reputation:
We really feel as financial planners that the current government, media, FPA and
unions have all contributed to the poor reputation of financial planners. A very
small proportion of the industry is rotten and the campaign waged against the
industry is simply corruption very much at work! [Adviser 1531]
The media uses biased and untrustworthy reporting. The profession/industry does
not do enough education. [Adviser 1333]
This industry has invested zero time in people psychology or personal growth. It
should be an entire subject and the basis of the customer relationship! [Adviser
584]
I believe that making a degree compulsory for all advisers will help improve trust
as the advisers who go down this path or already have are serious about long-term
careers in planning and helping clients for life. i.e. Compared to some current
planners in the industry who have come across from a sales background and are
just in it for a quick sale ($) and are not really concerned about the long term
financial health of a client. [Adviser 327]
The fourth theme, Life was connected to themes such as life, believe and experience with
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comments relating to the importance of the life experience of an adviser as well as the
adviser’s role in assisting the client through all life stages:
I believe that life experience carries a lot of weight in the overall advice process.
You cannot put an old head on young shoulders when it comes to a client's journey
through all phases of their life. [Adviser 9002]
A closer examination of the textual content revealed that most comments associated with
the fifth theme People acknowledged that advisers, like people in all industries, will have
some who are untrustworthy:
All industry/professions have untrustworthy people. [Adviser 1333]
The last two themes, Feel and Relationship had a relatively lower connection (<10%
connectivity) with other concepts as illustrated by their location on the map in Figure 6-41.
Feel was used in the context of expressing opinions about the reputation of advisers as
expressed by adviser #1531 on page 183. Adviser comments also highlighted the
importance of trust in the client-adviser relationship in the last theme Relationship.
The number one need in any relationship is trust. [Adviser 12]
The quantitative results in section 6.4.3 are supported by the open-ended comments
provided by advisers in this section, particularly those relating to the importance of
experience and education as trust factors. These results assist in explaining the role of trust
in personal financial planning.
6.5
Interviews
A total of (8) client interviews and (9) financial adviser interviews were conducted. The
interviews were in-depth with the shortest interview lasting just over 30 minutes and the
longest taking 1 hour and 10 minutes.
Both clients and advisers were generous with their time and provided rich and meaningful
data which was carefully and meticulously analysed using both the manual method and
using computer software Leximancer (as outlined in section 5.7.4) to reveal the main
themes and concepts that participants felt were relevant to the study.
6.5.1 Client interviews
A map of twenty-eight concepts, organised into twelve main thematic clusters emerged
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from the grounded analysis of the client interviews and is presented in Figure 6-42 below.
Figure 6-42 Map of concepts and themes: client interviews
The importance of themes is represented by the colour of the circle on the map. The most
important themes are characterised by the ‘hot’ colours such as red and orange, essentially
‘heat-mapped’ according to the colour wheel, with the less important themes showing on
cooler colours. These themes are also numbered in order of significance in Table 6-36
below. The concepts that make up these themes are represented by the smaller grey
coloured circles. The larger the grey circle, the more significant the concept. The location
of individual concepts (shown by the grey circles) shows the closeness of their semantic
relationship to other concepts. For example, the concepts ‘financial’ and ‘adviser’ are
closely located to one another in the Adviser thematic cluster.
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Table 6-36 Themes by significance: client interviews
Order of
Significance
1
2
3
4
5
6
7
8
9
10
11
12
Theme
adviser
people
things
best
time
thought
bank
trust
professional
year
ethical
commissions
Connectivity
100%
65%
54%
22%
21%
19%
13%
12%
06%
04%
03%
02%
Concepts (in order of significance)
adviser, financial, legislation
people, advice, information, wanted, qualifications
things, money, need, tax
best, interests, moment
time, pay
thought, market
bank, work
trust, saying
professional, feel
year
ethical
commissions
The results from an analysis of all twelve themes and associated concepts as identified in
the abovementioned table are reported below.
1. Adviser
The most relevant theme to appear from the analysis of the client interviews was Adviser
which included the concepts adviser, financial and legislation. As part of the analysis, the
concept Adviser included both the terms adviser and planner. In this study, clients used the
term mostly when describing the characteristics and behaviours they had observed of
advisers, both good and bad. The positive characteristics related to qualifications,
‘knowing the client’ and interaction with the client; as the examples below demonstrate:
He’s got a Business Economics Degree from, I think, La Trobe up here at the
university. He’s a member of the Financial Planning Association and there was
another one which is similar to that, I think. So he’s well qualified. [Interviewee
106]
Yes, I can have as much contact with him as I like and he always answers my
emails promptly. So I don’t usually ask him about other things, mainly financial
things or… But he is very supportive, yes. [Interviewee 106]
No, but there was another example that came to mind of our financial adviser
understanding how we think and how conservative and safe we like to play rather
than taking risks. [Interviewee 102]
He is interested in our personal circumstances. [Interviewee 105]
One of the poorer characteristics was in regards to listening:
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We were with an accountant once who was now moving into financial advice, so we
tried one of their people, just to compare. So we saw a financial planner there. He
was very perfunctory, very totally uninterested for about the first 20 minutes of the
interview. He hadn't done his homework on us obviously, and I could see that he
wasn't even listening. [Interviewee 105]
Some more general comments were in regards to the fees and commissions charged by
advisers; examples of this will be provided under the theme Commissions.
2. People
People was a highly relevant theme, used by clients generally when describing how they
believed individuals (clients/potential clients) in Australia generally live their life and
behave when it comes to their finances. A common sentiment expressed by clients was that
people generally make unwise decisions or are ignorant about their finances and possess a
certain level of vulnerability when engaging a financial adviser. Some examples are as
follows:
The whole thing is that the people who don’t have high income know how to save
and people with the high income just know how to spend and they don’t save
anything. [Interviewee 107]
It amazes me that people have some super, they really don't care about it nor
understand it nor want to access it… I think there should be a level of financial
planning for people of all sorts of incomes. [Interviewee 105]
I think people don't trust them. They're up there with car salesmen, and I think
people are a bit scared. [Interviewee 100]
I can’t believe when I hear the stories of how some people have lost their money.
It’s a bit like those internet scams where people send money to Russian women.
[Interviewee 106]
I'm sure some people end up at a financial planner when they are very somewhat
vulnerable or may have come into some money that was unexpected or gone
through - I've helped a couple of people with divorces, and they were very
vulnerable. [Interviewee 105]
The concept advice was highly relevant to the theme People as many discussions about
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people were in relation to advice that had been sought or about how to best offer or provide
advice.
Because you always read about them in the paper or hear about them on the
current affairs shows how some consumers have been ripped off. Obviously they
haven't found the correct or suitable financial adviser and I do think people need to
be very careful and maybe get advice from someone who's already got one who's
got a proven track record rather than go with someone that they've not heard of or
know nothing about. [Interviewer 102]
But presently at the moment - and this will be a generalisation - those that offer
advice to people on lower incomes, for financial planning I mean, experience has
shown that they have not always acted ethically. [Interviewee 105]
But that's where the banks have to be free, financial advice, to start people off - and
saying I don't know that it's even worth doing anything - but they've got to be. The
banks have the responsibility to provide the first level of financial advice being
financial providers. [Interviewee 100]
The concept information was also relevant to the People theme. An analysis of the concept
revealed that clients believed that consumers should obtain information about an adviser’s
background and experience, as well as about recommended products before making a
commitment to proceed with their recommendations. For example,
Well no, not necessarily, it just might be that what he's telling me and number three
sounds more interesting than number one. It may be I'm thinking well look, I'd like
information on the top five, and I'll go away and read it. [Interviewee 100]
Well if it was a friend, I’d be saying to them, “Get as much information as you
can.” One would hope that governments would have policies in place that would
protect consumers but that’s not always the case, well as far as I can see at the
moment. [Interviewee 106]
I don't know enough information about other people, it's hard to go from the
particular to the general, but in this case she was naïve, financially naïve, a clever
person but financially naïve, and she felt that he was just, quote, a nice person.
Probably he was, but not to her. So I think building that trust is so crucial, but I
think like all products we buy, you need to have a little bit of understanding, a little
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bit of information. [Interviewee 105]
Wanted was also a concept relevant to People. The term was used by clients in the context
of what they wanted from a financial adviser such as qualifications, listening skills,
professional advice and specific products. Some examples of these are below.
I wanted someone who - I looked for qualifications to begin with, their record, and
who they're employed by. [Interviewee 105]
I wanted someone that would listen carefully and someone who would act upon our
level of risk in relation to the financial products. [Interviewee 105]
If I’m sceptical I think well they’re just trying to sell me something, but I wanted
life insurance, I got life insurance; I wanted income protection, I got income
protection. I got what I wanted out of it, but in the greater scheme of things I think
they do sell people things that they don’t need. [Interviewee 101]
…some goals and actually where's the best place to put your money? Because I
don’t have time to manage it and neither does my husband so we wanted some
professional advice to tell us what you should do. [Interviewee 107]
Qualifications was a common concept identified by clients in the theme People as
something that they wanted people (advisers) to have, as shown above and also in the
following statements:
So I probably wouldn’t deal with him if he didn’t have those qualifications. We
knew that he had the Degree, etcetera, when we first met him. [Interviewee 106]
We wouldn't go to anybody who wasn't qualified. [Interviewee 102]
3. Things
The third most relevant theme (54%) was Things which was also identified as a significant
concept in the financial adviser interviews. Although a rudimentary term, things is defined
in the Oxford Dictionary as ‘personal belongings or clothing; an action, activity or thought’
(ed. Soanes, 2002, p. 949). The concept Things was used as a ‘catch all’ term by clients
when referring to their financial position, financial products or financial transactions and
other actions relating to their finances, as shown in the following statements:
Where before because it was I had no idea where we were that I went into a
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meeting and I got a piece of paper that said this is where things are but didn’t
understand it or couldn’t see well okay that's what you're telling me. [Interviewee
107]
He’s never actually pushed things that we weren’t happy with. [Interviewee 106]
He'll say, “Do you want to change anything?” and he'll show us a chart of where
things are moving, where things are safe, “Do you want to put less in cash, more in
this because this is doing well now or maybe put more in cash even though you're
not getting a lot of interest or money back, it's safe.” So, yes, we do normally go
over where we've got things and, yes, and he recommends and so far he's been right
with everything. [Interviewee 102]
4. Best
The theme Best was used by clients in the context of ‘best interests’, hence the term
interests rating as a highly significant concept for the theme. Clients believed that
trustworthy, ethical advisers would act in the client’s best interests and used this as a gauge
to indicate their level of trust in an adviser, as shown by the following statements:
It boiled down to one thing, I want that financial adviser to act in the client's best
interests and not just sell commissioned products. That's what the trust comes down
to. [Interviewee 105]
I think that you can usually tell by talking to a person and you get that feeling of
trust or whether they’re trying to push their own barrow or whether they’re
working in your best interests as well. Obviously he has to do what’s best for him
as well, but just that feeling that he wouldn’t do anything dishonest. He’s got his
reputation to think of. And just talking to him generally, you get that feeling. You
know when you talk to somebody that you meet for the first time and you either
relate to them or you don’t? Well I think I relate to him fairly well...You get that
feeling that you can relate well to someone and that they’ve got your best interests
at heart. [Interviewee 106]
Best interests was also a discussion point of the newly introduced FOFA legislation.
Clients had differing views as to what this meant to them. As one of the more sceptical
clients stated:
These new regulations. Because I'm thinking, in my best interests, how do you know
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what's in my best interests from half an hour sitting down with me. You can't know
really how I think about every single financial issue. You just can't get there. Also,
your best interests and my best interests may coincide at one point, but they also
may not, and what you think are my best interests are not necessarily. [Interviewee
100]
5. Time
The theme Time was significant in that it was used by clients in describing the frequency of
interaction with their adviser and the duration of their relationship with their adviser, where
both factors seemed to support the literature as being antecedents of trust (refer to page 33).
Well I probably have two visits and then sometimes phone calls. Probably about six
or seven times a year. It depends what’s happening. If I want to tell him something I
send an email and he always answers back pretty promptly. [Interviewee 106]
My in-laws have had money invested with him; he’s done our tax as I said for a
long time. I don’t know it’s such a long time ago I’m trying to reflect back.
[Interviewee 104]
It (trust) would be something that would build up over time. [Interviewee 101]
The concept pay was also connected to the theme Time where clients referred to times
when they were required to pay for insurance or tax or fees. For example, ‘we weren’t
particularly looking for investment at the time, but I don’t make an awful lot of money but
I pay probably around $30,000 tax or a bit more each year’.
6. Thought
Thought was a significant theme to evolve from the analysis as it represents the cognitive
processes adopted by clients that contribute to the building (or loss) of trust in their
advisers.
He listened carefully, he was excellent at that, and then he changed a couple of
ideas that I'd had, and I felt really comfortable with that, and I thought that's
excellent, I hadn't thought of that, that was great, and so we went ahead with that.
[Interviewee 105]
With [named adviser], one of the things that increased my trust in him was the fact
that he - I said, when we agreed to do this, and I said - he was getting the loan
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happening for us, and it was with [named bank]. I said, why [named bank]? He
said, oh, well, they're a good company, dah, dah, dah, dah. I said do you get paid
by them? He said, yes I do. I thought, okay. [Interviewee 100]
Okay, we went to [named bank] because I thought one, we'd had a relationship
with them for a number of years, we have a banking arrangement with them as
well. [Interviewee 105]
I thought he's not acting to the highest ethical standards. [Interviewee 105]
Because I thought she has the financial background to understand it, other people
are working with them successfully and that was it. [Interviewee 107]
If there was any unethical behaviour then I would lose all my trust. I would lose all
of it because I'm thinking if you aren't ethical in one part of your life then it affects
the rest of it. [Interviewee 107]
Market was a concept also associated with Thought and was used by clients often to
describe their thoughts on the consumer ‘market’ for advice. For example:
I think there's a real market there for affordable and ethical financial planning
advice. [Interviewee 105]
I think there's a brilliant market for sort of an early engagement with simple
financial advice on how to save, how to do budgets, look over how you're spending
your money, to put money - even don’t go do self-manage or don't do anything
complicated but doing early financial advice. [Interviewee 107]
7. Bank
The theme Bank was relevant to the study through the specific examples clients provided
about advice they had received from banks. Clients indicated that they had initially sought
out banks for advice due to their size, reputation or previous relationship. However, many
clients perceived that advisers in banks were incompetent to provide them with advice, or
that they were biased in their advice due to their sales targets or remuneration. Examples of
client comments in relation to banks are provided below.
A teller selling some product to a customer in a bank as is proposed, that worries
me enormously. [Interviewee 105]
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Oh, you need this, and I'm thinking well, that's not what I'm here for, I'm here about
this. They're pushing me in another direction. Sometimes in the banks they do. You
know, you go in about opening an account on this, and they're trying to sell you a
home loan. You're thinking, is your quota low darl? You need to get your quota up
on that one do you? [Interviewee 100]
To be honest straight across the board at the moment I don’t think I would trust
anybody. If you go to a bank - and they do warn you I think, and aren’t they about
to change that legislation at the moment, they warn you that they work on some sort
of commission, some sort of bonus on what loans they organise. [Interviewee 104]
It was a complete development where he showed us the plans and we all bought. So
all this was involved with a particular bank that kept throwing money at us to make
sure we could get the money to do it, and we mortgaged our house to do it.
[Interviewee 104]
…the first one we saw with [named bank] was very disappointing. Actually he
offered wrong advice, inappropriate products and I felt sorry for the young fellow,
because he was only training, and he was quite inexperienced. Nice young fellow,
but I came away from that meeting saying look, thanks very much, but that's - I
knew more than he did, and I'm not trying to be pretentious there. [Interviewee
105]
Yeah I presumed she’d have the right qualifications and I looked at the bank and it
had an AA rating at the time and I presumed they’d have all the structure in place.
[Interviewee 101]
8. Trust
Trust is a theme central to the research and clients described various elements of trust such
as client’s best interests, transparency in fee structure, organisation type, recommendations
from others, qualifications, knowledge, interaction, honesty, empathy and ethical
behaviour; as shown in the following statements:
But I think it deepens your trust if you know it's part of a firm because then they're
accountable to that firm. [Interviewee 102]
We've seen certificates up in his office and because we've known him for so long
and he used to do our tax before he was our financial adviser, we trust him and we
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know that he's qualified. [Interviewee 102]
What builds trust for me is the engagement and discussions we have, that when I
question stuff that they can answer it so it's the professional depth, the depth of
knowledge. [Interviewee 107]
…just that feeling that he wouldn’t do anything dishonest. [Interviewee 106]
But it’s a bit like empathy, isn’t it? You get that feeling that you can relate well to
someone and that they’ve got your best interests at heart. [Interviewee 106]
If there was any unethical behaviour then I would lose all my trust. [Interviewee
107]
9. Professional
The theme professional was used by clients mostly to describe the relationship they had
with their financial adviser as the following examples indicate:
So it is a little bit personal when we meet them but it's not friendship. It is a
professional relationship. [Interviewee 107]
It was a purely professional relationship, but at the same time it was closer than a
lot of the others. [Interviewee 100]
Well the first man, he was very nice and we trusted him. That was purely
professional because we didn’t actually meet him very much because we were away
most of the time. But with Michael, well I don’t socialise with him because he’s a
lot younger than me but he’ll answer my emails whenever I send them and we talk
about other things besides financial things. [Interviewee 106]
However, we're strictly professional apart from the friendly pleasantries we have,
because I only have one interview per year. [Interviewee 105]
10. Year
Year was a popular theme due to its use by clients in answering the question regarding the
frequency of interactions with their adviser where responses were commonly expressed on
a per year basis. For example, ‘Well I probably have two visits and then sometimes phone
calls. Probably about six or seven times a year’ [Interviewee 106].
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11. Ethical
Clients were asked to describe what ethical behaviour means to them (Question 15) with
responses leading to significance of the theme Ethical in the Leximancer analysis. Clients
commented that they would not deal with an adviser that they believed to be unethical, as
evidenced by the following examples:
Here's what I think, the application of moral standards to behaviour. Not legal
obligations, but what is morally right or wrong, and all the shades of grey in
between. So the difference between then legal compliance and ethical responsibility
is that legal requirements require that a business or a planner follows the letter of
the law, that is the prescribed standards of behaviour. Ethical responsibility sees
the financial planning meeting - all their legal obligations - and taking it further by
following the intention and spirit of the law. [Interviewee 105]
Well, I think that someone ethical needs to have proper morals and scruples, be
qualified, be forthright, not lie or deceive in any way, be open to any questions you
have and answer them truthfully and look after your interest to the best of his
ability… You'd like to think that someone ethical is trustworthy but I'm sure that
there are still people that make mistakes. [Interviewee 102]
If there was any unethical behaviour then I would lose all my trust. I would lose all
of it because I'm thinking if you aren't ethical in one part of your life then it affects
the rest of it. So I couldn’t - it would probably break the relationship. [Interviewee
107]
This sentiment was further supported by clients who provided examples of where they had
ceased using a previous adviser as they believed them to be unethical:
The first 20 minutes, as I said he was very perfunctory and sort of why are you
wasting my time sort of concept, until I mentioned that it was a seven figure sum
that I'm looking after. That got his attention, but that really annoyed me. I thought,
I said to him, I'm sorry, I'm not going to continue. Politely, I didn't tell him why.
But that annoyed me that he was only interested once he found out that I had a
substantial amount, and I found that completely and utterly - well I just regarded
that as well poor business practice. You never know who's coming in through your
door. But secondly, I thought he's not acting to the highest ethical standards.
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[Interviewee 105]
12. Commissions
Clients indicated that they were supportive of paying commissions to their adviser as long
as they were disclosed upfront and clearly identified:
So no, I don’t think they should ban all the commissions but I think people should
be aware of how much they’re paying. [Interviewee 106]
And I know in the past there was some commissions that the financial adviser
received but he was always up front about it. We got documentation to say how
much and all that kind of thing but you've got to expect that you can't get that kind
of advice for nothing. [Interviewee 102]
I say, what's the product, why are you selling me that product, and then I'm bold
enough now to say, outline your commission, your trailing commissions and any
kickbacks. [Interviewee 105]
One client suggested a hybrid model might be the most appropriate, given that clients want
loyalty from their adviser, but at an affordable cost:
I'd prefer a mix of both. I'd prefer they got a flat fee from the client. But at the same
time, that can prohibit people going to them and seeking financial advice, and then
they're in a worse place…That's where I want to say okay look I'm prepared to pay
for your advice, and say, make it nice round figures, say it's $100 for his advice for
an hour or so's consultation. Then if I choose to go with one of his companies, then
he would get that kick back, and I totally get that. But I've also paid him that base
rate so those kickbacks are then not as important, because I have actually paid him
for his advice. If I'm not paying him for his advice, he has no loyalty to me you see.
So that's where I think you need both. But you can't make the fee that high that
people who are on a pension for instance can't afford to go. [Interviewee 100]
6.5.2 Financial adviser interviews
A map of thirty-two concepts, organised in to nine main thematic clusters emerged from
the grounded analysis of the adviser’s interview transcriptions and is presented in Figure
6-43 below.
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Figure 6-43 Map of concepts and themes: financial adviser interviews
The location of individual concepts illustrates the closeness of their semantic relationship
to other concepts on the map. The significance of each theme on the semantic landscape is
represented by the colour of the circle. The themes are numbered in order of significance,
and concepts listed in order of significance in Table 6-37 below.
Table 6-37 Themes by significance: financial adviser interviews
Order of
significance
1
2
3
4
5
6
7
8
9
Theme
Connectivity
people
100%
clients
business
year
money
industry
trust
feel
started
49%
11%
09%
07%
04%
03%
02%
02%
Concepts (in order of significance)
people, things, time, need, look, work, insurance, long,
saying, take, investment, life, whole
clients, best, deal, become, issues, number, fact
business, Global Financial Crisis, terms
year, service, fee
money, course
industry
trust
feel
started
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The results from a qualitative analysis of each theme presented in Table 6-37 are described
below.
1. People
People was the most relevant theme to appear from the Leximancer analysis and the word
people was the most frequent word used by advisers being counted 249 times in the
transcripts and used more often than words such as money (count = 44) or business (count
= 76). The use of People in the transcripts primarily referred to clients. However there
were a small number of cases where the term People was used to refer to employers,
employees, advisers or as people in general.
The comments made by advisers clearly reflect the genuine concern they have for the
people they see as evidenced by the following comments.
You develop quite close relationships with people…the people do really take you
into their confidence with some things that sometimes they don’t tell their friends
and family… It’s all very well to be able to add up numbers and interpret laws and
do all that sort of thing. But to really do a good job, you need to understand what
makes individual people tick.
But to me the best part of the job, the greatest satisfaction is the personal
relationship and earning people’s trust.
[Interviewee 3]
I think when you sit down with a client the first time, they are looking to see what
your reaction is to them and they’re wanting to make sure that you care about them
as people and that you want to actually do the best thing for them. [Interviewee 6]
I did get quite emotional with some of the people that were there… You are dealing
with people there who are literally struggling from day to day and they’re at
[named charity] because they need food and I think physical help along those
lines… So it’s been about literally helping people getting their money under
control. [Interviewee 2]
So we're completely cognizant of the fragility of the relationship and that we have
to perform at 100 per cent all the time. Because there's a lot of lot of places for
people to go. [Interviewee 7]
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When you start dealing with people for a number of years, you can’t help becoming
friends with them. [Interviewee 9]
The People theme was also highly connected with the concept things. The use of the
concept things by adviser respondents often referred to actions and activities undertaken to
assist people such as their clients:
That’s our overarching Statement of Purpose. Now below that you have things like
independence, putting the client’s interests ahead of the business, integrity in
everything we do. [Interviewee3]
Yes, you’re always doing different things for them. It could be anything for instance
we had a client come in last week and he wanted us to witness all these documents
for him and he brought in his son, who is giving the power of attorney, his
girlfriend, his girlfriend’s parents and it ended up being all these people in the
room were witnessing all the documents and it took two hours. So that was “can
you give me five minutes to witness a few documents?” It took a long time. That’s
some of the things we get asked some times. [Interviewee 6]
Having good staff retention and all those types of things help the client as
well…The billing and transparency side of things we've got no issues. [Interviewee
4]
One of the things that we’ve been doing recently is just reviewing all of our clients
and because everything is changing, as you’re probably aware, is changing from
the old style where you used to be on commission to being fee-for-service.
[Interviewee 1]
Saying things like, this is what I think you should do, you should do these
things, and the reason why you should do these things is because these things will
happen, and when these things happen you will be in a better position. [Interviewee
1]
The concept things in some cases also referred to actions or activities undertaken by
clients:
There might be things like you know we took holidays, it might be things like we've
renovated the house, it might be things like my mother's sick and we've paid for her
to be cared for, or it might be one of us has been sick and have been off work.
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[Interviewee 7]
The concept time (32% relevance) was also closely connected with the theme People, and
advisers used this concept in the context of:
•
the age of the client-adviser relationship;
Clients do move, but most of the clients that I’ve got have been with me for a long
time and the guy I took over business from in 1992 were with him for 10 years as
well. So some of the clients I’ve got have been with the same business for 32 years.
[Interviewee 6]
I mean I think it always takes time, the 25 ongoing clients that I've had that I've
been looking after for a long time, definitely in that case I know all about
their kids and where they live and what they get up to on the weekends and whether
or not their parents are around or involved and whether or not they are going
through any sort of illness or things like that. I think that sort of close relationship
though does take time. [Interviewee 4]
•
the workload involved in providing advice to people;
I would hope they'd say so, I'd hope they'd feel that that was genuine and sincere,
yeah. Absolutely, I mean you can't spend over a period of time - may be a few
weeks - you spend up to - I know I do, you spend up to six, seven hours with these
people. So you can't spend that much time with people, and you have to get to know
them so that you can give them the right advice. You can't spend that amount of
time with people and not genuinely be interested - I don't think you'd last very long.
[Interviewee 7]
If you’re doing an investment of $200,000 plus, well, you can afford to put in the
time and effort. But we just need to alter the rules so that the small investments
and insurance can be done without the onerous paperwork that is done at the
moment. I’m not saying get rid of all the paperwork, there still has to be
transparency, the client has to know what you’re getting paid but if I can do an
insurance plan basically with two or three pages and a couple of hours work,
then a client can probably afford to do it. If I have to do 10 hours work, then they
can’t afford it and that’s where the big drama is. [Interviewee 1]
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•
trust
Trust is more of a process than a notion; I think it is something that evolves over
time. [Interviewee 6]
Trust in our experience takes a long time to build. [Interviewee 7]
The third most relevant concept to the theme People, was the need (27% relevance)
concept. This concept was mostly used in the context of describing actions and behaviours
that advisers saw as essential to their role. For example, interpersonal skills, empathy,
impartiality, fee disclosure, education, fact finding, background checks, mentoring junior
staff, and understanding the subjective elements of the role.
Advisers also highlighted the need for their clients to have adequate insurance protection,
superannuation strategies and to achieve long-term goals; and for the industry to raise
quality standards, abort commission payments and amend legislative requirements to
reduce the compliance burden.
Look (23%) was the fourth most relevant concept to People and related to looking at client
data and situations as well as looking after clients:
You know, knowing your client, and so generally we look at their - as we're putting
their sort of balance sheet together, their assets and their liabilities, once you've
been doing this a while you get a sense of how someone performs financially based
on the numbers. [Interviewee 7]
We attend funerals and we look after grieving spouses and you do sort of become a
part of the family without being in their pocket every week. [Interviewee 3]
They know that we’re not just out to get their dollar, we are looking after them.
[Interviewee 1]
The concept work was significant to People in terms of the quantity and type of work that
advisers conducted for people (clients and employers) as well as the length of working life
of their clients. Hence this concept was closely located to the investment concept on the
map and related to the type of investments that advisers could recommend.
The concepts life and insurance are both also situated closely together on the map, mainly
because advisers often talked about the importance of life insurance for their clients but
also about the change in insurance premiums depending on different stages of a client’s
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life, as evidenced below:
My client base is weighted heavily towards the older population as opposed to the
youngest but we obviously are always keen to bring on the younger ones
particularly when it comes to life insurance because the older they are the less
likely they are to have a need for the insurance or the insurance is becoming very
expensive so on that basis, when people are getting into their sixties the premiums
are becoming quite expensive and therefore people are saying well we’ve got to cut
back, we’ve got to do this, we’ve got to do that. [Interviewee 8]
The concept long is related to the theme People as the concept was often used in discussing
the long- term relationships that advisers have with people, as follows:
…dealing with one adviser and getting advice set around them, and someone
who knows them, and having complete flexibility to offer advice across a multiple of
areas, we believe assists us in having the best relationship with our clients over the
long term. [Interviewee 7]
The long concept was also used in the context of the time taken to provide advice and the
length of advice documents.
Saying was a concept used by advisers mainly when repeating statements that people
(advisers, clients, government officials) have had said to them while the concept Take was
used in a variety of contexts including people taking risks; taking care of clients; taking out
a sum of money or taking a matter seriously.
Whole was the least significant concept aligned with the People theme and was mainly
used when advisers were talking about their whole business, conversation or approach to
advising.
2. Clients
Being the second most prominent theme, Clients had 49% connectivity and was used 249
times throughout the adviser interviews. The theme Clients was associated with client base,
age, life-cycle stage; interaction method and frequency, as well as specific examples of
interactions with clients.
In terms of the client base, age or life-cycle stage of clients; advisers indicated that most
clients were older, at a pre-retirement or retirement stage. In addition, these clients had
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been with their adviser for a number of years. Due to strong client-adviser relationships,
advisers were beginning to gain some younger clients from the next generation of existing
clients. Examples are as follows:
I’ve got third-generation clients, that sort of thing. [Interviewee 1]
So while traditionally our client base has been older, I’d say we’re starting to pick
up more younger clients now because we’re dealing with the next generation in
some cases. [Interviewee 3]
Yeah but I definitely think most as I said even the clients that do come from the
outside, a lot of them are generally in that retirement or pre-retirement stage, that's
definitely where our specialty is. [Interviewee 4]
Yes, we’ve got quite a number of clients in the business that have been there for
well over 10 years. [Interviewee 5]
We have got a lot of clients in their 50’s who are pre-retirees. We do have a large
proportion of the client base in their 60’s and 70’s and 80’s and I’ve even got quite
a few in their 90’s. [Interviewee 6]
Well I still have a lot of clients which I’ve had for years, and years, and years, and
others that have become newer. [Interviewee 9]
Advisers interacted with their clients in a number of ways, including face-to-face,
telephone, email, newsletters and blogs. Frequency of interaction also varied depending on
the client’s needs, with written communication and phone calls more frequent than face-toface interaction. Examples of the frequency and type of interaction with clients are
provided below.
Let’s just say for instance you become a client of ours, what would happen would
be we would set everything up for you, it’s a lot of face-to-face time initially and
then once we’ve got everything sorted out we usually contact you within the
first month to make sure that everything is in place, make sure your happy,
comfortable, no other issues. Then after that we usually don’t talk for a few months,
probably six months, and they you’ll get a letter from us which basically outlines
how your investments are going and then at the 12 month point, you’ll get a faceto-face review for about an hour and a half to two hours. Then the next six month
cycle will be a letter. But normally you would get newsletters, you would get phone
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calls and you may wish to actually ask us something about your investments or you
might have seen something in the paper or there might be something that you want
to discuss that is changing your circumstances. So it’s hard to say, it varies
from client to client but I would probably have to say half of our contact is face-toface and half of it is written or telephone. [Interviewee 6]
Well we send out newsletters every three, four months. [Interviewee 8]
I go to [regional area] probably once a month and will see a lot of those clients in
their homes then. Those clients, actually, I probably tend to see about twice a year
directly and then have the odd phone call as well. It might be one or two phone
calls a year. And the clients that are away actually tend to get probably more
contact because we’re just on the internet or a telephone call. I know a gentleman
in [interstate], we’re probably on the internet exchanging emails or whatever for
business purposes probably once a month or maybe once every six weeks, two
months at the most. [Interviewee 1]
We meet at least once a year and my clients are actually 230 kilometres away from
where I live. [Interviewee 2]
But the client really stipulates that. Now the clients we have funds under
management for - and particularly our self-managed super fund clients - we
endeavour to speak to at least twice a year. [Interviewee 7]
[Named employee] has a once a year meeting with the clients. That is offered at
least once a year, some take it up, some meet with him twice a year. The more
sophisticated clients that might need additional advice, they’ll meet with him twice
a year, maybe three times, depending on their circumstances. In a lot of cases, he’ll
liaise with them via email and do the preparation of documentation that can be
done by email. [Interviewee 5]
The concept best was significant with the Client theme, being used by advisers mostly to
explain that the client’s best interests were at the forefront of their advice, as evidenced
below:
That I have the clients’ best interest at heart. [Interviewee 1]
I’m a certified Financial Planner. I’d like to think I’ve always put my clients’ best
interests first. [Interviewee 8]
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It all comes down to just acting in the best interests of the client all the time.
[Interviewee 2]
It's really just I guess more of a corporate culture thing to make sure you have
those conversations with your clients and you put them in front of the right people
at the right time if that's what's best for them.[Interviewee 4]
They're around things like you know working together, being completely open and
honest with each other, being agile and speedy in our work, and having a focus on
the customer and getting the best outcome for the client. [Interviewee 7]
The concept deal, was used by advisers to describe the provision of advice, for example:
People seem to base their decision on whether they want to deal with you or not on
personal factors like whether they trust you, like you and whether you get on.
[Interviewee 3]
There are a lot of clients in their 30’s and 40’s who we actually deal with for
insurance purposes, but obviously in that demographic they don’t have a lot of
money to invest, they’re basically about paying their mortgages off and protecting
their families, so it’s more of being able to ensure they’ve got adequate insurance
in place. [Interviewee 6]
Also significant, was the concept become, used by advisers to express the development of a
client-adviser relationship:
That can be quite difficult, but what we’ve noticed especially if you’ve been in the
business so long, your clients do become – you can become a little bit closer to
them, they can become perhaps a little bit dependent on you in some ways,
especially the much older ones. [Interviewee 6]
The concept issues, was a less significant concept associated with the Client theme and
related to specific challenges, or events that may be faced by clients, for example:
So if a client's looking to invest and there's a scenario there, we'll liaise with the
accountant, go meet with the accountant, or invite the accountant to come and see
us and sort of put a few brains around the table to work through the issues so that
we've got everything covered off appropriately so - we're pretty proactive at ticking
all the boxes. [Interviewee 7]
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So it’s one interview and two or three phone calls where we might deal with little
issues. [Interviewee 1]
Number and fact were the two least significant concepts associated with Client where
number referred to the number of clients and fact was often used by advisers in the context
of describing the fact finding process.
3. Business
The theme Business was the third highest ranking theme to emerge from the adviser
interviews, with 11% connectivity and the word business being used 76 times. Advisers
used the term Business when describing their financial advising organisation, particularly
the fee structure used by their organisation. Examples of the business concept are provided
below.
Well, where I’m working now is the original business I started in and still here.
[Interviewee 1]
FOFA hasn’t made much impact on what we as a business have to do because most
of it was about conflicted remuneration and our business is structured such that
it wasn’t an issue. [Interviewee 3]
It’s all the structure of the business. When I bought my business, it was the old style
model. It was all commission based and stuff like that and I spent four or five years
turning it around to a fee for advice model well before it was legally obliged or
cool to do so. [Interviewee 2]
No, it’s a family business with my son working with me and I also have my wife and
daughter who both work part-time in the business as well. [Interviewee 5]
We basically pretty much do our own thing, we run our own business, we have our
own client service model. [Interviewee 6]
The GFC was a concept significantly associated with the Business theme, specifically in
terms of how the GFC impacted on the financial advising business.
We lost very little and we ended up picking up new business after the GFC .
[Interviewee 3]
Storm Financial in Queensland going back six or seven years ago, they had their
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own dealership and they had no ethical or moral values. They were licensed
businesses in Queensland that got retirees to gear up heavily on their houses and
put money into the share market. Of course, in 2008 when the share market
essentially crashed due to the GFC, that business and all of its clients were hugely
at risk and fell apart. [Interviewee 5]
Now it did drive a lot of people into our property business as well, simply because
you know the GFC happened, yeah fine, and then things started coming good.
[Interviewee 7]
So over a period of about two or three years, 2008, 2009, and 2010, I decided that I
could pick quite easily those shares that generated good income, and didn’t have
very much risk attached to their business, and had consistent histories of paying
good incomes. Even during the GFC they paid good incomes. [Interviewee 9]
Terms was the least significant concept associated with Business and was used broadly to
assist with describing policies or principles employed by an advice business. For example:
You know we have a set of values that we all follow, and are assessed against I
guess in terms of our behaviours. [Interviewee 7]
Training and mentoring is something we invest very heavily in as well in terms of
staff development and making sure that we've got the right skills to maintain those
relationships. [Interviewee 4].
4. Year
Year was a significant theme due to its use by advisers in a range of situations that are
expressed on a per year basis, including:
•
the number of meetings with clients;
Two formal ones and we looked at it to call at least three or four other times
throughout the year as well. [Interviewee 2]
•
a client’s income;
One example I can think of was a client, they were on very, very good wages, sort
of $200,000 a year couple [Interviewee 7]
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•
insurance premiums;
… it’s really around about $1000 cost minimum and most of the clients are not
going to put up with paying $1000 fee to buy a $500 a year insurance premium.
[Interviewee 1]
•
income protection;
Anyway, when she came in ultimately a week or so later and sat her down, and I
said “What were you expecting from your insurances?”, and she said “I was
hoping just to get my medical expenses paid for”, which were about $8000, and I
said “Well, what they’re going to pay you is a cheque for $300,000 and you’re
going to get income protection cover for close to $50,000, a year for the whole time
that you’re off” – and she was off for most of that year. [Interviewee 5]
•
savings or investment contributions;
As an example – and we’ll be doing it and we’ll be doing it at virtually no cost
because they’re already clients of mine but one of my clients has a grandson that
they want to do a small investment for. And it’s only a $5000 investment, put a
couple of thousand dollars a year into it. [Interviewee 1]
The concepts service and fee were also associated with Year and often used together when
describing remuneration structures, as evidenced below.
I think because we're fee for service yes. If they've already decided to see me,
they're already decided to pay. We don't even have a fee initial consultation for
financial advice specifically. [Interviewee 4]
Oh yeah, 1997 we went to a fee for service model, yes. The dealership that we deal
in, I think they made the decision about 2002 that it was a fee for service
dealership, that is, no commission – no hidden commissions or kickbacks or
platform rebates, all of this sort of thing. [Interviewee 5]
One of the things that we’ve been doing recently is just reviewing all of our clients
and because everything is changing, as you’re probably aware, is changing
from the old style where you used to be on commission to being fee-for-service.
[Interviewee 1]
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5. Money
The Money theme is significant in that advisers provided several examples of clients and
their spending habits, which incidentally involves the use of money. For example:
So you know if I asked you how you were going and you bought your house 10
years ago, and your mortgage was $100,000 more than when you actually bought
the house and you know you had no savings and all your credit cards had very high
balances, I'd get a pretty good picture that you weren't doing too well with your
money management on a month to month basis. [Interviewee 7]
Then as I said, we had a follow up meeting about a month later and it was still all
emotional because she just couldn’t believe they’d spend that much money and she
still doesn’t know where it went. [Interviewee 2]
I’ve had clients, or people come to me, that have won substantial amounts of money
and have come to me- one client came to me, unfortunately, after he’d won a
substantial amount of money and had managed to spend three-quarters of it before
he realised that he was out of control. [Interviewee 1]
So I basically decided that really people don’t really want me, in any case, to put
them into high risk investments with a chance of getting high growth, they wanted
me to keep their money safe. But they also wanted to earn as much money as
possible. [Interviewee 9]
The concept course, although significant to the Money theme was insignificant in terms of
its most popular use being as the phrase ‘of course’, for example, ‘Well of course that
changed fairly early on’ [Interviewee 9]. However, the concept was also used by advisers
when discussing education and training, for example, ‘Yes, I’ve completed the CFP course
so I’m a fully-fledged financial planner’ [Interviewee 1].
6. Industry
The theme Industry was significant as many advisers commented on the financial planning
industry as a whole, particularly in response to the interview question about changes to the
legislation surrounding financial advice. Following are some examples of these comments.
Internally we haven’t had to make too much in the way of changes at all. I
understand what they’re trying to do and I support any effort to clean up the
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industry because it has got a terrible history. [Interviewee 3]
But they have… imposed further constraints- that has added a huge cost to the
industry and to our practice [Interviewer 5]
Obviously there are some crooks in every industry, so we will always have a
percentage of people who will do terrible things, and it doesn’t matter how much
you regulate, or try to regulate, it’s not going to stop, it’s just human nature.
[Interviewee 9]
To be honest, the financial advice industry would be very little changed because
there are always going to be the odd shoddy person out there. The odd shark.
That’s the case in any industry. [Interviewee 2]
7. Trust
The theme Trust was central to the interview questions being asked of advisers. More
specifically, advisers were asked the question ‘What does trust mean to you?’ (Question 15
– refer to Table 5-16 on page 99). Some examples of adviser responses follow below.
What does trust mean to me? It means that if they tell me something, then I can
believe it. I don’t need to double check on it. I don’t need to get a second opinion.
[Interviewee 2]
I’d put it as just about one of the most important issues to me as a person in my life.
Certainly from a professional point of view, it’s a source of the greatest satisfaction
and is more important than money. It’s earning and retaining people’s trust that is
the source of the greatest job satisfaction that I get. [Interviewee 3]
My personal notion of trust is that it’s like an assurance. If I am going to trust
somebody then what I’m wanting to discern is they are going to do what they said
they were going to do. What they are going to provide me with is what they actually
said they were going to provide me with. Trust is more of a process than a notion; I
think it is something that evolves over time. [Interviewee 6]
Trust is the client has to believe you. But then after they believe you, to stay a client
for the long term they have to believe you're in their corner, you're on their side,
you're working for them, you know it's you and them against the world kind of
thing. That's something we very much foster with our clients, we're here for
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you, we hold your hand through the whole thing to get you to where you need to be,
we'll get you there in the right way. We won't compromise anything, but we'll get
you there and we'll fight for you. So that's what rusts people on to a business. So
that's the two levels of trust. Yeah one's to get in the door, the other one is to
actually hold onto them so they don't go elsewhere. [Interviewee 7]
Some comments from advisers also related to the personal aspect of building trust:
But I guess if you’ve got a relationship with someone and you’ve had it for a long
time, the trust gets to a level where they say I can talk to him about anything. It’s
surprising that sometimes they ask about health issues as well, like they’ll say I
think I’ve got this bit of an issue I just need to talk to somebody about it, do you
mind if I have a chat to you about it. [Interviewee 6]
People seem to base their decision on whether they want to deal with you or not on
personal factors like whether they trust you, like you and whether you get on.
[Interviewee 3]
To be honest, I was a bit taken aback that he would say something like that because
I had only met him once face to face at that stage. So yeah, obviously he does have
a bit of trust in me. [Interviewee 2]
8. Feel
The theme Feel was sometimes used in the context of building trust, for example, ‘I'd hope
they'd feel that that was genuine and sincere, yeah’ [Interviewee 7] but was also used by
advisers to describe how they felt in regards to recent events reported in the media.
We’ve been smeared by regular advertising campaigns, smeared in the press. I’ve done
a lot of professional training, I’ve got two degrees and I feel no better than a real
estate agent I really feel that I look that grubby in the eyes of the public. [Interviewee
6]
We feel that companies that really did terrible, and terribly immoral things, are still
working much the same way as they always worked, and that’s not a good thing.
[Interviewee 9]
9. Started
The first questions asked of advisers in their interviews related to how they began or
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started their financial advising career. Three advisers started their career in insurance, for
example:
Well, I actually started off as an insurance agent and when they started bringing
out a few of the insurance investment products like insurance bonds, I saw that as
an opportunity to move further afield from just doing insurance and doing a little
bit more for my clients and started doing the exams and studied to become a fullyfledged financial adviser. And that was way back in about ’85. [Interviewee1]
Other advisers came from a variety of other backgrounds including accounting, actuarial
studies, banking, real estate, teaching and textiles.
6.6
Summary and Conclusion
This chapter reported the results obtained from analysing the data in the study using a
mixed methods approach. The quantitative results from the three questionnaires were
analysed using SPSS while the qualitative results such as open-ended comments from the
questionnaires and interview transcriptions were analysed using Leximancer.
Descriptive results from the questionnaires indicated that the client cohort was generally
representative of the Australian population, with the majority of respondents from a
professional occupation, and the highest number of respondents from New South Wales.
Of the 179 client respondents in the first questionnaire, 48.3 percent had received financial
advice and 73.3 percent of the thirty respondents in the second questionnaire. Quantitative
analysis revealed no statistically significant results related to demographics and usefulness
of advice but overall clients found SOAs provided by superannuation funds and dealer
groups were more useful and relevant than those provided by banks. Results also suggested
that the behavioural skills of an adviser may influence the usefulness of the SOA and thus
the quality of advice provided as a higher financial adviser behaviour score (FABS) was
associated with a higher proportion of SOAs found to be useful and relevant. Furthermore,
the FABS of banks was significantly lower than all other financial advice organisations.
Clients who had been with their adviser for greater than 10 years or new to using their
current adviser (1-2yrs) judged their advisers to be more trustworthy than those who had
been with their adviser for 3-9 years. Clients also reported higher scores on trust
judgements relating to dependability, reliability, confidence and care for advisers with an
FPA membership.
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Chapter 6: Results
Open-ended comments provided by clients were mostly of negative sentiment where
clients associated their previous advice experiences with losing money, poor advice, poor
research, high costs, banks and advisers who put their own interests ahead of their client’s.
Clients also felt that advisers should be more qualified. Client interviews supported some
of this sentiment but in many cases, these clients had since found advisers who they found
were trustworthy and qualified. Positive experiences were associated with frequency of
interaction and length of time with their adviser, fee transparency, interpersonal skills,
empathy and ethical behaviour. The method of remuneration was not of consequence to
clients who had found advisers who displayed these characteristics and were trustworthy.
The mean age of the seventy-six financial adviser questionnaire respondents was 49, with
approximately 83% of these male; representative of the advice industry. Thirty-eight
percent of advisers were remunerated via a stand -alone fee for service and 62% were
employed by a dealership.
Advisers self-rated their behavioural skills (FABS) higher than clients did, with accounting
practice advisers rating theirs the highest. Competency skills were rated similarly by clients
and advisers for advisers remunerated by a fee-for-service. Advisers of dealer groups selfrated their competency skills the highest while clients rated their competency skills at the
lowest.
Some significant associations were found between different types of advisers, specifically:
•
CPAs self-rated their technical skills higher than all others;
•
advisers with greater than ten years of experience believed themselves to be more
trustworthy than those with less experience and did not believe that banning
commissions would make advisers more trustworthy;
•
CFPs were less likely to agree than CPAs that banning commissions made advisers
more trustworthy;
•
independent advisers had lower general trust levels than advisers from dealerships.
In addition, the ethical development of advisers was measured using the DIT which
reported a low P score of 28.6 and found most advisers to be at stage 4 of the moral
judgement development scale. Although not statistically significant, those with higher
education levels or work experience were reported to have higher P scores and CFPs
reported higher P scores than non-CFPs.
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Chapter 6: Results
Qualitative analysis of advisers’ open-ended comments and interviews found that advisers
had genuine care and concern for their clients and often provided extra services to clients
for which they were not remunerated. Advisers generally agreed that education and work
experience, along with interpersonal skills, empathy, impartiality and fee disclosure were
important in providing the best service to clients but felt that over compliance was a burden
to them carrying out their role effectively. Advisers also considered that a few rogue
advisers, along with the media had damaged the reputation of the advice industry.
The significant relationships reported in this chapter, using multiple methodologies are
complex. They provide answers to the research questions and need to be compared with
results from previous research, along with a discussion of likely reasons for their
occurrence. This will occur in the next chapter as answers to the research questions are
synthesized and discussed.
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Chapter 7: Discussion
Chapter 7: DISCUSSION
7.1
Introduction
This research has sought to examine the role of trust in personal financial planning.
Chapter 2 outlined the context for the research and Chapter 3 provided a review of the
literature on trust in this context. Chapter 4 summarised the key theories as well as the
research questions that are answered in this chapter using the quantitative and qualitative
results presented in Chapter 6.
In answering the research questions, this chapter compares the results with findings from
the literature where appropriate, and provides interpretations and explanations. Findings
from the study that are discussed in this chapter include:
•
the importance of affective characteristics of trust in a professional relationship
such as personal financial planning;
•
the importance of accountability for trust in personal financial planning through
regulatory and professional bodies;
•
that there is a link between behavioural skills of financial planners and trust;
•
that those who have had considerable experience in a trusting client-adviser
relationship generally do not believe that a different remuneration structure will
cause the level of trust to change;
•
that there is a link between trust and ethics - if a client perceives their adviser is
trustworthy, they also perceive them to be ethical and vice versa, and
•
that changes in the financial planning environment may lead to higher trust in
instances of already high trust but violate trust where trust factors show signals of
failure.
The structure of this chapter is based around the six main research questions as identified
in Chapters 1 and 4; beginning with research question one. Following the research
questions is a brief discussion of emerging issues that evolved from the results and were
identified as important to the study’s objectives. The chapter concludes with a summary of
the discussions and how they answered the research questions and addressed gaps in the
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Chapter 7: Discussion
literature.
7.2
Research Question 1: Characteristics of Trust in Personal Financial
Planning
RQ1: What characteristics of trust are evident in personal financial planning?
A characteristic is ‘a quality typical of a person or thing’ (ed. Soanes, 2002, p. 143). An
examination of previous research in Chapter 3 identified a range of characteristics of trust
across various contexts (refer Appendix B1). Accordingly, this section of the chapter
focuses on the characteristics of trust found to be typical to personal financial planning.
Qualitative analysis of the open-ended comments in client questionnaires and client
interviews provided an indication of the main characteristics of trust that are evident in
personal financial planning. These main characteristics are illustrated in Figure 7-1 and
discussed in further detail below. Quantitative results from client questionnaires are also
discussed where these trust characteristics were measured using a Likert scale.
Vulnerability/
Risk
Feeling
Faith
Characteristics
of Trust in
Personal
Financial
Planning
Accountability
Honesty
Competence
Best interests
Figure 7-1 Characteristics of trust identified by clients of personal financial advisers
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Chapter 7: Discussion
7.2.1 Vulnerability and Risk
Clients identified with vulnerability and risk as key characteristics of trust, as evidenced by
client comments in the interview phase of the research. For example
I'm sure some people end up at a financial planner when they are very somewhat
vulnerable or may have come into some money that was unexpected or gone
through - I've helped a couple of people with divorces, and they were very
vulnerable. [Interviewee 105]
Because I'm taking you at your word that my money's going to be safe where you're
telling me to put it, and that's a big risk. [Interviewee 100]
Yes because they came with a recommendation, because they were a professional,
because I've got no expertise in this area at all and it just seems to be clouded in
mystery of what you do… so I invested trust in them. [Interviewee 107]
This stuff makes me SO anxious because I don’t know enough about the financial
system… [Client 450, CQ1]
Results suggest that there must be an element of vulnerability or risk in order for trust to
exist, whether it be a situation that a client finds themselves in (such as divorce or
inheritance as indicated by interviewee 105), or whether it be attributable to a lack of
knowledge (as indicated by interviewee 107 and client 450). The risk faced by clients is
that the advice may not assist them to achieve their goals or worse still, may place the
client in a worse position than they were prior to obtaining financial advice. For example,
as conveyed in the open-ended comments:
Made investments of my own in the end adviser received his money and I made
nothing. I run at a loss. [Client 297]
Lack of knowledge has been referred to in the literature as a ‘competence gap’ (Brien,
1998; Lewis and Weigert, 1985; Miranda and Klement, 2009; Parsons, 1972) in the context
of ethics and professional relationships. However, there is little empirical evidence in the
literature (particularly from a client’s perspective) to support the notion that the
‘competence gap’ is an inherent risk characteristic of trust. This study has provided the
evidence that risk and vulnerability associated with the competence gap are characteristics
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Chapter 7: Discussion
of trust.
Definitions of trust in the literature include references to both vulnerability and risk. For
example, Mayer, Davis and Schoorman (1995, p.712), Rousseau et al (1998, p. 395) and
Sharma and Patterson (1999, p. 155) recognise the psychological role of vulnerability in
trusting relationships and Sheppard and Sherman (1998, p. 423), Lewis and Weigert (1985,
p. 971) and Johnson-George and Swap (1982, p.1306) identify with trust as the undertaking
a risky action. The results from the current study support previous theoretical studies and
add to the body of literature by providing specific empirical examples of risky actions as
described by clients in the personal financial planning environment.
7.2.2 Feeling
The results of the study have shown that trust in personal financial planning has a large
affective component (as defined in the conceptual framework chapter – see 4.2.1 Affect
and cognition on page 53). The research findings indicate that for trust to exist between a
client and an adviser, cognitive characteristics of trust must be accompanied by the
affective characteristic that clients simply describe as a ‘feeling’. For example:
I think that you can usually tell by talking to a person and you get that feeling of
trust or whether they’re trying to push their own barrow or whether they’re
working in your best interests as well. Obviously he has to do what’s best for him
as well, but just that feeling that he wouldn’t do anything dishonest. He’s got his
reputation to think of. And just talking to him generally, you get that feeling.
[Interviewee 106]
Well, we always check our statements because we have moved money around a bit
so, even though we trust him, we still check and I don't know, I guess – it's just a
feeling we get that we do trust him and he's proven that we can trust him.
[Interviewee 102]
Although the literature acknowledges the affective component of trust (Zajonc, 1980;
Johnson and Grayson, 1998; Johnson and Grayson in Swartz & Iacobucci (Eds), 2000, p.
358 & p. 365; Albaum and Young, 2003, p.255; Johnson & Grayson, 2005, p.501; Guenzi
and Georges, 2010, pp. 117-118), many studies have focused on the cognitive
characteristics of trust and fail to acknowledge the affective characteristics. While the
current study shows trust to have both cognitive and affective characteristics, the results
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Chapter 7: Discussion
indicate that the affective characteristics of trust in personal financial planning are perhaps
more important to the presence of trust in a professional relationship and may have more
salience than previously thought. This may also be true across a wide range of relationships
and contexts.
7.2.3 Honesty
Clients in the research study found honesty to be an important characteristic of trust. The
response from clients when asked to explain what trust meant to them was:
…the integrity of a person, their honesty, their fairness, their reliance, but most
importantly, above all that, that they carry out that fiduciary duty, that that's what
they're really there for. [Interviewee 105]
Obviously he has to do what’s best for him as well, but just that feeling that he
wouldn’t do anything dishonest. [Interviewee 106]
You're given the information to make a decision and that you feel that the
information is true and correct. So that's what trust means to me. They know the
industry that I don’t know. They know the business and that if I take their advice
and they're saying here's the outcomes from that advice that they will be correct.
They will match. [Interviewee 107]
Open-ended comments from clients also indicated that honesty was a characteristic that
clients were looking for in an adviser. For example:
They don’t want 20 pages of a PDS - they want honesty and care. [Client 07, CQ2]
Clients cited examples of honesty with regards to disclosure of remuneration, with the
general expectation that honest advisers would declare their remuneration clearly upfront.
Some examples follow below:
Paid advice is clean and reliable upfront. [Client 256, CQ1]
He was upfront about it [receiving a commission]. If he had have gone oh, no, no,
no, it's just because they're a really good company, dah, dah, dah, I possibly
wouldn't have believed him. Because you know that they get commission from
wherever they put their loans and stuff, so yeah, it was that sort of thing that
increased my trust in him. [Interviewee 100]
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Chapter 7: Discussion
Results from client questionnaires (CQ1, CQ2) show, using a five point Likert scale, that
clients regarded their advisers as displaying honest behaviour, with a median score of 4 out
of 5. Furthermore, results from the financial adviser questionnaire (FAQ) indicated that
advisers themselves more strongly agreed that they displayed honest behaviour, with a
median score of 5 out of 5 on the five-point Likert scale. The results are summarised in
Table 7-1 below and also show that clients more strongly regarded their advisers as
displaying honest behaviour post-GFC (CQ2). This may be attributable to a number of
factors but suggests that the GFC provided advisers with more opportunities to demonstrate
their honest behaviour, In addition, the introduction of laws post-GFC surrounding
transparency of fees may have had the added effect of boosting the perception of honest
behaviour exhibited by advisers. Clients (pre-GFC) in CQ1 who ranked both honest
behaviour and trustworthiness of their adviser as low, provide support for this explanation
as evidenced by their open-ended comments as follows:
Financial advice is a farce. Most run off at the lip with their own views - and
products that will give them a return. [Client 492, CQ1]
[Named Fund]’s financial planner was just an insurance salesman. [Client 554,
CQ1]
Advice received in these cases was provided by banks which coincidently also reported a
significantly lower mean Financial Adviser Behaviour Score (FABS) ((𝑥̅ = 51.65) in CQ1
than all other organisation types (𝑥̅ = 54.98) as well as in CQ2.
Table 7-1 Likert scale rankings of honest behaviour displayed by financial advisers
CQ1 Pre-GFC
CQ2 Post-GFC
FAQ
Median
4
4
5
Mean
3.70
3.84
4.71
N
80
19
65
As discussed above, honesty has been identified as an important characteristic of trust in
personal financial planning. The results also provide empirical support to the literature
where honesty has made an appearance in the definition of trust, for example, Rempel,
Holmes and Zanna, 1985; Morgan and Hunt, 1994; Kirchmajer & Patterson, 2003;
Svennson, 2004, and has provided new information in understanding the role of trust in
personal financial planning where there currently exists a research gap. Furthermore, the
220
Chapter 7: Discussion
findings have shown that in the context of personal financial planning, dissatisfying events
provide a real opportunity for an adviser’s honesty (or dishonesty) to be shown to clients.
In addition, the findings provide support for legislation that bans commissions and
increases transparency of fees by showing that it improves the perception that advisers are
honest and as a result increases client trust in financial advice.
7.2.4 Faith
While trust definitions in the literature have included terms such as confidence (Lewis and
Weigert, 1985, p. 971; Crosby, Evans and Cowles, 1990, p.70; Moorman, Deshpande and
Zaltman, 1993, p. 82; Morgan and Hunt, 1994, p. 23; McAllister, 1995, p. 25; Lewicki,
McAllister and Bies, 1998, p. 439; Sharma and Patterson, 1999, p.155), reliability (Rotter,
1967, p.651; Rotter, 1980, p.1; Wrightsman and Baker, 1969, p.299; Schurr and Ozanne,
1985, p. 940; Moorman, Deshpande and Zaltman, 1993, p. 82; Morgan and Hunt, 1994, p.
23; Sharma and Patterson, 1999, p.155; Sirdeshmukh, Singh and Sabol, 2002, p.17;
Johnson and Grayson, 2005, p.501) and belief (Schurr and Ozanne, 1985, p. 940; Anderson
and Weitz, 1989, p. 312; Anderson and Narus, 1990, p. 45; Crosby, Evans and Cowles,
1990, p.70; Robinson, 1996, p.576; Boyd, 2003, p. 398; Miranda and Klement, 2009,
p.30), the results from clients obtained in this study describe faith as being characteristic of
trust. The following examples from client interviews show the importance that faith has for
trust in the context of personal financial planning.
I guess trust, especially when it comes to money, means having faith that the person
you're trusting with your money is going to do the right thing so that you don't lose
any of that money that you've worked so hard for. [Interviewee 102]
I think you go in on somewhat blind faith, and I think therein lies the real problem
with our financial planning industry at the moment, because it's so diverse.
[Interviewee 105]
But reading about them as a company I believe in them, believe in their
management, I believe they had a future, I believe they had a setback and they
came out with a recommendation to sell them. I disputed it. I said "I don’t believe
it's true." This is part of where I lost faith. [Interviewee 107]
Results from client questionnaires 1 and 2 indicated that a client’s faith in their adviser was
higher when their adviser was reliable. This faith in their adviser was further supported by
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Chapter 7: Discussion
results from a five point Likert scale ranking trust judgements in client questionnaire 2 as
follows:
‘I can rely in my adviser to do the things he/she has promised to do’ (𝑥� = 4).
‘When my adviser explains things that may seem rather unlikely, I am confident that
he/she is telling the truth’ (𝑥� = 3.5).
A visual analysis of the results for these two statements as provided in Section 6.3 (refer
Figure 6-28 and Figure 6-29 on page 155) revealed that there were no negative rankings for
reliability and confidence by clients who had engaged an adviser since the GFC but that
there were negative rankings by clients who had last engaged an adviser prior to the GFC.
Further analysis of this data indicates that the clients who reported negative rankings for
these trust judgements had also ranked their adviser as untrustworthy on the FABS. This
assists in explaining why they had not returned to their adviser for subsequent advice postGFC.
The findings from the study show that faith is an important characteristic of trust in
personal financial planning as a client must have confidence, or faith that their financial
adviser can be relied upon to provide the right advice. When a client does not have faith
that their adviser is doing the right thing then they also are unable to trust their adviser.
Dissatisfying events such as the GFC, or losing money on an investment can lead a client
to lose faith in their adviser if the client believes that the adviser cannot be relied upon to
achieve an expected outcome. This, in turn leads to a lack of trust in the adviser.
7.2.5 Best interests
Results from client interviews indicated that a client displays trust in their adviser when the
adviser acts in the client’s best interests. This is supported by the concepts in the theme
Best as part of the Leximancer analysis in section 6.5.1 and is illustrated by client
responses to the question ‘What elements build trust with a financial adviser?’:
I want that financial adviser to act in the client's best interests and not just sell
commissioned products. That's what the trust comes down to. [Interviewee 105]
I think that you can usually tell by talking to a person and you get that feeling of
trust or whether they’re trying to push their own barrow or whether they’re
working in your best interests as well... You get that feeling that you can relate well
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Chapter 7: Discussion
to someone and that they’ve got your best interests at heart. [Interviewee 106]
Furthermore, results from client questionnaire 2 indicated that where clients believed an
adviser acted out of self-interest, they also reported them to be untrustworthy. For example,
Client 24 (CQ2) consistently ranked their adviser to be untrustworthy (questions 1a, 12h
and 16a) and also included the following open-ended comment:
Sometimes feel that the investments recommended are also what is best for his
company. [Client 24, CQ2]
Clients who found advisers to be acting with self-interest rather than the client’s best
interests (as illustrated by the open-ended comments below) also ‘strongly agreed’ that
their adviser was ‘marketing oneself’ (CQ2 question 12i) and did not find their adviser to
be trustworthy (CQ2 questions 1a, 12h and 16a).
We find most financial advisers act with more self-interest in products offered and
are rarely proactive in advising market trends. [Client 18, CQ2]
…Great says the "financial planner" - here's another sucker!! I’ll bleed him for
everything I can squeeze out of him and I’ll never see them again but I’ll set him up
for anything from which I get a trailing commission - until he dies I am on a winner
and I don’t have to front him again. [Client 07, CQ2]
Similar results were also found in CQ1:
…one must remember professional advisers first and foremost are for themselves.
[Client 20, CQ1]
These empirical results indicate that when trust is present in personal financial planning,
advisers act in their client’s best interests, putting a strong focus on ensuring that any
strategy or product recommended to clients can clearly be tied back to client goals and
objectives. Findings suggest that trust cannot exist in the client-adviser relationship unless
the adviser is seen to put the client’s best interests first.
The findings provide ‘real-life’ evidence to support the meta- analysis of literature
conducted by Balliet and Van Lange (2013) that emphasized ‘the importance of defining
trust in terms of beliefs about others’ benevolent motives’ (p. 1102) in situations involving
strong conflict of interest.
Furthermore, the results provide some much needed empirical evidence to support the
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Chapter 7: Discussion
claim that the introduction of a Best Interests Duty (BID) as part of the federal
government’s FOFA reforms will improve trust in personal financial planning
(Commonwealth of Australia, 2010). The results also provide support for the banning of
commission payments to advisers in as far as it may eliminate perceived conflicts of
interest that lead to distrust.
7.2.6 Accountability
Clients acknowledged that they trusted their advisers because they understood that their
advisers were accountable to their employer, regulatory authority or professional body.
This characteristic of accountability is described by clients who trust their adviser as
follows:
But I think it deepens your trust if you know it's part of a firm because then they're
accountable to that firm. [Interviewee 102]
…whenever you go to a Chartered Accountant and they've got the chartered
symbol, you know you're going to a Chartered Accountant with the backing of the
Chartered Accountants, and that's what needs to really happen with that financial
planning [association]. [Interviewee 100]
Also they were talking about bank tellers giving out financial advice or pushing
products. Well I don’t think that’s appropriate. And I think that legislation should
be put in place to protect people from that sort of pressure. [Interviewee 106]
One respondent who had not sought advice due to their general lack of trust in advisers
stated:
They want to gamble with your money and get paid to do it (by fees) but accept no
responsibility if their information proves wrong. [Client 584, CQ1]
These client comments indicate the importance of accountability in personal financial
planning and hence the vital role that regulatory and professional bodies play in
maintaining trust in the financial planning environment. The results indicate the importance
of accountability as a characteristic of trust and support the planned implementation of an
enhanced register of financial advisers (Commonwealth of Australia – The Treasury,
2014a) as well as need for reform in fundamental areas as identified by the FPA as follows:
•
‘the role of 'approved' professional bodies in assisting ASIC to achieve consumer
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Chapter 7: Discussion
protection;
•
the role of regulatory agencies in preventing the provision of unethical and
misleading financial advice;
•
compensation processes relating to unethical or misleading financial advice;
•
the response and subsequent action by financial services providers and companies
to misconduct in the industry.’ (De Gori, 2014)
Fukuyama (1995) and Johnson and Grayson in Swartz and Iacobucci (Eds) (2000) allude to
accountability in their discussions on systems-based trust and view it as something that is
equally available to all firms operating in the same business environment. However,
empirical results from clients in this current study indicate that accountability, while a
characteristic of trust, is not yet fully developed in personal financial planning in Australia.
Furthermore, the findings suggest that clients would like to see greater protection through
improved legislation and regulatory power to deter advisers from pushing products or
providing inappropriate advice by holding them accountable for poor advice. This has
implications for policy makers, regulators and professional bodies and is addressed further
in Chapter 8.
7.2.7 Competence
Results from this study revealed that competence, as indicated by qualifications,
behavioural skills and technical skills, is a vital characteristic of trust in personal financial
planning.
Results from the Leximancer analysis of client questionnaires indicated the importance of
qualifications, with ‘qualifications’ rated as the second most prominent theme by clients in
CQ1 and third in CQ2. The open-ended comments in these analyses were mostly from
respondents who reported that they did not trust financial advisers as they felt that advisers
did not have the necessary qualifications. For example:
Financial planners/advisers should be required by legislation to gain some
recognised accreditation (similar to a CPA)…the ones I deal with are at best
basically incompetent. [Client 203, CQ1]
…so called Financial Planners - are in the main uneducated, lazy salesman - male
or female - they are driven by ego - they can’t spell 'ethics'. [Client 07, CQ2]
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Chapter 7: Discussion
Also, a potential client who has not yet sought financial advice and stated that they did not
trust advisers (CQ1, question 14, refer Appendix C1) provides an explanation in their
open-ended comment as follows:
Financial advisers are generally not of the same quality and do not have the same
level of qualifications as say doctors, lawyers, accountants. [Client 185, CQ1]
While Likert scale responses to CQ2 (question 1h) ‘Qualifications such as a university
degree make a financial planner more trustworthy’ showed a mean score of only 2.63 out
of 5 and a median score of 2 out of 5, clients who knew the qualifications of their financial
adviser (CQ2, question 14) also ranked their adviser’s competence-based skills (CQ2,
question 13, Appendix C8: Client Questionnaire 2) higher than those who did not.
Although qualifications did not necessarily make an adviser more trustworthy, qualified
advisers were trusted while advisers with no qualifications were not. Qualifications were
an important characteristic required for initial trust. This is further supported by the
following client interview statements:
So I probably wouldn’t deal with him if he didn’t have those qualifications. We
knew that he had the Degree, etcetera, when we first met him. [Interviewee 106]
We wouldn't go to anybody who wasn't qualified. [Interviewee 102]
We've seen certificates up in his office and because we've known him for so long
and he used to do our tax before he was our financial adviser, we trust him and we
know that he's qualified. [Interviewee 102]
Clients who trusted their financial adviser also rated the behavioural competencies of their
financial adviser more highly on the FABS than those who did not trust their adviser.
Furthermore, cross-tabulation of the FABS and usefulness of SOA in CQ1 and CQ2 (see
Table 6-10) reported a higher FABS for SOAs found to be useful and relevant than SOAs
that were useless or not relevant. These results suggest the behavioural skills of an adviser
may not only influence the usefulness of the SOA and thus the quality of advice provided
but provide an indication to clients that the adviser can be trusted. This is also supported by
the results from client interviews; the following is an example of the importance of the
behavioural skill of listening:
Yes, we went into all that detail, and I told him this is what we're basing our
decisions upon, and he was - and this is why we stayed with him. He listened
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Chapter 7: Discussion
carefully, he was excellent at that… [Interviewee 105]
As was expected, the SOAs that were both useful and relevant also reported advisers with
higher technical competence-based skills. Common to SOAs that were less useful or
useless, was that problem solving skills received a median of less than 3 on a five point
Likert scale with none of these clients (with the exception of one) rating their adviser as
trustworthy.
Advisers ranked themselves highly across all behavioural (excluding marketing oneself)
and technical competency skills and higher than clients did. Furthermore, advisers ranked
the skill of ‘problem solving’ the highest of all other competence-based skills (𝑥̅ = 4.48) in
the questionnaire, compared with clients who rated their adviser’s problem solving skills
lowest (𝑥̅ = 3.26). It is likely that the mismatch between client-ranked and self-ranked
adviser skill levels is partly to blame in situations where trust is an issue.
An array of literature on trust across different contexts and organisational settings cite the
role of competence, expertise or ability in the production of trust. However unlike the
theoretical approaches taken by Barber (1983), Lewis and Weigert (1985), Mayer, Davis
and Schoorman (1995), Rousseau et al (1998) and Johnson and Grayson in Swartz &
Iacobucci (Eds) (2000), the results in this study provide empirical evidence to validate
claims that competence provides perceived positive intentions that contribute to trust.
The results from the study also elaborate on the literature on client commitment in personal
financial planning that found interpersonal communication skills such as listening, caring,
friendly and professional behaviour displayed by advisers to have a large effect on client
commitment (Christiansen and DeVaney, 1998; Sharman and Patterson, 1999; Kirchmajer
and Patterson, 2003; Sharpe et al, 2007) by identifying such behavioural skills in the FABS
as characteristic of trust.
Furthermore, the study contributes to the body of literature on understanding trust by
providing an empirical study in a particular context, demonstrating that competence - both
behavioural and technical - is a characteristic of trust in the context of personal financial
planning. To date, there have been no similar studies found in the literature.
The first research question was answered by finding seven characteristics of trust evident
in personal financial planning: vulnerability and risk, feeling, honesty, faith, best interests,
accountability and competence. These characteristics assist in understanding trust as it
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Chapter 7: Discussion
applies in the context of personal financial planning and adds to the body of literature by
providing specific empirical examples to complement existing theoretical studies. Through
answering research question one; the study has highlighted the importance of affective
characteristics of trust in a professional relationship such as personal financial planning.
Answering this question on the characteristics of trust has also demonstrated that increased
legislation and the behavioural and technical competency of advisers can build consumer
trust in financial advice while conflicts of interest and dissatisfying events can put client
trust at risk in an environment where transparency and minimum educational qualifications
are not properly regulated. This has implications for policy makers, regulators and
professional bodies and may also be true across a wide range of relationships and contexts.
7.3
Research Question 2: How Financial Advisers Perceive Their Role
in Developing Trust
RQ2: How do financial advisers perceive their role in developing trust with their
client?
The results from question 1a in the FAQ (refer Appendix C15: Financial Adviser
Questionnaire) indicate on a five point Likert scale that financial advisers find financial
planners in general to be trustworthy (𝑥� = 4, M = 4, 𝑥̅ = 3.71) but clients generally did not
agree with this statement (𝑥� = 3, M = 3, 𝑥̅ = 2.83). Furthermore, results from question 8h
(FAQ) demonstrate that advisers found themselves to exhibit trustworthy behaviour and
rated this behaviour the highest of all behaviours in the FABS with a mean of 4.72 and
median of 5 on a five point Likert scale. Results from five point Likert scale rankings on
trust judgements (question 11, FAQ) also indicate that advisers have a strong view that
they are reliable (𝑥̅ = 4.57), and caring (𝑥̅ = 4.48) toward their clients. In developing trust, a
qualitative analysis of open-ended comments and interview results indicated that advisers
perceived qualifications, skills, benevolence, getting to know their client and investment of
time as important factors.
The following open-ended comment supports the view that advisers believe qualifications
assist in developing trust with clients. For example:
I believe that making a degree compulsory for all advisers will help improve trust
as the advisers who go down this path or already have are serious about long-term
careers in planning and helping clients for life. [Adviser 327, FAQ]
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Chapter 7: Discussion
In addition, interviews with advisers indicated that they displayed certifications and
qualifications in offices or in information booklets to clients which they believed assisted
in developing trust with clients. Some advisers also provided testimonials to clients and
highlighted their experience in financial planning. For example:
They can tell because of my qualifications that I haven’t been in the industry five
minutes. I let them know that they’re dealing with someone who’s been in the
industry for quite some time and relax them in that regard. [Interviewee 8]
Ensuring that advisers are well trained and mentored to have the necessary skills was also
seen as important in developing trust with clients, indicated as follows:
Training and mentoring is something we invest very heavily in as well in terms of
staff development and making sure that we've got the right skills to maintain those
relationships. [Interviewee 4]
Benevolence or putting the client’s interests first was central to how advisers perceived
their role in developing trust, with all adviser interviewees citing its importance. Some
results from adviser interviews follow below.
It all comes down to just acting in the best interests of the client all the time.
[Interviewee 2]
I just believe that part of giving people advice is actually making sure it’s
appropriate to them and you can demonstrate to them that you’re actually acting in
their best interests. We don’t do anything for clients unless it puts them in a better
position. [Interviewee 6]
…it doesn’t really matter what industry you are in, whether you’re a doctor,
whether you’re a plumber, whether you’re a financial adviser, you obviously have
to have the best interest of your clients at heart. [Interviewee 9]
In addition to putting the client’s interests first, some advisers mentioned that getting to
know their client was essential to developing trust with them, and was necessary in order to
provide advice that is in their client’s best interest. For example:
So trust is really getting to know somebody, about discussing with them what you
want and then seeing what they can actually do to deliver that for you, and then
going ahead and actually delivering it, and then after that is all said and done, just
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Chapter 7: Discussion
making that process continuously to make sure that you are delivery what you
should be delivering. [Interviewee 6]
While there was consensus amongst adviser interview participants that knowing their client
and acting in their best interests is crucial to developing trust, a number of advisers also
highlighted that investing time with their clients assisted in developing trust, and that trust
itself evolves over time; as evidenced by the following comments by advisers:
Trust is more of a process than a notion; I think it is something that evolves over
time. [Interviewee 6]
Trust in our experience takes a long time to build. [Interviewee 7]
The qualitative results from this study show that financial advisers see their role in
developing trust with clients as the process of using their skills and knowledge to get to
know their clients and provide advice for the long-term that is in the best interests of their
clients. Although the findings support the literature on trust in service relationships that cite
competence (Barber, 1983; Lewis and Weigert, 1985; Rousseau et al, 1998; Johnson and
Grayson in Swartz & Iacobucci (Eds), 2000; Johnson and Grayson, 2005) and client best
interests (Bejou et al, 1998; Balliet and Van Lange, 2013) as important factors in trust
production, this is the first empirical study of its kind to examine trust from an adviser’s
perspective and how advisers perceive their role in developing trust with their client, using
a mixed methodology.
Research question two asked how financial advisers perceive their role in developing trust
in personal financial planning. A discussion of results from the study presented in this
section have indicated that financial advisers perceive gaining appropriate qualifications
and skills as important to their role in developing trust as well as taking time to get to know
their clients and putting the clients’ best interests first. Advisers also perceived themselves
as reliable and caring and rated themselves more trustworthy than clients rated them. This
mismatch of trust is discussed further in section 7.8 (emerging issues) on page 257.
7.4
Research Question 3: Factors Influencing Trust between Client and
Adviser
RQ3: How do individual, demographic, society, systems and process based factors
influence the trust between client and adviser?
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Chapter 7: Discussion
7.4.1 Individual factors
Individual factors found to influence trust between client and adviser included
characteristics personal to the financial adviser such as listening skills, reliability, honesty,
genuine care and concern for the client, and ethical behaviour.
Results from both CQ1 and CQ2 of a five point Likert scale ranking of financial adviser
behaviour (refer Table 6-5 on page 120 and Table 6-17 on page 142) indicate that clients
found their adviser to be listening, reliable and honest, with the median score for these
behaviours in both questionnaires being 4 out of 5. In terms of caring behaviour, median
results from CQ1 (𝑥� = 4, 𝑥̅ = 3.5) and CQ2 (𝑥� = 3, 𝑥̅ = 3.58) differed slightly and CQ2
indicated that clients generally found their advisers to behave ethically (𝑥� = 4, 𝑥̅ = 3.68).
Client interviews assisted in understanding how these personal characteristics influenced
their trust of financial advisers as outlined below.
When I saw the third financial planner, the one we've stayed with, I said to him,
[adviser’s name], here is what I want from a financial planner, and I outlined the
things that I wanted from them, such as they would operate in my best interests,
that they would sell product that was appropriate to my level of risk, they would
listen carefully, that they would be aware of my personal situation and try and
provide me with information that matched our personal situation, and I think also
that I wanted them to act ethically. [Interviewee 105]
…just that feeling that he wouldn’t do anything dishonest. [Interviewee 106]
If there was any unethical behaviour then I would lose all my trust. [Interviewee
107]
The results also suggested that a divergence in self-rating of advisers versus client ratings
is in itself a symptom of insufficient trust. This is explored further in Section 7.8.1 on page
257.
7.4.2 Demographic factors
Results from the current study found demographic factors such as qualifications and work
experience influenced the trust between client and adviser.
Findings from CQ2 indicated that clients who knew the qualifications of their financial
adviser also ranked their adviser’s competence-based skills higher than those who did not.
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Chapter 7: Discussion
Thus, qualifications indirectly served to increase trust in their adviser through competence
(which was found to be a characteristic of trust; see section 7.2.7 Competence on page
225). However, rankings from clients on the five point Likert scale for question 1h (CQ2)
indicated that clients disagreed with the statement ‘qualifications make an adviser more
trustworthy’ (𝑥� = 2, 𝑥̅ = 2.63). This seems to indicate that while qualifications of advisers
may influence trust, qualifications are not sufficient on their own to increase client’s trust
in their adviser.
More telling were results from the Leximancer analyses of open-ended comments by
clients in CQ1 and CQ2 that showed qualifications to be a major theme (see section 6.2.4
and 6.3.4 on pages 125 and 156) raised by clients in seeking an adviser they can trust. A
number of comments were from clients who found advisers untrustworthy and expressed
the view that advisers generally do not have a sufficient level of qualifications. Some
examples of these comments are as follows:
You don’t realise so called Financial Planners - are in the main uneducated…
[Client 07, CQ2]
Client interviews also revealed qualifications to be a major concept as indicated in Table
6-36 on page 186. Results indicated that clients who trusted their advisers also believed
that their advisers were appropriately qualified, with some clients highlighting the
importance they placed on adviser qualifications as follows:
So I probably wouldn’t deal with him if he didn’t have those qualifications. We
knew that he had the Degree, etcetera, when we first met him. [Interviewee 106]
We trust him and we know that he's qualified…We wouldn't go to anybody who
wasn't qualified. [Interviewee 102]
I wanted someone who - I looked for qualifications to begin with, their record, and
who they're employed by. [Interviewee 105]
Client interviews also revealed that adviser work experience had some influence on
whether the client trusted their adviser. For example:
The first one [adviser] we saw with [named bank] was very disappointing. Actually
he offered wrong advice, inappropriate products and I felt sorry for the young
fellow, because he was only training, and he was quite inexperienced. Nice young
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Chapter 7: Discussion
fellow, but I came away from that meeting saying look, thanks very much, but that's
- I knew more than he did, and I'm not trying to be pretentious there. But he was
training, and I think they threw him in at the deep end and that didn't turn out very
well at all. [Interviewee 105]
Question 1b of CQ2 asked clients to rank their response to the following statement on
adviser work experience using a five point Likert scale (where 1= strongly disagree and 5 =
strongly agree):
A financial planner with less than 10 years of experience is more trustworthy than
one with more than 10 years of experience.
Ninety percent of respondents were neutral or disagreed that planners with less than 10
years’ experience are more trustworthy. A median score of 2 out of 5 suggests that clients
found advisers with more than ten years’ experience to be more trustworthy than those with
less experience. Advisers themselves also found work experience to influence trust and
likewise reported a median score of 2 out of 5 for the same statement. Furthermore,
advisers with more than ten years’ experience more strongly disagreed (𝑥� = 2) with the
statement than those in the 6-9 year group (𝑥� = 2.5) suggesting that advisers with more
than ten years’ experience in an advising role believe themselves to be more trustworthy
than advisers with less experience than themselves. These results were also found to be
statistically significant (refer to section 6.4.3).
Further supporting the claim that work experience influences trust with clients, are the
significant results (𝜒 2 (3, 𝑁 = 65) = 9.078, 𝑝 = .028, 𝜂2 = 0.14) that were found for
advisers with differing years of experience in ranking the following trust judgement:
I have proven to be trustworthy with my clients.
Posthoc pairwise comparisons using the Mann-Whitney test showed a significant
difference (𝑝 = .026) between advisers with 1-2 years’ experience (𝑥� = 4) and advisers
with more than 10 years’ experience (𝑥� = 5), which may be because those with less
experience have had less opportunities to build trust with clients than those with more
experience as an adviser.
In addition, results from a five point Likert scale in response to the statement
The Global Financial Crisis (GFC) increased my trust in financial planners
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Chapter 7: Discussion
showed that clients who were with their adviser for more than 10 years were neutral (𝑥� = 3)
in their response to the impact of the GFC on their trust in financial planners but those with
their adviser for less than 10 years disagreed (𝑥� = 2).
Client comments reflected a similar sentiment in regards to work experience, with one
client not poorly affected by the GFC suggesting that previous experience provides a
record of ‘good’ advice that builds trust, for example:
I just think maybe a proven record, the advice he's given us in the past regarding
shares, when he helped us sell our bank shares for really good money when we
needed the money. I don't know. So far everything he's told us we've gone by and
it's proved to work out. [Interviewee 102]
7.4.3 Society based factors
The main society based factors to influence the trust between client and adviser were found
to be reputation and general trust. These factors were more likely to affect initial trust
production in that they influenced the seeking of financial advice. Measures of such factors
were provided in question 1 (a, e and n) of CQ2 using a five point Likert scale (1= strongly
disagree, 2 = disagree, 3 = neutral, 4= agree, 5= strongly agree) and are provided in Table
7-2 below:
Table 7-2 Society based trust measures and financial planner trust (CQ2)
Question
reference
1a
1e
1n
12h
Statement/measure
Financial planners are trustworthy
The public reputation of a firm is important when choosing a
financial planner you can trust.
I find it easy to trust people
Behaviour of most recent adviser : ‘trustworthy’
Median
Mean
3
4
3.00
4.00
3
4
2.76
3.63
As demonstrated in the table, the general trust level of respondents (1n) was found to be
fairly neutral and at a similar level to trust in financial planners generally (1a). This may
indicate that trust of financial planners reflects the general trust level of society. However,
the results also suggest clients who have received financial advice find advisers more
trustworthy than society in general (12h) and by those who have not received advice. Thus,
the general trust level held in society may affect initial trust of advisers which is then built
upon through process based factors as discussed in section 7.4.5. Findings from openended comments, as well as from client interviews provide some insight regarding the
establishment of initial trust by clients as demonstrated below:
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Chapter 7: Discussion
It has taken time to pluck up courage to see a Financial Planner. Stories friends
told us previously put us off seeking advice. [Client 02: CQ2]
I went to see these financial planners with a fair degree of healthy scepticism.
[Interviewee 105]
Well it was also like we are a bit sceptical. [Interviewee 100]
The public reputation of a firm is also important to potential clients as demonstrated by the
median and mean results of 4 out of 5 for question 1e. Client comments in the interview
process indicated how this influenced them:
…but I chose [named bank] for one reason mainly… it was independent of the big
four. [Interviewee 105]
The reason I went with the bank is because it’s a bigger organisation and I’d
imagine they’d have guidelines and standard ways of dealing with people and it’ll
be more safe. [Interviewee 101]
I think so. But I think it deepens your trust if you know it's part of a firm because
then they're accountable to that firm. [Interviewee 102]
7.4.4 Systems and institutional based factors
Systems based factors such as remuneration type, organisation type and perceived
organisational characteristics, legislation and regulators were all found to influence the
trust between client and adviser.
Remuneration type
Remuneration type was found to be an influencing factor in generating the initial trust
between a client and adviser and was found to be more relevant to clients who have had
little experience in a trusting client-adviser relationship. This is discussed more fully in the
next section (refer section 7.5 Research Question 4: Implications of Business Models for
Trust).
Organisation type and perceived organisational characteristics
Results from CQ1 indicated that of all financial service providers, banks were the most
common (30%), followed closely by dealer groups (26%), as indicated in Figure 6-6 in
chapter 6. However, although more likely to be providing advice, banks were also found to
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Chapter 7: Discussion
have a lower median score than other organisation types for trustworthiness and a lower
median score for the behavioural skills of caring, flexible, listening, empathy, tactful and
relationship building when compared to all organisation types such as dealer groups,
independent advisers and superannuation funds (refer Appendix D2: Cross-tabulation
results of organisation type and behavioural skills: client questionnaire 1 on page 412). The
behaviour ‘Marketing Oneself’ scored higher for banks than all other organisation types.
Findings from CQ1 also showed the mean FABS of banks (𝑥̅ = 51.65) to be significantly
lower (p = 0.035) than the mean for all other organisation types providing financial advice
(𝑥̅ = 54.98). Such findings were supported by CQ2. In addition, CQ2 found that advisers
located at banks did not meet six of the seven additional competence based skills (time
management, verbal, written, problem solving, technical, numeracy, social/ethical
awareness), with only verbal skills receiving a median score greater than 3 (𝑥� = 4).
Thus, it may be deducted from this and other findings reported in chapter 7, that banks
have the initial trust of clients due to reputation, size and the offering of ‘free’ advice (see
Table 6-7 on page 122) but may fail to build trust in later stages due to a lack of
behavioural skill competence that results in less useful advice being provided. This is
further supported by results from a cross-tabulation of the financial adviser behaviour score
(FABS) and usefulness of SOA (see Table 6-10 on page 124) that indicated a higher FABS
was more likely to result in an SOA being useful and relevant.
The qualitative analysis of client’s open-ended comments provided in section 6.2.4 and
6.3.4 also highlighted the influence of organisation type on trust, as did client interviews as
evidenced by the following examples:
[Named bank]'s financial planner was just an insurance salesman. [Client 131]
Oh, you need this, and I'm thinking well, that's not what I'm here for, I'm here about
this. They're pushing me in another direction. Sometimes in the banks they do. You
know, you go in about opening an account on this, and they're trying to sell you a
home loan. You're thinking, is your quota low darl? You need to get your quota up
on that one do you? [Interviewee 100]
…we’ve got a lot of financial advice through our bank and the little amount of
advice that we have had, I think, has been pretty well bias about just keeping
throwing money at us until we have trouble paying it back. [Interviewee 104]
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Chapter 7: Discussion
Legislation and regulation
Findings from client interviews suggested that there was a certain level of ‘assumed’ trust
in that they assumed that financial advisers would be following the law and that
professional bodies would be overseeing their work practices. They had general trust in the
regulatory system that non-compliant advisers are dealt with appropriately and while a
number of clients could not correctly name any of the relevant professional bodies, they
did comment that they knew one existed.
For question 1g (CQ2), respondents provided five point Likert scale responses for the
following statements:
Government legislation banning commissions makes financial planners more
trustworthy.
Financial planners who are members of a recognised professional body are more
trustworthy.
Clients were found to generally agree with both statements, with the mean and median
results identical for both statements ((𝑥� = 4, 𝑥̅ = 3.57), indicating that government
legislation and professional regulation both influence trust to some degree. Client
comments in questionnaires and interviews provided further insight to these influencing
factors:
Financial planners/advisors should be required by legislation to gain some
recognised accreditation (similar to a CPA). [Client 138]
Well, probably the legislation that was in place that was brought in by the Labor
government and now it’s going to be watered down. That will allow for some
people to get away with giving financial advice and perhaps without many
qualifications. Also they were talking about bank tellers giving out financial advice
or pushing products. Well I don’t think that’s appropriate. And I think that
legislation should be put in place to protect people from that sort of pressure.
[Interviewee 106]
I think they might be pushing products on to people that don’t need it. As far as the
regulator’s ability to deal with that, I’m not sure how they’d police that.
[Interviewee 101]
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Chapter 7: Discussion
Although clients were in support of increased regulation and legislation, it should also be
noted that clients rarely ‘check’ that advisers are complying. Results from CQ1 and CQ2
showed that many clients did not know if their adviser had an AFSL (CQ1: 44%, CQ2:
33%) or if their adviser had provided them with an FSG (CQ1: 25%, CQ2: 28%). This, in
addition to the client comments above, imply that clients must also trust the regulatory
system and expect that such regulation will be monitored and enforced.
7.4.5 Process based factors
Some factors were found to build trust in the client-adviser relationship as part of a
process, or series of actions. Repeated interaction, satisfaction with previous interaction,
age of relationship, technical competence, interpersonal skills and benevolent actions were
found to influence trust in the client-adviser relationship.
Interaction
In the marketing literature, frequency of interaction and satisfaction with previous
interactions have been found to improve customer relationship commitment (Crosby et al,
1990; Ganesan, 1994; Johnson and Grayson, 2005; Miranda and Klement, 2009). This has
been supported by client interviews in the current study and found to influence a client’s
trust in their adviser. Clients who had high trust in their adviser were found to be pleased
with the interaction they had with their adviser which on average would be 2 meetings a
year and 6 – 7 phone calls or emails. While the face to face meetings were adviser
prompted, the phone calls and emails were more likely to be initiated by the client.
Age of relationship
The age of the client-adviser relationship was found to influence the trust between client
and adviser with higher trust associated with older relationships (greater than ten years).
This may be because in an older relationship, an adviser has had more opportunities to
prove their trustworthiness to their client, especially at times involving dissatisfying events
such as the GFC. This was demonstrated by the results in section 6.6.3 that showed
advisers who last sought advice in 2010 (just post-GFC) rated the trustworthiness of their
adviser higher than those who last sought advice in all other years.
Results also indicated that clients who last sought advice prior to the GFC (2009) and have
not sought advice since that time, had lower trust judgement ratings of their adviser. This
supports the idea that advisers in these circumstances did not perform to the expected
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Chapter 7: Discussion
standard of clients at what would be seen to be a critical time, resulting in a loss of trust in
the process. The results suggest that familiarity breeds respect rather than contempt when
trustee performance is deemed satisfactory by the trustor, and that when it is not, the
relationship is simply broken off.
Furthermore, five-point Likert scale responses to the statement,
The Global Financial Crisis (GFC) increased my trust in financial planner
showed that clients who were with their adviser for more than 10 years were neutral in
their responses but those with their adviser for less than 10 years disagreed (𝑥� = 2); clients
who had been with their adviser longer, were more likely to have remained with that
adviser post-GFC.
Findings suggested that clients are likely to trust their financial adviser for the first 1-2
years but after that time (3-9 year) is when the real ‘testing’ takes place, and where an
adviser’s actions can build or break the trust. Once a client has been with their adviser for
10 years, the adviser has had many opportunities to prove they are trustworthy and to build
a high level of trust with the client. Interviews with clients showed this to be a common
thread. There were several clients who had full trust in their adviser – all of these clients
had been with their adviser for 20 years or more. Clients who had changed advisers tended
to do so at the 6-9 year bracket because they had long enough to ‘test’ their adviser (for
example with regards to competence, ethical behaviour) but found in this time that their
adviser had breached their trust by providing advice that was not in their best interests.
Clients discovered that advice was not in their best interests when they either lost their life
savings, found their debt level to be excessive and difficult to repay while receiving little or
no investment returns, or discovered new information from other sources such as the
media, internet, relatives or another adviser. For example,
We'd probably been with the financial advisor for about seven or eight years…we
took her advice and rather than looking at the market or looking at anybody else
and we met and we set a plan in action. At the end of that we disengaged and we
have - our super – I’ll try not to use an expletive – with almost nothing in it and we
had investment debt with no investments left…
So we seemed to be playing a big game with very little money and then taking on
debt to do it so I wouldn’t - so I probably gradually lost my trust as we didn’t
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Chapter 7: Discussion
actually make an awful lot of money with it. We put money into it to make money
but then the returns aren't brilliant. So I suppose the lack of success gradually
eroded where we started and the faith we had at the beginning. [Interviewee 107]
Technical competence and interpersonal skills
Findings suggested that technical competence and interpersonal skills contributed to a
more useful SOA and also that these skills influenced the trust between client and adviser.
Technical competence (time management, verbal, written, problem solving, technical,
numeracy, social/ethical awareness) was measured in CQ2 (question 13) with clients
ranking verbal communication skills of their adviser higher than any of the other
competence-based skills. No respondents ranked verbal skills or numeracy skills as being
of a poor or very poor standard but 32% of clients observed advisers to have a poor
standard of problem solving skills. SOAs that were found to be both useful and relevant
corresponded with advisers who had higher median competence-based skills. Common to
SOAs that were less useful or useless, was that problem solving skills and social/ethical
awareness both received a median less than 3 out of 5, that is the standard was rated as
‘poor’ or ‘very poor’. Further analysis of the results revealed that advisers who were found
to be trustworthy also had a higher level of competence skills than advisers who were
found to be untrustworthy.
Similar results were obtained for interpersonal skills indicated by the financial adviser
behaviour score (FABS) in both CQ1 and CQ2. In addition, the usefulness of SOA (see
Table 6-10 on page 124) showed a higher FABS for SOAs found to be useful and relevant
than SOAs that were useless or not relevant.
Benevolence
The term ‘benevolent’ is defined as being ‘well-meaning and kindly’ and ‘charitable rather
than profit-making’ (ed. Soanes, 2002, p. 76). Results from CQ2 found clients rated the
benevolent behaviour of their advisers the lowest out of all twenty behavioural skills
contained in the financial planning competencies Birkett (1996). All clients who did not
find their adviser trustworthy also did not find their adviser to display benevolent
behaviour.
Client interviews indicated that clients who had high trust relationships with their adviser
also found their adviser readily available to answer any questions that they had and to
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Chapter 7: Discussion
assist with paperwork or act as an intermediary with Centrelink, all at no additional charge.
For example:
I can have as much contact with him as I like and he always answers my emails
promptly. [Interviewee 106]
Advisers identified that they often spent time performing tasks for clients that clients were
not directly charged for. Some examples included witnessing documents; discussing
funeral arrangements, generic financial advice, making insurance claims, and liaising with
Centrelink on a client’s behalf. Some examples follow below.
Particularly the tangible things like the Centrelink nominee service. I mean they
have to sign a form to authorise us to be able to work with Centrelink so they know
that we’re doing it and they know that they’re not being charged. [Interviewee 3]
Yes, you’re always doing different things for them. It could be anything for
instance we had a client come in last week and he wanted us to witness all these
documents for him and he brought in his son, who is giving the power of attorney,
his girlfriend, his girlfriend’s parents and it ended up being all these people in the
room were witnessing all the documents and it took two hours. So that was “can
you give me five minutes to witness a few documents?” It took a long time. That’s
some of the things we get asked some times. [Interviewee 6]
A number of clients, say the financial planning basis, they might ring you up and
say, “Oh look, I read an article or someone’s talked to us about something. What
are your thoughts? What do you know about it?” That type of thing. [Interviewee 8]
These benevolent actions contribute to the trust a client has in their adviser. This
complements the empirical study of Cullen, Parboteeah and Victor (2003) that found
perceptions of a benevolent climate of an organisation were positively related to
commitment.
Research question three asks how individual, demographic, society, systems and process
based factors influence the trust between client and adviser. Results from the study answer
this question by finding a range of factors that influence trust in personal financial
planning, as shown in Figure 7-2 below.
241
Chapter 7: Discussion
Figure 7-2 Factors influencing trust in personal financial planning
Individual
factors
Demographic
factors
Listening
skills
Reliability
Social norms
Ethical
behaviour
7.5
Systems
factors
Process
factors
Remuneration
Interaction
type
Qualifications
Organisation
type
General trust
Honesty
Genuine Care
Society
factors
Legislation
Work
experience
Reputation
Professional
regulation
Age of
relationship
Technical
competence
Interpersonal
skills
Benevolence
Research Question 4: Implications of Business Models for Trust
RQ4: What are the implications of different business models for trust?
The results from this study showed that financial advisers are paid by clients through a
variety of remuneration models, including fee-for-service, and commissions and bonuses
from product manufacturers. Fee-for-service charges may comprise an hourly rate, a flat
fee or a proportion of funds under management (FUM). Some clients also reported that no
payment was required for advice. The findings also indicate that these different models
offered across a range of organisation structures have a number of implications for trust in
personal financial planning through the way in which they are disclosed to clients and
through the impact they have on the usefulness of advice provided.
Results from fifty percent of respondents to CQ1 who had sought financial advice
indicated that no payment was required for financial advice they received between 1990
and 2009. However, it is possible that they may have paid their adviser indirectly through
commissions on products paid by product manufacturers on the funds invested (whether
the respondent was aware of it or not).
Thirty-one percent of respondents indicated that they paid for advice through commissions
(noting client questionnaire 1 was administered in April 2009, prior to the FOFA reform
242
Chapter 7: Discussion
banning commission payments on new clients) with the least common payment method
being a percentage of funds in the portfolio and flat fees (more likely to be paid by affluent
clients) paid in just over six percent of respondent cases.
A smaller proportion of the CQ2 sample (18%) than the CQ1 sample (49%) indicated that
there was no payment required for advice sought while a larger proportion indicated that
they were required to make a flat fee payment (CQ2: 36% vs CQ1: 15%) reflecting the
draft legislative provisions put forward by the Ripoll Report (Commonwealth of Australia
2009) calling for a ban on commissions.
Findings from CQ1 showed that dealer groups were more likely to charge commissions
while banks were reported to be more likely to offer advice free of charge. Independent
financial advisers had a range of remuneration methods which included commissions. In
CQ2, there is a greater proportion of commissions being paid to advisers in banks (CQ2:
40%; CQ1: 17%) and a lower proportion of advice provided free of charge (CQ2: 20%;
CQ1: 74%). A likely explanation of this is that disclosure of commissions may have been
more transparent in CQ2 than CQ1 and clients may have increased awareness of the fee
structures due to the GFC and recent corporate collapses.
To establish if there were any trust implications of commission payments as a form of
adviser’s remuneration, client respondents were asked to provide a five-point Likert scale
response to the question:
In your opinion, is financial advice influenced by the commissions a financial
planner/adviser may receive from investment products?
Findings revealed that 60 percent of respondents agreed with the statement, 30 percent
were indifferent and only 10 percent disagreed. Descriptive statistics indicated a median
result of 4.00 out of 5, where 4 = ‘Agree’. Of those who did not pay for their advice, just
over 50% agreed that commissions would influence the advice provided while 64% of
those who paid for their advice with commissions believed that their advice is influenced
by the commissions they paid. Only one respondent who paid a retainer believed that
advice would be influenced and 80% of those paying a flat fee agreed. The findings
demonstrate that trust in financial advisers may be compromised in situations where
business models include commission payments in their remuneration structure. This is
further supported by the following open-ended comment:
243
Chapter 7: Discussion
Financial advice is a farce. Most run off at the lip with their own views - and
products that will give them a return - BANKS ARE WORST [client’s
capitalisation]. [CQ1, Client 492]
Furthermore, results also indicated that only advice requiring no payment or paid via fees
was found to be useful and relevant in CQ2. The usefulness and relevance of advice paid
via fees in CQ2 was consistent with that reported in CQ1, at around 80%. No advice paid
via commissions was found to be both useful and relevant in CQ2, although 82% of this
advice was reported to be both useful and relevant in CQ1. It could be assumed that advice
that is found to be both useful and relevant is more trusted than advice that is not relevant
or useless.
In addition, with a median score of 5 out of 5, over 93% of respondents indicated (with a
response of Agree or Strongly Agree) that they would prefer to pay a flat fee for advice
(CQ2 refer Appendix C8: 1g, 1j) and fifty-seven percent of respondents, agreed that
government legislation banning commissions makes financial planners more trustworthy (𝑥�
= 4, M = 4, 𝑥̅ = 3.57).
Results from client interviews indicated that the business model, or remuneration structure
of advisers may have less severe implications for clients who had already established trust
with their adviser. These clients were more supportive of paying commissions to their
adviser as long as they were disclosed upfront and clearly identified:
So no, I don’t think they should ban all the commissions but I think people should
be aware of how much they’re paying. [Interviewee 106]
And I know in the past there was some commissions that the financial adviser
received but he was always up front about it. We got documentation to say how
much and all that kind of thing but you've got to expect that you can't get that kind
of advice for nothing. [Interviewee 102]
One client suggested a hybrid model might be the most appropriate, given that clients want
loyalty from their adviser, but at an affordable cost:
I'd prefer a mix of both. I'd prefer they got a flat fee from the client. But at the same
time, that can prohibit people going to them and seeking financial advice, and then
they're in a worse place…That's where I want to say okay look I'm prepared to pay
for your advice, and say, make it nice round figures, say it's $100 for his advice for
244
Chapter 7: Discussion
an hour or so's consultation. Then if I choose to go with one of his companies, then
he would get that kick back, and I totally get that. But I've also paid him that base
rate so those kickbacks are then not as important, because I have actually paid him
for his advice. If I'm not paying him for his advice, he has no loyalty to me you see.
So that's where I think you need both. But you can't make the fee that high that
people who are on a pension for instance can't afford to go. [Interviewee 100]
Form an adviser’s perspective, results from the financial adviser questionnaire (FAQ,
question 1k) showed that 59% of advisers supported a fee for advice model rather than one
that is commission based. However all advisers other than those who were remunerated by
a salary generally disagreed with the following statement:
Government legislation banning commissions makes financial planners more
trustworthy. [Question 1g, FAQ]
This implies that advisers who are remunerated in some way by commissions don’t see
themselves becoming any more trustworthy should they cease to receive commissions;
likely because they are already providing advice that is in the best interests of the client and
not based on how much they will receive as a commission. It also infers that if an adviser is
essentially untrustworthy, the banning of commissions will not make them any more
trustworthy. This explanation is supported by the findings from adviser interviews:
Obviously there are some crooks in every industry, so we will always have a
percentage of people who will do terrible things, and it doesn’t matter how much
you regulate, or try to regulate, it’s not going to stop, it’s just human nature.
[Interviewee 9]
To be honest, the financial advice industry would be very little changed because
there are always going to be the odd shoddy person out there. The odd shark.
That’s the case in any industry. [Interviewee 2]
In addition there were significant differences between advisers with 1-2 years of
experience (who agreed with the statement) and those with more than ten years’ experience
(who disagreed). Those with greater than ten years’ experience also rated themselves as
being more trustworthy (FAQ, question 11a) than did advisers with 1-2 years’ experience
and the difference was found to be significant. A conceivable explanation could be that
advisers who have been in the industry for longer periods of time are more likely to have
245
Chapter 7: Discussion
received commissions at some point as part of their remuneration structure and not felt that
it has influenced advice provided, and are also more likely to have established trust with
clients through the building of a relationship over time that is not based on remuneration
structure.
Findings from both client and adviser perspectives on remuneration structures show that
those who have had considerable experience in a trusting client-adviser relationship
generally do not believe that a different remuneration structure will cause the level of trust
to change. However, for both clients and advisers who have little experience in a trusting
client-adviser relationship, remuneration structures play an important role in generating the
initial trust between a client and adviser.
Research question four asked ‘What are the implications of different business models for
trust?’ The results suggest that business model structures that include commission
payments or bonuses may cause distrust of advisers among consumers who have yet to
seek advice, or for clients who have had previously unsatisfactory experiences. The results
have also indicated that regardless of the business model, clients expect fees to be clearly
disclosed upfront. Such results are useful to regulators, policy makers, financial advice
businesses and professional bodies in making decisions about business models used in
personal financial planning. The findings also make an empirical contribution to the scarce
academic literature available on business model structures in personal financial planning.
7.6
Research Question 5: The Relationship Between Ethical Behaviour
and Trust
RQ5: What is the relationship between ethical behaviour and trust?
Brien (1998) argues that instead of aiming for ethics directly, professions ought to aim for
trust, which is theorised to indirectly promote ethical behaviour. Shockley-Zalabak (2011)
also posits that ethics influence perceptions of trust and that trust influences perceptions of
ethical behaviour and Amrhein (2009) suggests that in the context of providing insurance
advice, ethical behaviour translates to trust. However, the literature is lacking the empirical
evidence to examine the relationship between ethical behaviour and trust. This study is the
first of its kind to examine this relationship empirically in the context of personal financial
planning.
Results provided by CQ2 (question 12p), using a five point Likert scale indicate that clients
246
Chapter 7: Discussion
perceived that their most recent adviser behaved ethically, with a median result of 4 out of
5, and mean of 3.68 out of 5. Similarly, clients generally perceived that their adviser was
trustworthy, with a median result of 4, and a mean of 3.63. Detailed analyses of the
findings reveal that all clients who agreed, or strongly agreed that their adviser was
trustworthy, also agreed or strongly agreed that their adviser was ethical, except for one
client who was ‘neutral’. Only three clients did not perceive that their adviser was
trustworthy, and these clients also did not perceive that their adviser was ethical. So then, if
a client perceives their adviser is trustworthy, they also perceive them to be ethical; the
reverse also holds true.
Comparing the results to question 1a, which includes respondents both who have and have
not received advice, the general trustworthy rating of advisers drops to a median of 3 out of
5 (or a neutral position) with a mean of 2.83, suggesting that interacting with an adviser
may increase one’s trust in financial advisers and possibly allay any initial concerns of
distrust.
Furthermore, respondents made it clear in CQ2 (question 1d) that ethical values were more
important to them than competence when it came to choosing a financial planner as more
than 65% disagreed (see Figure 6-24 on page 146) with the following statement:
More importance should be placed on competence than ethical values when choosing a
financial planner [Question 1d, CQ2]
A possible explanation for this may be that since the client cannot easily validate the
competence of the professional, due to the ‘competence gap’ (Lewis and Weigert, 1985),
they are more comfortable with assessing the ethical values of an adviser when making
decisions about whether to trust them or not. Findings from client interviews in the current
study also assist in better understanding the relationship between ethical behaviour and
trust.
Clients were asked if they felt that ethics and trust were related. Clients perceived that they
were related, and made the following comments:
If I don't think that you're ethically in line with me, chances are really good I'm
probably not going to invest with you. [Interviewee 100]
I think some people could be ethical but maybe not trustworthy in other fields. I
don't know. You'd like to think that someone ethical is trustworthy but I'm sure that
247
Chapter 7: Discussion
there are still people that make mistakes. [Interviewee 102]
If there was any unethical behaviour then I would lose all my trust. I would lose all
of it because I'm thinking if you aren't ethical in one part of your life then it affects
the rest of it. So I couldn’t - it would probably break the relationship. If I saw
unethical conduct in any of the way - I wouldn’t trust them at all. [Interviewee 107]
I think if you had common interests and if I knew the person’s family and he knew
my family and we had the same morals… I would be more open to asking them for
advice I guess. [Interviewee 101]
These findings from client interviews suggest two things about the relationship between
ethical behaviour and trust. Firstly, they suggest that if the client perceives their adviser has
behaved in a manner contradictory to their own moral compass, the unethical behaviour of
the adviser voids any trust that the client may have had in them. Client Interviewee 105
alluded to the possibility that this may mean that less ethical clients (such as his brother)
are attracted to less ethical advisers (such as a previous adviser who Client Interviewee 105
had lost trust in due to what he perceived to be unethical behaviour). The findings provide
empirical evidence to support the proposition of Gullet et al (2009) in the organisational
literature on buyer-seller relationships that the trust relationship is a product of the
mediating lens that is used in assessing ethical behaviour.
Secondly, Client Interviewee 102 indicated the importance of context and competence in
the relationship between ethical behaviour and trust as an adviser may be ethical but not
trustworthy in all contexts as there is a possibility that they may make mistakes (this may
raise issues of incompetence).
Interviews with advisers also provided an alternate perspective by which to examine the
relationship between ethical behaviour and trust. All advisers agreed that trust and ethical
behaviour were essentially related, with the main premise being that ethical behaviour
builds or increases trust. For example:
It [behaving ethically] should always increase trust because what it demonstrates is
that you are acting in somebody else’s best interests by actually acting ethically.
[Interviewee 6]
One adviser also suggested that trust depended on the adviser behaving in line with the
client’s ethical principles:
248
Chapter 7: Discussion
I'd say yes fundamentally in that if you have ethical clients and you behave ethically
then that's always going to help you build that sort of trusted relationship.
[Interviewee 4]
Some advisers also suggested that remuneration structures and organisational culture
played important roles in ensuring that advisers were ethical in providing advice to clients
and that in turn, this would build trust from clients while others intimated that ethical
behaviour needs to be demonstrated consistently over time to build trust.
One adviser questioned how clients would know if their adviser was behaving ethically or
not, however, client responses suggest that it is really whether the client perceives that their
adviser is acting ethically or at least acting in line with the client’s ethical standards. Trust
is built when the client and adviser’s moral compass are aligned.
To provide an indication of advisers’ ethical behaviour, Rest’s Defining Issues Test (DIT)
was conducted in the current study and measured advisers’ moral reasoning. The results
were lower than expected in that overall, advisers failed to reach the principled moral
reasoning score (P score) (P = 28.64) of senior high school students (P = 31.8; Rest, 1994)
and adults in general (P = 40; Rest, 1994). An analysis of advisers who were qualified
Certified Financial Planners (CFPs) provided a higher P score of 33.15 which was lower
than CFPs in Bigel’s (1998, 2000) studies but comparable to non-CFP financial planning
practitioners with low educational achievement (P = 31.86; Bigel, 2000). The current
study also reported the lowest P score of studies of accountants, auditors, accounting and
business students, as summarised in Table 7-3 below. Such findings call for further
research as to what can be done to improve the ethical development of financial advisers in
Australia. Possible solutions may include increased education, curriculum redesign, revised
policies, regulatory changes and the introduction of an overarching code of ethics to apply
to all financial advisers in Australia, not just those who are members of the main
professional bodies.
249
Chapter 7: Discussion
Table 7-3 DIT P-scores from comparison studies
Study
Abdolmohammad
i and Baker
(2006)
Allen and Ng
(2001)
Armstrong (1987)
Bigel (1998)
Bigel (2000)
Region/
Country
North
Eastern
United
States
United
States
United
States
United
States
United
States
Sample Description
AICPA members
Data Collection
Method
In person –
forced ranking
using computer
punch cards
Mail Survey
CPAs
Mail Survey
31.03 (Partners/
Proprietors)
38.5
CFP licensees
Mail survey
38.01
Practicing financial
planners who are US
members of the
International
Association for
Financial Planning
(IAFP)
Mail survey
40.00 (CFP high
educational
achievement)
35.23(Non-CFP
high educational
achievement)
33.85 (CFP low
educational
achievement)
31.86 (Non-CFP
low educational
achievement)
31.168 (Nonspecialists)
31.6 (Tax
practitioners)
36.9
Accounting students in
final unit of study
Doyle, Hughes
and Summers
(2013)
Ireland
Tax practitioners and
non -specialists
Mail survey
Eynon, Hill and
Stevens (1997)
United
States
Mail survey
Herington and
Weaver (2008)
Australia
Licensed CPAs who
are sole proprietors
and small firm
practitioners
Undergraduate and
postgraduate business
students
Lampe and Finn
(1992)
United
States
Auditing students and
auditors in accounting
firms
Ponemon (1992)
United
States
United
States
CPAs
Australia
Financial service
representatives on
ASIC’s Professional
Register of AFSL
holders and authorised
representatives
Shaub (1994)
Current Study
CPAs
Mean P
(%)Score
35.68
Survey selfcompleted in
classroom
setting
Experimental
survey
completed
under
observation
Mail survey
38.99
Mail survey and
conducted in
classroom
setting
Mail survey
41.3
34.5 (Auditing
class of university
students)
40.9 (Practicing
CPA Auditors)
38.02
28.64 (Total)
33.15 (CFPs)
Although there are a number of factors at play, it is possible that the low P score for
advisers in the current study is largely attributable to the low education level of advisers
250
Chapter 7: Discussion
when compared to other studies. Demographic information from the current study
indicated that the lowest educational level of advisers was Year 10 of high school while
38% held a diploma or advanced diploma and only 36% of adviser respondents held a
bachelor degree. Thirty percent held the FPA’s Certified Financial Planner (CFP)
designation and 6% were a Certified Practising Accountant (CPA). Rest (1986) found
from a 10-year longitudinal study that formal education is a powerful predictor of moral
judgement development and resulting DIT scores. McNeel (1994) supports this in his
summary of studies showing the effect of formal education on DIT scores. Although not
significant, advisers in the current study who held postgraduate qualifications had a higher
P score (30.34) than all other education levels.
McNeel (1994) also suggested that higher education may not accomplish moral judgement
growth if it is vocationally oriented or where the emphasis is on teaching technical
competence with little attention given to broader questions of human values and morality,
as is the case in financial planning where much of the education is technically focused and
compliance based. Results from the current study also showed financial advisers were
ranked highly on their technical competence skills using a 5-point Likert scale but lower on
their social/ethical awareness (CQ2: 𝑥� = 3, 𝑥̅ = 3.37) as shown in Table 6-19 on page 143
in the previous chapter. To address the emphasis on teaching technical competence,
McNeel (1994, p.29) suggested that educational approaches in business should ‘integrate
vocational education with a broader liberal arts focus’.
Furthermore, the current study showed financial advisers were highest on stage 4 of the
moral judgement development scale which represents ‘the morality of law and duty to the
social order’ (Rest and Narvaez, 1994, p. 5). The increased focus on compliance through
the rigid regulatory framework imposed by the profession and the government since the
GFC would have played a major role in contributing to the high stage 4 scores. The
compliance aspect of financial advising has also been emphasised in formal education
programs for personal financial planning which may have impacted the results. While most
advisers were identified at stage 4 of the conventional level of moral development, some
advisers were still found to reach the post-conventional level at stages 5 and 6, with 20.3%
of advisers having a P score of 40.0 or more. However, in this study, extremely low P
scores (starting at zero) may have contributed to make the total P score lower than would
otherwise be the case.
Stage 6 involves moral justice and human rights that may result in violation of laws or
251
Chapter 7: Discussion
regulations and goes against the increased focus on following rules and procedures
introduced since the collapse of major financial services providers in Australia such as
Westpoint, Opes Prime and Storm Financial, in addition to the GFC. For example, the FPA
introduced an updated code of conduct and the Federal Government implemented
legislative reform through FOFA. Similar to tax practitioners, financial planners have
many rules based regulations and ethical codes that Doyle et al (2013) argue, along with
education, socialisation, different geographical jurisdictions and a long span of time may
also assist in explaining lower P scores than previous DIT studies.
These findings strongly suggest that more formal education and the integration of liberal
arts studies into the financial planning curriculum may increase the moral judgement of
future advisers which has been found to be an indication of ethical behaviour that translates
to trust. As there are no other DIT studies of financial advisers (other than Bigel’s which
were conducted over a decade ago), this study has a fundamental role to play in the future
education of financial advisers. The findings support the higher education requirements
recently imposed by both the FPA and ASIC but also provide insight as to how best design
financial planning curriculum to encourage principled thinking and ethical behaviour in an
area that has previously been tainted by the unethical behaviour of a handful of advisers in
their involvement in corporate collapses as portrayed in the media. Completion of an ethics
course at university has been found to improve moral judgement in accountants (Eynon et
al, 1997) and may also do the same for financial advisers, as may the integration of more
liberal arts units. These findings are thus useful for policy makers, regulators, educators
and the profession in supporting advisers to become principled thinkers who rely on
reasoning processes that go beyond the legal framework and ethical codes to resolve moral
issues and build trust with their clients in personal financial planning. As one client puts it:
I think morality, trust and ethics go hand-in-hand, and I think as far as ethics go, it
could be prescribed rules that somebody has and you have to follow – that’s the
ethics of the company. But in saying that, you have to have the right morals to
follow the ethics of the company. I don’t know how to explain it, but I think it’s the
whole package. It’s easy for a company to have a standard outbreak of procedure
and say these are the company’s ethics and this is what we stand for and this is
what we were aiming at, but it’s the person that’s putting it into practice that makes
contact with the client and has to stick to the ethics. [Interviewee101]
In answering research question five, the study found the following relationships to exist
252
Chapter 7: Discussion
between between ethical behaviour and trust:
•
If a client perceives their adviser is ethical, then they also perceive them as
trustworthy in the context of providing financial advice;
•
If a client finds that an adviser’s moral compass, or ethical principles are aligned
with their own, then they are also more likely to trust them;
•
Any known breach of ethical behaviour that is not in accordance with the client’s
ethical principles will result in immediate distrust.
The findings also revealed that advisers failed to reach the principled moral reasoning
score of high school students and adults in general, being the lowest score of all studies in
accounting and auditing as well as their student counterparts. As this score is an indicator
of advisers’ ethical behaviour and knowing that ethical behaviour increases trust shows the
relative importance of improving the moral reasoning of personal financial planners in
Australia. Suggestions include reviewing ethical codes, professional obligations, increased
education and an educational shift to incorporate broader issues surrounding human values
and morality. Further research is required in this regard.
7.7
Research Question 6: The Impact of Recent Changes in the
Financial Planning Environment on Trust
RQ6: How have recent changes in the financial planning environment impacted on
the role of trust?
Anderson (1971) as cited in Lewis and Weigert (1985) hypothesised that trust declines in
contexts of rapid change and that as trust declines, ‘the probability of terminating the
relationship increases; and the probability of bureaucratic solutions increases’ (p. 980).
Recent events such as high profile corporate collapses and the GFC, have been the catalyst
for many changes in the financial planning environment in the last five years and have led
to bureaucratic solutions being proposed in the form of legislation reform and increased
regulation. Findings from this study outlined in the results chapter (see Figure 6-14, Figure
6-19, Figure 6-42 and Figure 6-43) have indicated that major events and changes to the
legislative and regulatory framework have all impacted on trust in personal financial
planning.
The media attention given to the corporate collapses of Westpoint in 2006, Opes Prime in
2008 and Storm Financial in 2009, resulted in significant negative publicity on the use of
253
Chapter 7: Discussion
commission-based payments and the perceived integrity of financial planners and advisers.
Just over 21 percent of respondents in CQ1 (administered in April 2009) indicated that they
had not sought financial advice as they did not trust advisers. Findings from the openended comments in CQ1 revealed that many clients had become sceptical about financial
advisers with a Leximancer analysis showing ‘trust’ to be a significant theme for clients
who made negative comments about the trustworthiness of their advisers and expressed
concern about the conflict of interests arising from commission payments. This was further
supported by open-ended comments in CQ2 which suggest also that the negative publicity
influences initial trust. For example:
It has taken time to pluck up courage to see a Financial Planner. Stories friends
told us previously put us off seeking advice. [Client 02, CQ2]
Advisers felt very strongly that the media had tarnished their reputation through the way
that they portrayed financial advisers in reports about corporate collapses:
We continuously are branded with the same stigma as those who have entered the
industry and wronged clients. [Adviser 1694, FAQ]
We really feel as financial planners that the current government, media, FPA and
unions have all contributed to the poor reputation of financial planners. [Adviser
1531, FAQ]
The media uses biased and untrustworthy reporting. [Adviser 1333, FAQ]
Around the same time as the high profile corporate collapses was the GFC. This event was
dissatisfying for clients and advisers alike but provided an opportune time to examine trust
in the client-adviser relationship as it created a situation where confidence in the other is an
issue (Rempel, Holmes and Zanna, 1985); uncertainty and risk are present (Sharma and
Patterson, 1999) and where a bad outcome may make one regret their action (Luhmann,
1988).
Findings from the current study revealed that clients reported poorer trust assessments of
advisers who were last sought prior to 2009 (pre-GFC) than those post-GFC with 38%
given a positive classification prior to 2009 and 100% for advice provided since that time.
For example, dependability, reliability and confidence are all ranked higher in the years
2010-2013 than in 2009 and prior (see Figure 6-27, Figure 6-28 and Figure 6-29).
In addition, the length of the client-adviser relationship had some bearing on how clients
254
Chapter 7: Discussion
perceived their adviser’s trustworthiness in relation to the GFC with findings revealing that
clients who were with their adviser for more than ten years were neutral in their response to
the statement ‘the global financial crisis increased my trust in financial planners’ while
those with their adviser for less than ten years disagreed with the statement. Furthermore,
clients who were with their adviser for greater than ten years or had a new adviser (1-2
years) found their advisers more trustworthy than clients who were with their advisers for
3-9 years.
The situation posed by the GFC provided a ‘test’ for advisers that enabled clients to assess
their trustworthiness. A reasonable explanation seems to be that where clients perceived
advisers to fail the ‘test of trustworthiness’, they found a new adviser or did not seek any
further financial advice. Where clients perceived advisers to ‘pass’ the test, they continued
their relationship with their adviser. Various factors as previously discussed in section 7.4
(RQ3) were used in assessing advisers. Client interviews provided further insight into this
assessment of trustworthiness at the time of the GFC:
Well, our advisor knows that we're very conservative and that we don't like to take
risks so the money we lost was minimal because most of it was in safety areas…and
during the GFC when things went down we were able to get back exactly what we
put in because that was a small part of one of our super funds that he had
suggested a long time ago because he knew that we were worried that we could
lose money. [Interviewee 102]
Client interviews also suggested initial trust levels to be lower at the time of the GFC due
to the increased risk involved:
It was around the same time as the GFC and I don’t know if moving to a new
country and not knowing who to go to – I’ve been very sceptical, and because of
that I’ve held everything in cash. I did see a financial advisor in Campbelltown but
decided not to use it….the advice he gave me I felt was risky. [Interviewee 101]
With the corporate collapses and GFC making headlines nationally and internationally,
bureaucratic solutions in the form of legislation under the banner of Future of Financial
Advice (Commonwealth of Australia, 2009) were introduced. Findings from this study
indicated mixed feelings from clients with regards to how the legislative changes impacted
on trust in advisers. Clients generally agreed with the statement that ‘government
legislation banning commissions makes financial planners more trustworthy’ (CQ2,
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Chapter 7: Discussion
question 1g – see Table 6-21 on page 148) and open-ended comments in the questionnaires
along with client interviews provided an indication as to how legislation and regulation
may increase client trust in financial advisers, as follows:
Financial planners/advisors should be required by legislation to gain some
recognised accreditation (similar to a CPA). [Client 203, CQ1]
I thought, I am so glad that we have more regulation on our banks than perhaps is
necessary or perhaps the banks would like…yeah the GFC is really something that
we were very much cushioned from in Australia. [Interviewee 100]
Clients who were interviewed in this study who had established trusting relationships over
a period of time with their adviser generally agreed that some increased regulation was
warranted but were relatively nonchalant about the impact of legislative changes when it
came to their own adviser. These clients trusted that their adviser would provide them with
the best advice most suitable to their needs, regardless of legislative changes:
It probably won't make a difference to us because whatever is, is. And I know in the
past there was some commissions that the financial advisor received but he was
always up front about it. We got documentation to say how much and all that kind
of thing but you've got to expect that you can't get that kind of advice for nothing.
[Interviewee 102]
Clients also recognised that there may always be a small number of advisers who still
choose to do the wrong thing. For example:
I think regulation is a good thing to a point. I know that it’s got something to do
with the commission basis of the service and I think that’s probably a good thing,
because like I said earlier, human nature, people are greedy and if you’re a good
salesman you’ll push your product and people might be paying for things they don’t
need. I think financial advice is very personal depending on each family or each
person’s circumstances; there is a whole lot of variables. I think they might be
pushing products on to people that don’t need it. As far as the regulator’s ability to
deal with that, I’m not sure how they’d police that. [Interviewee 101]
Although clients generally agreed with having greater regulation, results in CQ1 and CQ2
on the issuing of FSGs and AFSL numbers (refer Figure 6-8 on page 118 and Figure 6-20
on page 140) suggest that clients don’t take much notice of the legislation nor check if their
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Chapter 7: Discussion
advice is in accordance with it. They simply trust for the reasons previously outlined in
RQ1 and RQ3. They assume that advisers would follow the law at minimum, which
indirectly also assumes some general trust in the regulatory system that non-compliant
advisers are dealt with appropriately and consumers protected from them.
The answer to research question six is addressed by the research findings in this study
which show that changes in the financial planning environment may lead to higher trust in
instances of already high trust but violate trust where trust factors show signals of failure.
Such changes can act as a ‘test of trustworthiness’ and are less likely to impact trust levels
for established client-adviser relationships. Media reporting has the potential to breed
distrust where changes to the financial planning environment are reported in a negative
manner. The findings for this research question in this study has pioneered the way to
closing the gap in trust research as called for by Johnson and Grayson (2005) by
empirically examining trust in light of the impact of dissatisfying events such as corporate
collapses and the GFC .
7.8
Emerging Issues
Although the findings of this study primarily addressed the research questions previously
addressed in this chapter, some additional issues in relation to trust in personal financial
planning emerged from the findings which were worthy of discussion, as outlined below.
7.8.1
A mismatch of trust
Advisers ranked themselves highly across all behavioural (excluding marketing oneself)
and technical competency skills and higher than clients did. However, the standard
variation for some of these skills was high as some advisers also rated competencies such
as ‘time management’, ‘written’ skills and ‘social/ethical awareness’ as ‘poor’. The selfratings in Table 6-28 indicate that advisers ranked the skill of ‘problem solving’ the highest
of all other competence-based skills (𝑥̅ = 4.48) in the questionnaire, compared with clients
who rated their adviser’s problem solving skills lowest (𝑥̅ = 3.26).
In addition, findings showed clients placed high importance on competence of advisers and
indicated that qualifications and professional membership of advisers were important trust
factors while the FAQ showed a large number of advisers to hold only minimal
qualifications and more than half had no professional membership.
The ‘mismatch’ between adviser and client rankings could partly explain the distrust that
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Chapter 7: Discussion
exists in the financial planning environment. While advisers see themselves as displaying a
high level of competency in areas such as problem-solving, clients are not necessarily
seeing such skills exhibited. This could be addressed by raising education standards for
financial planners and including more problem-based learning in the curriculum.
7.8.2
Importance of the professional bodies
Findings from the study indicated that professional bodies not only had an important role in
building and sustaining trust in financial advisers but also showed that FPA members
performed more highly across client ratings of all competence based skills. Adviser selfreported results were also higher amongst CFP designated advisers.
In addition, client interviews revealed that many clients could not name any of the
professional bodies in the financial planning environment other than accounting bodies
CPA Australia and the Institute of Chartered Accountants, even though they said that they
were aware that a national financial planning body would exist:
Facilitator:
And have you seen anything about your adviser having a
professional membership at all?
Interviewee102:
I'm sure I have, I couldn't describe it exactly.
Facilitator:
Are you aware of who the industry/professional bodies are?
Interviewee100:
Not for financial planning no.
Interviewee 105:
If you asked me about accounting, I could say yeah I know
most of them. The financial planner, the answer's no, no, and
that's interesting, isn't it.
Clients indicated that they believed more should be done to promote the national
professional body and to use this body for regulatory purposes, for example:
Because that governing body, who like I know there's like the Chartered
Accountants, there's the CPAs and there's like physiotherapists have their little
body. Whoever the financial planners' body is needs to be more proactive in saying
we are trustworthy, we are people you want to know. You want us. This, look for
one with this emblem so that you know that they are trustworthy people and they
are following our guidelines, and these are our guidelines, and you need to be told
these things and you need to ask these questions and read this fine print.
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Chapter 7: Discussion
[Interviewee 100]
That's where, that's where the government needs to step in and say I will fund a
media campaign of XYZ, and you know what, chances are it's not actually going to
cost them that much as opposed to legislation this way. Legislation's terribly
expensive, whereas a media campaign and help and get the people only using them.
Because that's going to weed out the shonkies initially, it's also going to make
people do their course, make sure they're chartered, so they've got - so they can
say, I'm chartered. [Interviewee 100]
These additional findings provide further insight into the role of trust in personal financial
planning and will assist professional bodies and regulators as they seek to maximise
consumer trust and further develop financial planning as a profession.
The emerging issues presented in this section provide further insights to understanding the
role of trust in personal financial planning. They have indicated that advisers will need to
improve their problem-solving skills in order to build trust from clients. Furthermore, it is
evident that to maximise consumer trust, professional bodies will need to do more to
develop financial planning as a profession, to promote the national professional body and
to use this body for regulatory purposes.
7.9
Conclusion
The results from the current study have been discussed in this chapter in response to the six
specific research questions as identified in Chapters 1 and 4 to examine the role of trust in
personal financial planning.
This chapter has identified seven primary characteristics of trust that are evident in
personal financial planning: vulnerability and risk, feeling, honesty, faith, best interests,
accountability and competence. Of significance is the importance of affective
characteristics of trust in a professional relationship such as personal financial planning and
the importance of accountability for trust in personal financial planning.
The chapter has also explained how financial advisers perceive their role in developing
trust with their clients and established individual, demographic, society, systems and
process based factors that influence the trust between client and adviser, with the link
between behavioural skills and trust being particularly significant. Furthermore, the chapter
explored the implications of different business models for trust, showing that remuneration
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Chapter 7: Discussion
type is not as important for the development of trust in a relationship as the media would
have one believe.
Additionally, the chapter discussed the empirical findings of the relationship between
ethical behaviour and trust, and showed how recent changes in the financial planning
environment have impacted on trust in financial planning. In addition the chapter has raised
issues that were observed from the results of the study but not addressed by the research
questions, such as the mismatch of trust between client and adviser, and the importance of
professional bodies in building trust in personal financial planning.
In answering the research questions, this chapter discussed how the results address the
research gaps in the trust literature, and how the findings add to the body of knowledge in
trust, ethical behaviour and more specifically, the discipline of financial planning. The next
chapter, Chapter 8 provides a summary of the study, including the research processes
undertaken, contribution of research findings, limitations, implications of the research and
recommendations for future research.
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Chapter 8: Conclusion
Chapter 8: CONCLUSION
8.1
Introduction
This chapter provides an overview of the thesis and a summary of the main findings. It
considers both the academic and practical contribution the study. It also considers the
implications of the research and addresses the limitations of the study. Furthermore, the
chapter makes recommendations for future research and policy makers, and provides final
conclusions about the study.
This thesis commenced with the proposition that the role of trust in personal financial
planning was significant and important in achieving the economic and social objectives in
Australia through widening participation and high quality advice. Recent changes in the
financial advice environment and ensuing public debate highlighted the importance of
client trust in the engagement and delivery of financial advice to achieve these objectives.
For these reasons, the role of trust was considered worthy of further investigation.
This study has:
1. Identified characteristics of trust that are relevant to personal financial planning;
2. Explained how financial advisers perceive their role in developing trust with their
clients;
3. Established individual, demographic, society, systems and process based factors
that influence the trust between client and adviser;
4. Explored the implications of different business models for trust;
5. Examined the interplay between ethical behaviour and trust, and
6. Shown how recent changes in the financial planning environment have impacted on
trust in financial planning.
Overall, the contribution of this thesis to the academic literature is strong. The finding that
behavioural skills of financial planners are linked with trust is important for guiding the
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Chapter 8: Conclusion
literature on interpersonal skills in a range of business contexts. Furthermore, the finding
that remuneration is not important for the development of trust in a relationship contributes
to the literature on customer relationship management. Of significant importance to the
wider ethics literature is the link established between ethics and trust in an empirical
manner and the finding that ethical development is lower in Australian financial planners.
The study also makes a practical contribution to financial planning. Specifically, the study
found that affective trust is the most important in financial planning relationships and
established the importance of accountability for trust.
The research is justified given the current public perception, exacerbated by recent
corporate collapses and the GFC, that financial planners are untrustworthy, unethical and
incompetent (ASIC & ACA, 2003; Constantine, 2009) and that their remuneration and
reward structures are associated with self-interest and not in the best interests of financial
planning clients (ASIC submission in Ripoll Report, Commonwealth of Australia, 2009,
p.76).
The research also coincided with moves from the professional bodies as well as the
government to improve the reputation of financial planners in Australia. The peak
professional body in financial planning in Australia, the Financial Planning Association
(FPA), is attempting to raise education standards for certified financial planners (FPA,
2010) and in 2009 (since updated in 2013) introduced a new code of conduct encompassing
a code of ethics (FPA, 2013a). The government also conducted a parliamentary inquiry on
corporations and financial services (Ripoll Report, 2009) which resulted in regulatory
reform through the Future of Financial Advice (FOFA), including legislative changes
restricting remuneration and rewards payments to financial planners. These events have led
to a heightened interest in the provision of financial advice and in recognising financial
planning as an emerging profession.
This study has focused on the role of trust in the complex and changing environment of
financial planning and the factors influencing this trust. This study has presented both
evidence and argument that trust is an essential ingredient in the ability of the financial
planner to provide a professional service to their client.
8.2
Research processes undertaken
The research design and methodology adopted for the purposes of conducting the research
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Chapter 8: Conclusion
were presented in detail in Chapter 5 of the thesis. The methodology adopted a mixed
methods approach, utilising both quantitative and qualitative research methods to generate
preliminary data on the role of trust in financial planning and to analyse data to answer the
research questions posed by the study.
The first stage of the research involved the literature review. Once this was completed, the
research instruments could be designed – two client questionnaires (CQ1 and CQ2), one
financial adviser questionnaire (FAQ), and semi-structured client and adviser interviews
(SCI, SFI). As the first client questionnaire was administered just prior to the GFC, the
second client questionnaire was designed to enable post-GFC data to be collected to assist
in analysing the role of trust at a time of change and when clients would seek financial
advice. A financial adviser questionnaire was also designed in order to understand how
financial advisers perceive their role in developing trust with their clients. These surveys
were triangulated with interview questions of both financial advisers and clients.
Quantitative research methods were used to generate and analyse data from both client
questionnaires and the financial adviser questionnaire while qualitative methods were used
to analyse the open-ended comments in all three questionnaires in addition to the client and
adviser interviews. The quantitative methods undertaken to analyse the questionnaires
included frequency distribution, cross-tabulation, means, percentage distributions and
statistical tests such as chi square, t-tests and analysis of variances (ANOVA) using SPSS
for Windows (Version 22) software. Qualitative methods employed for interview analysis
included a four stage content analysis that involved drawing out the major themes and
concepts in the data using both a manual method and more automated data mining through
Leximancer software.
An overarching qualitative approach was taken in interpreting and discussing the results in
Chapter 7 through triangulating the data obtained from both clients and advisers through
the various research instruments.
8.3
Limitations
One of the major limitations to the study was that although a number of financial advisers
from banking organisations participated in the financial adviser questionnaire, none of
these advisers volunteered to participate in the interview stage of the study. This limited
the financial adviser interview results to non-bank participants and thus the study was
unable to provide further interpretation of the quantitative results reported in the
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Chapter 8: Conclusion
questionnaire by clients and advisers of banks.
The study had other limitations. Securing access to a large sample group of clients,
potential clients and financial planners to participate in the study became one of the biggest
challenges encountered throughout the course of the thesis. While the questionnaires
indicate that respondents represented all demographic categories and organisation types
and adviser participants were across professional membership groups, it is acknowledged
that the specific challenges associated with obtaining the sample for the second client
questionnaire as outlined in Appendix C12 on page 348, may have led to bias.
The potential for bias caused by the low response rate for the second client questionnaire,
has also been recognised on numerous occasions in Chapter 6 of the thesis. In addition,
response numbers used for measurement in the data analysis stage, such as for organisation
type, remuneration method and professional designation, were small. This may have
affected the generalisability of the results of some of the testing.
Furthermore, the objectivity of respondents was maintained by ensuring responses to
questionnaires were provided anonymously, that responses were analysed without
identification of any participant, that no sensitive information was sought and that
participation was voluntary.
8.4
Research Findings and Contribution
There are two types of contribution made by the research findings in this thesis. One
contribution is to the existing academic knowledge base in the area of trust and the other is
a practical contribution to regulators and financial advisers as to how advisers can best
build trusting relationships with their clients that can withstand external pressures. These
contributions also address key areas of public debate concerning the professionalisation of
financial planning and legislative reform.
An academic contribution has been made to the existing knowledge base in a number of
ways. Firstly, the characteristics of trust in personal financial planning were identified by
the study to include both cognitive and affective characteristics. Affective characteristics of
trust in personal financial planning were found to be essential to the client-adviser
relationship and this may translate to professional service relationships in a range of
contexts where previous studies have focused on cognitive characteristics.
Secondly, findings that suggested trust cannot exist in the client-adviser relationship unless
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Chapter 8: Conclusion
the adviser puts the client’s best interests before their own interests and that advisers who
appear to be self-marketing are perceived as untrustworthy, provide ‘real-life’ evidence to
support the meta- analysis of literature conducted by Balliet and Van Lange (2013) that
emphasized ‘the importance of defining trust in terms of beliefs about others’ benevolent
motives’ (p. 1102) in situations involving strong conflict of interest.
Thirdly, adding to the existing knowledge base on trust, accountability was found to be a
significant characteristic of trust in financial planning and results indicated this
characteristic was not yet fully developed in personal financial planning in Australia.
Fourthly, results suggested the behavioural skills of an adviser influence the usefulness of
the SOA and thus the quality of advice, but also provide an indication to clients that the
adviser can be trusted. This is the first study of its kind that reports the client’s assessment
of the quality of advice as well as adviser behavioural skills, including trustworthiness.
In addition, the study added to the academic literature by finding through RQ1 and RQ3
that adviser qualifications were an important characteristic required for initial trust but that
while qualifications may influence trust, they are insufficient on their own in increasing
client trust.
Furthermore, this is the first empirical study of its kind to examine trust from an adviser’s
perspective and how advisers perceive their role in developing trust with their client. The
results not only made a contribution by demonstrating the mismatch between adviser selfratings of competence and client ratings but also revealed similarities in that both clients
and advisers perceived that reputation and qualifications were key factors in influencing
trust. Moreover, the study uncovered the importance of ethical behaviour in building and
maintaining trust; specifically the alignment of the client’s and adviser’s ethical
development. Although the link between ethics and trust has been somewhat theorised in
the academic literature (Brien, 1998; Amrhein, 2009; Shockley-Zalabak, 2011) this study is
the first to provide empirical evidence to support such claims.
The final contribution this study has made to academic knowledge was to measure the
ethical development of financial advisers in Australia for the first time using Rest’s DIT
(1986). This adds to the existing knowledge base of DIT results across different
occupations and professions and allowed for comparisons to be made against other studies,
specifically the two Bigel studies (1998, 2000) of financial planners in the United States.
The study found the ethical development score of financial advisers in Australia to be
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Chapter 8: Conclusion
much lower than similar studies in the United States, and also lower than the general
population of the previous studies conducted internationally using the same test (Rest,
1994). A detailed analysis of results in the current study also highlighted that education
may be partly to blame, in addition to the strict compliance culture in Australia resulting
from legislative reform and recent changes in the financial environment such as corporate
collapses and the GFC.
More generally, this thesis has assisted in closing the research gap in the academic
literature available in financial planning and provided a basis on which to undertake further
studies in the area.
From a practical perspective, the study has also made a number of contributions. The
findings have presented practitioners with a range of factors that influence trust with their
clients that may be used to guide practitioner behaviour and encourage practitioners to
engage in training that addresses such factors in order to establish and maintain trusting
relationships with clients.
Another practical contribution is to professional bodies, specifically the FPA, by
highlighting the importance of promoting the profession to initially engage clients and
establish trust. It also emphasises the crucial role of the profession in building and
maintaining trust through enforcing educational and professional requirements on its
members.
In addition, the study has made a contribution to the education of financial advisers by
demonstrating that while both competence and the ethical development of advisers are
essential for trust in the client-adviser relationship, both are affected by the education of
the adviser. Findings revealed that financial adviser education needs to address both
technical and behavioural skills with studies also integrating more broad liberal arts topics
comprising human values and morality.
Furthermore, the results provide some much needed empirical evidence that supports the
introduction of a Best Interests Duty (BID) as part of the federal government’s FOFA
reforms to improve trust in personal financial planning.
8.5
Implications and recommendations
In addition to the academic and practical contributions made by the findings from this
thesis, the study also has implications for theory, financial advisers, the financial planning
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Chapter 8: Conclusion
industry, professional bodies, educators, regulators, clients and more broadly, society.
The findings from this study with regards to characteristics of trust and trust factors, as
well as the impact of external events on trust, are able to be applied to future studies on
trust, and in a range of contexts, thus building on existing trust theory.
The thesis also provides guidance to financial advisers and others in the financial advice
industry with regards to the skills and factors that build and maintain trust with clients.
This may lead some advisers to engage in additional training, complete further education to
improve their technical or behavioural skills or to reconsider the way they interact with
clients.
The findings have implications for professional bodies that were found to play a key role in
contributing to a positive reputation of financial advisers and holding responsibilities for
setting quality standards through education and accreditation. Consideration of the findings
from this thesis may be made by the Finance Professionals’ Education Council (FPEC) in
fulfilling its obligations to raise the standard of financial planning education through
setting curriculum requirements at level seven of the Australian Qualifications Framework;
developing a standardised framework for the graduate professional year; developing and
administering a registration exam at the end of a professional year; and establishing and
maintaining the professional pathway for financial advisers (Commonwealth of Australia,
2014e).
In addition, the thesis findings have implications for current and future educators of
financial planning courses as the study has identified a need for further education of
financial advisers that may lead to increased demand for education in this area. The
curriculum design of such courses will also be influenced by the findings in terms of
technical and behavioural skill requirements and the need to integrate broader social and
ethical capabilities. For similar reasons, the research also has implications for the minimum
education requirements set by regulatory and professional bodies.
There has already been much public debate with regards to the Future of Financial Advice
(FOFA) reform and findings from this thesis provide the empirical evidence to assist with
shaping the future direction of this reform to achieve the economic and social objectives in
Australia through improving consumer confidence in financial planning, widening
participation and providing high quality advice to clients. Hence, these implications have
potential benefits for advisers, clients and society as a whole.
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Chapter 8: Conclusion
In light of both the findings from this study and the limitations and implications previously
discussed in this chapter, a number of recommendations for future research have evolved.
These recommendations include testing the factors found to influence trust with additional
samples of clients, both within and outside Australia, in addition to testing these trust
factors in other contexts.
Another fruitful area of research would be to further investigate the role of trust in personal
financial planning as perceived by financial advisers who work in banking organisations in
Australia, as the current study was limited by the lack of interview participants in this
demographic. It is suggested that an ethnographic study would be most beneficial in this
regard.
Furthermore, there is a need for more research on the ethical development of financial
advisers, as well as closely related professions such as accounting. Many of the studies
involving the DIT are now dated and there is very little data available from Australia which
makes comparisons difficult.
Financial planning education is also an area worthy of further research, particularly in
examining the impact of introducing a broader liberal arts focus to the curriculum and
undertaking to assess the ethical development of financial planning graduates at differing
stages of their studies. Findings from the current study also suggest that further research is
required as to how problem solving skills and interpersonal skills can best be learned to
prepare future financial planners.
Finally, in the complex and changing environment of financial planning, research as to the
impact of legislative changes such as FOFA on both advisers and clients will be useful for
designing and implementing future regulatory changes in Australia and in other countries
with similar economic and societal objectives.
8.6
Final Conclusions
This study is one of the first of its type conducted in Australia on consumers, clients and
advisers in the personal financial planning environment. It has attempted to focus attention
on the role of trust in the provision of financial advice provided by financial planning
practitioners.
The characteristics of, and factors influencing trust discovered in this study have made a
considerable contribution to the academic knowledge base on trust as well as financial
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Chapter 8: Conclusion
planning. The study has also provided valuable practical information to assist practitioners
in building trust with their clients and to assist regulators and professional bodies to
maximise consumer confidence and participation in financial planning.
In addition, the study has contributed towards better understanding the relationship
between ethical behaviour and trust and exposed areas of financial planning that require
further attention if it is to be recognised as a true profession. The main implications of the
study are in the areas of policy, skills development, education and ethical development, and
recommendations for future research in these areas have been made.
Furthermore, the findings contribute to understanding the role of trust in personal financial
planning and to how financial planners can fulfil their obligations as an emerging
profession in a complex and changing environment while satisfying broader economic and
social objectives. The first step in meeting these objectives is in creating an environment of
trust in personal financial planning where people have the confidence to initially seek
advice, as articulated by the following comment:
…people don’t know that they need a financial planner until they actually go and
see one. It’s not about knowing whether you need one or not, it’s about actually
trying to find out whether you do. [Interviewee 6]
8.7
Concluding statement
This thesis has investigated the role of trust in personal financial planning. It has made
academic and practical contributions with its findings benefitting both advisers and clients
alike. The study has implications for the profession, educators, regulators and more
broadly, society.
As Hamel (2010, n.p.) has stated:
Trust is not simply a matter of truthfulness, or even constancy. It is also a matter of
amity and goodwill. We trust those who have our best interests at heart, and
mistrust those who seem deaf to our concerns.
This thesis is a foundation on which to build further research and to achieve the social and
economic benefits that result from trust in personal financial planning.
269
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LIST OF APPENDICES
1 Appendix A: Chapter 2 Context of the Study
2 Appendix B: Chapter 3 Literature Review
3 Appendix C: Chapter 5 Methodology
4 Appendix D: Chapter 6 Results
289
APPENDIX A
Chapter 2 Context of the Study
290
Appendix A1: Recommendations from Ripoll Report
(Extracted from Parliamentary Joint Committee on Corporations and Financial Services
Inquiry into financial products and services in Australia, Commonwealth of Australia,
2009, pp. 150-151)
Recommendation 1
The committee recommends that the Corporations Act be amended to explicitly include
a fiduciary duty for financial advisers operating under an AFSL, requiring them to place
their clients' interests ahead of their own.
Recommendation 2
The committee recommends that the government ensure ASIC is appropriately resourced
to perform effective risk-based surveillance of the advice provided by licensees and their
authorised representatives. ASIC should also conduct financial advice shadow shopping
exercises annually.
Recommendation 3
The committee recommends that the Corporations Act be amended to require advisers to
disclose more prominently in marketing material restrictions on the advice they are able
to provide consumers and any potential conflicts of interest.
Recommendation 4
The committee recommends that the government consult with and support industry in
developing the most appropriate mechanism by which to cease payments from product
manufacturers to financial advisers.
Recommendation 5
The committee recommends that the government consider the implications of making
the cost of financial advice tax deductible for consumers as part of its response to the
Treasury review into the tax system.
Recommendation 6
The committee recommends that section 920A of the Corporations Act be amended to
291
provide extended powers for ASIC to ban individuals from the financial services
industry.
Recommendation 7
The committee recommends that, as part of their licence conditions, ASIC
require agribusiness MIS licensees to demonstrate they have sufficient working
capital to meet current obligations.
Recommendation 8
The committee recommends that sections 913B and 915C of the Corporations Act be
amended to allow ASIC to deny an application, or suspend or cancel a licence, where
there is a reasonable belief that the licensee 'may not comply' with their obligations
under the licence.
Recommendation 9
The committee recommends that ASIC immediately begin consultation with the
financial services industry on the establishment of an independent, industry-based
professional standards board to oversee nomenclature, and competency and conduct
standards for financial advisers.
Recommendation 10
The committee recommends that the government investigate the costs and benefits of
different models of a statutory last resort compensation fund for investors.
Recommendation 11
The committee recommends that ASIC develop and deliver more effective education
activities targeted to groups in the community who are likely to be seeking financial
advice for the first time.
292
Appendix A2: Financial planning legislation
Corporations Act 2001 (Commonwealth of Australia). Retrieved 20 March 2015 from: <
http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/>
Corporations Amendment (Further Future of Financial Advice Measures) Act 2012
(Commonwealth of Australia). Retrieved 20 March 2015 from: <
http://www.austlii.edu.au/cgi-bin/download.cgi/au/legis/cth/num_act/cafofama2012636>
Corporations Amendment (Future of Financial Advice) Act 2012 (Commonwealth of
Australia). Retrieved 20 March 2015 from:
<http://www.comlaw.gov.au/Details/C2012A00067>
Financial Services Reform Act 2001 (Commonwealth of Australia). Retrieved 20 March
2015 from: < http://www.comlaw.gov.au/Details/C2004A00891>
Insurance (Agents and Brokers) Act 1984 (Commonwealth of Australia). Retrieved 20
March 2015 from: < http://www.comlaw.gov.au/Series/C2004A02939>
Insurance Contracts Act 1984 (Commonwealth of Australia). Retrieved 20 March 2015
from: < http://www.austlii.edu.au/au/legis/cth/consol_act/ica1984220/notes.html>
Life Insurance Act 1995 (Commonwealth of Australia). Retrieved 20 March 2015 from:
< http://www.comlaw.gov.au/Series/C2004A04860>
Managed Investments Act 1998 (Commonwealth of Australia). Retrieved 20 March 2015
from: < http://www.comlaw.gov.au/Details/C2004C00970>
National Consumer Credit Protection Act 2009 (Commonwealth of Australia). Retrieved
20 March 2015 from: < http://www.comlaw.gov.au/Series/C2009A00134>
Superannuation Industry (Supervision) Act 1993 (Commonwealth of Australia).
Retrieved 20 March 2015 from: < http://www.comlaw.gov.au/Series/C2004A04633>
293
Appendix A3: Tiers of financial advice and education requirements
Regulatory Guideline 146 (RG146) (ASIC, 2012b, p.5, 61) provides for education level
requirements for two different types (or ‘tiers’) of financial advice, being:
Tier 1 products
All financial products except those listed under Tier 2. The Tier 1 education level is
broadly equivalent to the Diploma level under the Australian Qualifications Framework
Tier 2 products
General insurance products, except for personal sickness and accident; consumer credit;
insurance; basic deposit products; non-cash payment products; First Home Saver deposit
accounts. The Tier 2 education level is broadly equivalent to the Certificate III level
under the Australian Qualifications Framework.
294
Appendix A4: Recommendations from the PJC on Corporations and
Financial Services inquiry into proposals to lift the professional, ethical
and education standards in the financial services industry
(Extracted from Parliamentary Joint Committee on Corporations and Financial Services
Inquiry into proposals to lift the professional, ethical and education standards in the
financial services industry, Commonwealth of Australia, 2014, pp. xiii-xvi)
Recommendation 1
The committee recommends that the term 'general advice' in the Corporations Act 2001
be replaced with the term 'product sales information' to better reflect the nature of that
information.
Recommendation 2
The committee recommends that the term 'personal advice' in the Corporations Act 2001
be replaced with 'financial advice' to better reflect the nature of that advice.
Recommendation 3
The committee recommends that to provide 'financial advice' an individual must be
registered as a financial adviser.
Recommendation 4
The committee recommends that the government should bring forward legislation to
protect the titles 'financial adviser' and 'financial planner' and require that to be eligible
to use the title 'financial adviser', an individual must be registered as a financial adviser.
Recommendation 5
The committee recommends that the register of financial advisers:
•
include the information fields detailed in the government's announcement of the
register on 24 October 2014;
•
have a unique identifier that follows every individual adviser throughout their
career;
295
•
only list financial advisers on the register when a professional association (which
has been approved by the Professional Standards Councils) advises that the
adviser has completed the requirements of the Finance Professionals’ Education
Council approved professional year and passed the registration exam;
•
record any higher qualification awarded by a professional body to the adviser;
•
annotate any censure or limitation placed on a financial adviser by a professional
body, Australian Securities and Investments Commission or Australian Financial
Service Licence holder, and
•
highlight that an adviser is no longer authorised to provide financial advice if the
adviser has their membership of the nominated professional body suspended or
revoked.
Recommendation 6
The committee recommends that the government consider proposals to increase fees for
organisational licensees to reflect the scale of their financial advice operations, in the
context of a broader review of ASIC's fees and charges.
Recommendation 7
The committee recommends that:
•
the mandatory minimum educational standard for financial advisers should be
increased to a degree qualification at Australian Qualification Framework level
seven; and
•
a Finance Professionals' Education Council should set the core and sector
specific requirements for Australian Qualifications Framework level seven
courses.
Recommendation 8
The committee recommends that ASIC should only list a financial adviser on the register
when they have:
•
satisfactorily completed a structured professional year and passed the assessed
components; and
296
•
passed a registration exam set by the Finance Professionals' Education Council
administered by an independent invigilator.
Recommendation 9
The committee recommends that the government require mandatory ongoing
professional development for financial advisers that:
•
is set by their professional association in accordance with Professional Standards
Councils requirements; and
•
achieves a level of cross industry standardisation recommended by the Finance
Professionals' Education Council.
Recommendation 10
The committee recommends that the professional associations establish an independent
Finance Professionals' Education Council that:
•
is controlled and funded by professional associations which have been approved
by the Professional Standards Councils;
•
comprises a representative from each professional association (which has been
approved by the Professional Standards Councils), an agreed number of
academics, at least one consumer advocate, preferably two who represent
different sectors and an ethicist;
•
receives advice from ASIC about local and international trends and best practices
to inform ongoing curriculum review;
•
sets curriculum requirements at the Australian Qualifications Framework level
seven standard for core subjects and sector specific subjects (e.g. Self-Managed
Superannuation Fund services, financial advice, insurance/risk or markets);
•
develops a standardised framework and standard for the graduate professional
year to be administered by professional associations;
•
develops and administers through an external, independent invigilator a
registration exam at the end of the professional year; and
•
establishes and maintains the professional pathway for financial advisers
including recognised prior learning provisions and continuing professional
297
development.
Recommendation 11
The committee recommends that professional associations representing individuals in
the financial services industry be required to establish codes of ethics that are compliant
with the requirements of a Professional Standards Scheme and that are approved by the
Professional Standards Council.
Recommendation 12
The committee recommends that financial sector professional associations that wish to
have representation on the Finance Professionals' Education Council and to be able to
make recommendations to ASIC regarding the registration of financial advisers, should
be required to establish Professional Standards Schemes under the Professional
Standards Councils, within three years.
Recommendation 13
The committee recommends that any individual wishing to provide financial advice be
required to be a member of a professional body that is operating under a Professional
Standards Scheme approved by the Professional Standards Councils and to meet their
educational, professional year and registration exam requirements.
Recommendation 14
The committee recommends that government require implementation of the
recommendations in accordance with the transitional schedule outlined in the table on
page (xvi) of the report.
298
APPENDIX B
Chapter 3 Literature Review
299
Appendix B1: Definitions of trust and trust constructs found in the
literature
Literature source
Trust construct or definition
Rotter 1967, p.651; Rotter
1980, p.1
‘A generalised expectancy held by an individual that the word, promise,
oral or written statement of another individual or group can be relied on.’
Wrightsman and Baker 1969,
p.299
‘The extent to which people are seen as moral, honest, or reliable’.
Johnson-George and Swap
1982, p.1306
The element of risk involved when one must decide whether becoming
vulnerable or dependent is worth the possibility of a shared positive
outcome, despite a careful assessment of the other person's intentions,
capabilities, and motives.
Barber 1983, p. 164-165
Trust is a set of ‘socially learned and socially confirmed expectations that
people have of each other, of the organisations and institutions in which
they live, and of the natural and moral social orders that set the
fundamental understandings for their lives’.
Lewis and Weigert 1985, p.
971
The ‘undertaking of a risky course of action on the confident expectation
that all persons involved in the action will act competently and dutifully’.
Rempel, Holmes and Zanna
1985, p. 96
Trust is a construct with a number of elements: faith , dependability and
predictability.
Schurr and Ozanne 1985, p.
940
Belief that a party's word or promise is reliable and that a party will fulfill
his or her obligation in an exchange relationship.
Zaltman and Moorman 1988,
p. 17
An interpersonal or inter-organisational state that reflects the extent to
which parties can predict one another's behaviour; can depend on one
another when it counts; and have faith that the other will continue to act in
a responsive manner despite an uncertain future.
Anderson and Weitz 1989, p.
312
Belief that needs will be met in the future by the actions of another party.
Anderson and Narus 1990, p.
45
‘the firm’s belief that another company will perform actions that result in
positive outcomes for the firm as well as not take unexpected actions that
result in negative outcomes’.
Crosby, Evans and Cowles
1990, p.70
Confident belief that a salesperson can be relied upon to behave in a
manner that will serve the long-term needs of the customer.
Moorman, Deshpande and
Zaltman 1993, p. 82
‘willingness to rely on an exchange partner in whom one has confidence’
Morgan and Hunt 1994, p. 23
‘…confidence in an exchange partner’s reliability and integrity.’
Fukuyama 1995, p. 26
The expectation of ‘regular, honest and cooperative behaviour based on
commonly shared norms’.
Hosmer 1995, p. 399
‘the expectation of ethically justifiable behaviour- that is, morally correct
decisions and actions based upon ethical principles of analysis’.
Mayer, Davis and Schoorman
1995, p.712
‘the willingness of a party to be vulnerable to the actions of another party
based on the expectation that the other will perform a particular action
important to the trustor, irrespective of the ability to monitor or control that
other party’
300
McAllister 1995, p. 25
‘the extent to which a person is confident in, and willing to act on the
basis of, the words, actions and decisions of another.’
Robinson 1996, p.576
A person’s ‘expectations, assumptions, or beliefs about the likelihood that
another’s future actions will be beneficial, favourable, or at least not
detrimental to one’s interests’.
Christiansen and Devaney
1998, p.4
Frequent and honest communication plays a key role.
Zaheer, McEvily and Perrone,
1998, p.143
The expectation that an adviser can be relied upon to fulfill obligations
(Anderson and Weitz 1989), behave in a predictable manner and act
and negotiate fairly when the possibility of opportunism is present
(Anderson and Narus 1990, Bromiley and Cummings 1995) .
Johnson & Grayson 1998
Multidimensionality of trust- cognitive and affective trust are separate
dimensions of trust with unique antecedents and consequences for
relationships.
Lewicki, McAllister and Bies
1998, p. 439
‘Confident positive expectations regarding another’s conduct’.
Rousseau et al 1998, p.395
‘Psychological state comprising the intention to accept vulnerability based
upon positive expectations of the intentions or behaviour of another’.
Sharma and Patterson 1999,
p.155
Implies personal vulnerability through reliance on, or confidence in, the
financial adviser’s competence and ability to satisfy the long-term
interests of the client.
Johnson & Grayson in Swartz
& Iacobucci (Eds) 2000, p.
358 & p. 365
Four levels (generalized, system, process-based, and personality-based )
which vary in terms of relevance as the relationship progresses from
exploration to commitment.
Involves cognitive and affective indicators to provide a confident
expectation that all involved will behave competently and dutifully.
Sirdeshmukh, Singh and
Sabol 2002, p.17
The expectations held by trustor that the trustee is dependable and can
be relied on to deliver promises made.
Albaum and Young 2003,
p.255
Trust is ‘an evolving affective state including both emotional and cognitive
elements and emerges from the perceptions of competence and a
positive, caring motivation in the relationship partner to be trusted, and
functions to increase the propensity to manage risk in the relationship of
parties' shared environment’.
Boyd 2003, p. 398
Involves a belief in an agent’s competence, predictability, integrity and
benevolence.
Kirchmajer & Patterson 2003,
p.4
A multi–dimensional construct involving credibility and benevolence.
Based upon the ability of a financial planner to perform their role
effectively, based upon their experience, expertise and task-specific
competencies; with honesty and an intentional motive beneficial to the
client.
Weisinger 2004, p. 56
Based on communication.
Johnson & Grayson 2005,
p.501
Knowledge and emotion driven action, with willingness to rely on a
provider being based on reliable conduct and interactions.
Sharpe et al 2007, p.7
‘the belief that the financial planner can be relied on to behave in such a
manner that the long term interest of the client will be served (adapted
from Crosby et al 1990, Sharma & Patterson, 1999)’ .
301
Kohn 2008, p.17
‘Trust is an expectation about another’s actions, based on the
understanding that the other has the capacity to create mental models of
possible course of action, and to evaluate them within a framework that
can incorporate interests besides the other’s own.’
Wood, Boles, Johnston and
Bellenger 2008, p.264
‘An expectation by the buyer that the seller will engage in actions
supporting the buyer’s interests in that setting (Hardin 2002, Morgan and
Hunt 1994).’
Miranda and Klement 2009,
p.30
‘… the belief that a person or organization will honour promises and act in
ways that are expected of them’.
Guenzi and Georges 2010,
pp.117-118
An affective response significantly driven by benevolence, competence
and likeability/similarity; resulting in customer satisfaction, positive
attitudes, intentions and behaviours.
302
Appendix B2: An overview of the multidimensional construct of trust (Svensson, 2004, p.473)
303
APPENDIX C
Chapter 5 Methodology
304
Appendix C1: Client Questionnaire 1
CONSUMER SURVEY ON
FINANCIAL ADVICE AND FINANCIAL ADVISER BEHAVIOUR.
University of Wollongong postgraduate research student, Ms Michelle Cull, is
conducting research in the area of Financial Planning in order to improve the quality of
financial advice provided to consumers in Australia.
It would be greatly appreciated if you could assist by completing this questionnaire and
returning it to the University in the reply paid envelope by April 30, 2009.
The questionnaire will take about 10 minutes to complete. The information you provide
will be kept confidential, in accordance with University of Wollongong’s privacy policy.
Thankyou for your cooperation.
1.
Please indicate your age (in years) as at January 1, 2009:
2.
Please indicate if you are male or female (please tick):
Male
1
Female
2
3.
What is the postcode for the area you live in?
4.
What occupational group do you belong to? Please tick one box only.
Professional (eg. accountant, doctor, teacher)
1
Technician/Trades Worker (eg. mechanic)
2
Community/Personal Service (eg. police officer, travel agent)
3
Clerical and Administrative (eg. receptionist, data entry clerk)
4
Sales Worker
5
Machinery Operator/Driver
6
Labourer
7
Other, please specify: ________________________________
305
5.
Have you ever sought advice from a financial planner/adviser?
No
1
Proceed to question 14 on page 4.
Yes
2
Proceed to the next question.
6.
Please indicate the year you last sought advice (eg. 2007):
7.
What type of financial planner/adviser did you seek advice from?
Financial Planner/Adviser from a Dealer Group (eg. Mercer Wealth, Charter)
1
Independent Planner/Adviser (eg. Joe Smith - Independent Financial Adviser)
2
Financial Planner/Adviser from a bank (eg. Westpac, ANZ, ING)
3
Financial Planner/Adviser from a superannuation fund (eg. REST)
4
Financial Planner/Adviser from an Insurance company (eg. NRMA)
5
Don’t know
6
Other – please specify: ____________________________________
8.
Did your financial planner/adviser provide you with an Australian Financial
Services Licence (ASFL) number?
Yes
No
Don’t know
1
9.
3
Did your financial planner/adviser provide you with a Financial Services Guide
(FSG)?
Yes
No
Don’t know
1
10.
2
2
3
How did you pay your financial planner/adviser?
No payment required
1
Retainer fee
2
Commission (s) earned from products
3
Don’t know
4
Other – please specify:__________________________________
306
11.
12.
Did you receive a Statement of Advice?
Yes  I read it thoroughly
1
I had a quick read
No 
4
(Go to Question 13)
2
I did not read it
3
Was the Statement of Advice you received (tick one box only):
Useless
13.
1
Useful but not relevant
2
Useful and relevant
3
Place a tick in the column that best corresponds with the behaviour of your
most current financial planner/adviser.
Strongly
Disagree 1
Disagree 2
Reliable
Honest
Responsible
Caring
Professional
Patient
Flexible
Trustworthy
Marketing
Oneself
Listening
Communicative
Empathy
Tactful
Friendly/
Approachable
Relationship
building
307
Neutral 3
Agree 4
Strongly
Agree 5
Please proceed to Question 15.
14.
(Only to be answered if you answered “No” to Question 5)
Why have you chosen not to seek financial advice from an authorised
planner/adviser? Please tick (you may tick more than one box).
Have not thought about it
1
Not enough time
1
Don’t know how to find one
1
Not enough money to invest
1
Too expensive
1
Don’t need advice
1
Don’t trust them
1
Other, please state: ___________________________
15.
In your opinion, is financial advice influenced by the commissions a financial
planner/adviser may receive from investment products?
Strongly Disagree
1
16.
Disagree
Neutral
2
3
Agree
Strongly Agree
4
5
(Optional) Please use the space provided to add any additional information you feel
is relevant to the questionnaire.
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Thankyou for your time and assistance in filling out this questionnaire.
Please place completed questionnaire inside envelope provided and post to address
on envelope. No stamp is required.
Your cooperation is appreciated.
308
Appendix C2: Participant Information Sheet - Client Questionnaire 1
PARTICIPATION INFORMATION SHEET
CONSUMER SURVEY ON
FINANCIAL ADVICE AND FINANCIAL ADVISER BEHAVIOUR.
Dear participant,
I am a postgraduate research student in the Faculty of Commerce (School of Accounting
and Finance) at the University of Wollongong and am conducting research in the area of
Financial Planning in order to improve the quality of financial advice provided to
consumers in Australia.
It would be greatly appreciated if you could assist by completing this questionnaire and
returning it to the University in the reply paid envelope by April 30, 2009.
The questionnaire will take about 10 minutes to complete.
Participation in this research is completely voluntary and information you provide will
be kept confidential, in accordance with University of Wollongong’s privacy policy. In
order to ensure the utmost privacy, the questionnaire is anonymous. An identification
number has been allocated to each participant for follow up procedures only and will not
be disclosed to anyone other than for the purpose of this research.
The information collected will form part of postgraduate student research and may also
be reported in the form of conference presentations, academic journal publications
and/or formal reports to government or professional bodies.
If you have any further questions about this research, please contact the University of
Wollongong on (02) 42213555.
This research has been approved by the Human Research Ethics Committee. If you have
any concerns or complaints regarding the way in which research is or has been
conducted, you should contact the University of Wollongong Ethics Officer on (02)
42214457 and quote reference HE08/321.
Thankyou for your cooperation.
Yours Sincerely,
Michelle Cull
Postgraduate Research Student
School of Accounting and Finance
Faculty of Commerce - University of Wollongong
309
Appendix C3: Observational Studies Procedure
1. The questionnaire was given to the respondent in an envelope.
2.
The time they started (and later finished) was noted.
3. Probing questions about the introduction were asked, such as:
a. Does the introduction provide credibility?
b. What does the title of the survey mean to you?
c. Are you satisfied that the information you provide will be kept confidential?
d. If you received this in the mail, would you want to respond? Why or Why
not?
4. Handling of the form was observed and hesitations noted.
5. As respondents moved through the form, they were asked:
a. What did you take this to mean?
b. What is going through your mind?
c. Is it easy to understand what the question is asking?
d. What do you think others might take this to mean?
6. When respondents highlighted an error or misunderstood the intended meaning of a
question, they were asked how they thought it could be improved.
7. Particular attention was paid to question 10 (later becoming question 13). The
respondent was asked what meaning they applied to each of the listed behaviours
and asked to give examples of how this behaviour was or was not displayed by their
planner/adviser. This was used to determine if respondents gave each word the same
meaning as what was intended.
310
Appendix C4: Coding Sheet for Client Questionnaire 1
CODEBOOK FOR CLIENT SURVEY 1
Survey
Variable
SPSS Variable Name
Coding
Coding instructions and notes
Identification number
ID
number assigned to each survey
Each survey to be given a consecutive identifying
Ref
Respons
e number
number for cross reference
1
Age
Age
Enter age as stated
2
Gender
Gender
1= Male
2=Female
3=Queer
3
Postcode
Postcode
Enter four digit code as stated
4
Occupational Group
OccupationGrp
1= Professional eg. Accountant, Doctor, Teacher
Recoded to ABS category
2= Technician/Trades Worker eg. Mechanic
Recoded to ABS category
3= Community/Personal Service eg. Police Officer,
Recoded to ABS category
travel agent
4= Clerical and Administrative eg. Receptionist, data
Recoded to ABS category
entry clerk
5= Sales Worker
Recoded to ABS category
6= Machinery Operator/Driver
Recoded to ABS category
7= Labourer
Recoded to ABS category
8= Pensioner
Recoded to ABS category
9= Student
Recoded to ABS category
10 = Other not specified
Recoded to ABS category
11 = Govt welfare
Recoded to ABS category
311
12 = Health
Recoded to ABS category
13 = Child care
Recoded to ABS category
14=housewife/home duties
Recoded to ABS category
15=Retired
Recoded to ABS category
16=IT programmer
Recoded to ABS category
17=Aged Carer
Recoded to ABS category
18=Grazier
Recoded to ABS category
19=Traffic Controller
Recoded to ABS category
20= Employee Relations
Recoded to ABS category
21= Medical Pensioner
Recoded to ABS category
22=Road Transport
Recoded to ABS category
23=Cleaner
Recoded to ABS category
24=cook
Recoded to ABS category
25=Primary Producer
Recoded to ABS category
26=Miner
Recoded to ABS category
27=Fisherman (Owner Operator)
Recoded to ABS category
28=Self Employed Multi Skills
Recoded to ABS category
29=Flight Attendant
Recoded to ABS category
30= Small business entrepreneur
Recoded to ABS category
31=Research Assistant
Recoded to ABS category
32=Hospitality
Recoded to ABS category
33=Security Officer
Recoded to ABS category
34= Liquor Manager
Recoded to ABS category
The above raw codes recoded to the ABS based
categories outlined below:
ABS Based Category Codes
Raw Codes
1 = Professionals (incl Managers)
1, 12, 16, 18, 20, 34
312
5
6
Sought advice from FP
Year last sought
Soughtadvice
2=Technicians and Trades Workers
2, 24, 29
3= Community and Personal Service Workers
3,13,17, 32,33
4=Clerical And Administrative Workers
4, 31
5=Sales Workers
5
6=Machinery Operators and Drivers
6,22, 26
7=Labourers
7, 19, 23
8=Retired/Pensioner
8,15
9=Government Welfare
11, 21
10=Student
9
11=Home Duties
14
12=Not specified
10
14=Entrepreneur
28, 30
15=Farmer
18, 25, 27
1= no
Go to Q 15
2= yes
Continue
YearSoughtAdvice
Enter four digit year as stated
TypeofFP
1= Dealer Group
advice
7
Type of Financial
eg. Mercer Wealth, Charter
Planner
2= Independent
3= Bank
eg. Westpac, Commonwealth
4= Superannuation Fund
eg. REST
5= Insurance Company
eg. NRMA
6= Don't know
7= Office Protective Commission
8= AMP
Recode to 1
9=Bridges
Recode to 1
313
8
AFSL provided
AFSLprovided
10=Dealer Group and Bank
Recode to ‘Combination’
11=Accountant
Recode to 2
12=Free service
Recode to 6
13=Dealer Group, Bank, Independent and Super fund
Recode to Combination
14= Dealer group and Bank
Recode to Combination
15=Accountant/Independent FP
Recode to 2
16=Bank and Super fund
Recode to Combination
17=State Super
Recode to 4
18= Independent and Bank
Recode to Combination
1= Yes
2= No
3= Don't know
9
FSG provided
FSGprovided
1= Yes
2= No
3= Don't know
10
Type of Payment
PaymentType
1= No payment
2= Retainer
3= Commission
4 = Don't know
5 = Retainer and Commission
6 = Flat fee
11
Did they receive an
ReadSOA
1= Read SOA thoroughly
SOA
2= Read SOA quickly
3 = Did not read SOA
12
Usefulness of SOA
SOAusefulness
4 = No
Go to Q14
1= Useless
Leave blank if not answered
314
2= Useful but not relevant
3= Useful and relevant
13a
Behaviour of FP
Reliable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13b
Honest
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13c
Responsible
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13d
Caring
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13e
Professional
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
315
13f
Patient
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13g
Flexible
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13h
Trustworthy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13i
Marketing Oneself
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13j
Listening
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13k
Communicative
1= Strongly Disagree
2= Disagree
316
3= Neutral
4= Agree
5= Strongly Agree
13l
Empathy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13m
Tactful
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13n
FriendlyApproachable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13o
RelationshipBuilding
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
14a - e
Why has respondent
WhyNoAdviceSought
1= Have not thought about it
Only answered by those who responded "no" to Q5
2= Not enough time
Can choose more than one (up to 5)
chosen not to seek
financial advice?
317
3= Don't know how to find one
4= Not enough money to invest
5= Too expensive
6= Don't need advice
7= Don't trust them
8= Manage my own finances well
9= Waiting for appointment
10= Advice from family members
15
Influence of
InfluenceOfCommissi
commissions on
ons
1= Strongly Disagree
financial advice
provided
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
318
Appendix C5: Coding of Open- Ended/Free Responses (Q16): Client
Questionnaire 1
Code
Description
1
Good advice received from adviser
2
Can get advice for free from internet/books/magazines/commonsense
3
Upfront paid advice is reliable/good advice
4
There is limited transparency with how commissions are paid to FPs
5
Bad/unsuitable advice received from adviser
6
High costs
7
Will seek advice when situation requires it
8
Have been lucky with own property investment/s
9
Not used/blank/miscoded
10
Don’t trust them
11
Adviser only in it for themselves/like a salesman
12
Banks do not provide a positive experience/result
13
Best for accountant to provide advice
14
Should be more qualified
15
FPs are gambling with your money
319
Appendix C6 : Participant Information Sheet: Client Questionnaire 2/
Client Interview
Human Research Ethics Committee
Office of Research Services
Participant Information Sheet (General)
Project Title: The changing role of trust in personal financial planning.
Who is carrying out the study?
You are invited to participate in a study conducted by chief investigator, Michelle Cull,
PhD candidate in the School of Business. The research will form the basis of her PhD
thesis at the University of Western Sydney under the supervision of Professor Gabriel
Donleavy.
What is the study about?
The purpose is to investigate the changing role of trust in the relationship between
client and adviser.
What does the study involve?
The study involves completion of a short questionnaire about your experience/s with
financial advisers. Even if you have never been to a financial adviser, your feedback is
helpful in understanding your perceptions of financial advisers.
How much time will the study take?
The study should take between 10 to 20 minutes to complete.
Will the study benefit me?
The study may not have any immediate benefits for you but by participating you may
indirectly benefit from an improved professional relationship with future financial
advisers and improved quality of financial advice.
Will the study involve any discomfort for me?
No, other than a small sacrifice of your time.
How is this study being paid for?
The study is being funded as part of the normal provisions for PhD students.
Will anyone else know the results? How will the results be disseminated?
All aspects of the study, including results, will be confidential and only the researcher/s
will have access to information you provide. Results will be disseminated as part of a
PhD thesis and a report of the study may be submitted for publication but individual
participants will not be identified.
Can I withdraw from the study?
Participation is entirely voluntary: you are not obliged to be involved and - if you do
participate -you can withdraw at any time without giving any reason and without any
consequences.
Can I tell other people about the study?
320
Yes, you can tell other people about the study by providing them with the chief
investigator's contact details. They can contact the chief investigator to discuss their
participation in the research project and obtain an information sheet.
What if I require further information?
When you have read this information, MICHELLE CULL will discuss it with you further
and answer any questions you may have. If you would like to know more at any stage,
please feel free to contact her on 02 46203519.
What if I have a complaint?
This study has been approved by the University of Western Sydney Human Research
Ethics Committee.
The Approval number is H9490.
If you have any complaints or reservations about the ethical conduct of this research,
you may contact the Ethics Committee through the Office of Research Services on Tel
+61 2 4736 0229 Fax +61 2 4736 0013 or email humanethics@uws.edu.au.
Any issues you raise will be treated in confidence and investigated fully, and you will be
informed of the outcome.
If you agree to participate in this study, you may be asked to sign the Participant
Consent Form.
321
Appendix C7: Script for client invite to complete questionnaire 2
UWS Research Project on ‘The Changing Role of Trust in Personal Financial Planning’
Dear Sir/Madam,
You are invited to participate in a study I am conducting as a PhD candidate at the University of
Western Sydney, to investigate the changing role of trust in the relationship between client and
financial adviser.
The study involves completion of a short questionnaire about your experience/s with financial
advisers. Even if you have never been to a financial adviser, your feedback is still helpful in
understanding perceptions of financial advisers. Any information you provide will be kept
confidential and the completed questionnaire will remain anonymous.
Your feedback will be invaluable to my research and I would be much appreciative if you were
able to participate. Once you have read the attached participant information sheet, please
complete and return the questionnaire in the reply-paid envelope provided.
If you would like to also participate in the interview phase of this research project, please
complete the ‘Interest in interview participation’ section below and return with your questionnaire.
Many thanks for your assistance in this important research project.
Kind regards,
Michelle
Michelle Cull
PhD Candidate- School of Business
University of Western Sydney
Locked Bag 1797 Penrith NSW 2751
Phone: 02 4620 3519
Email: m.cull@uws.edu.au
Interest in interview participation
If you are interested in participating in the interview phase of this research project, please enter
your name and preferred contact details below and return with your questionnaire in the reply
paid envelope provided. Note that your contact details will not be stored with or linked with your
questionnaire results in any way.
Name: _______________________________________________________________
Preferred contact method (please complete one or more from the choices below):
Phone: _______________________________________________________________
Email: ________________________________________________________________
Postal
Address:_____________________________________________________________________
Thankyou for your interest. You will soon receive more information about the interview phase of the project
and how you can participate.
322
Appendix C8: Client Questionnaire 2
THE CHANGING ROLE OF TRUST IN PERSONAL FINANCIAL PLANNING
Before completing this questionnaire, please ensure you have read and understood the attached
Participant Information Sheet. Once completed, please return to the University in the reply paid
envelope by [insert date]. No stamp is required. Thank you for your participation and cooperation.
1.
Place a tick in the column that best indicates the extent to which you agree or disagree with the
following statements.
Strongly
Disagree
1
Disagree
Neutral
Agree
2
3
4
Strongly
Agree
5
a. Financial planners are trustworthy.
b. A financial planner with less than 10 years of
experience is more trustworthy than one with more
than 10 years of experience.
c. Large firms that offer financial advice are more
trustworthy than small firms that offer financial
advice.
d. More importance should be placed on technical
competence than ethical values when choosing a
financial planner.
e. The public reputation of a firm is important when
choosing a financial planner you can trust.
f. I would trust a financial planner more if we shared
the same personal and/or intellectual interests.
g. Government legislation banning commissions
makes financial planners more trustworthy.
h. Qualifications such as a university degree make a
financial planner more trustworthy.
i. The Global Financial Crisis (GFC) increased my trust
in financial planners.
j. I would prefer to pay a flat fee for advice rather than
have a financial planner rewarded by commissions
from companies whose products they recommend.
k. Financial planners are more trustworthy now than
they were before the Global Financial Crisis (GFC).
l. Financial planners who are members of a
recognised professional body are more trustworthy.
m. I could not trust a financial planner if I didn’t agree
with their personal values.
n. I find it easy to trust people.
2.
Have you ever sought advice from a financial planner/adviser?
3.
No 1
Proceed to question 17 on page 5.
Yes
Please indicate the year you last sought advice (eg. 2010):
323
2
Proceed to the next question.
4.
What type of financial planner/adviser did you seek advice from?
Financial Planner/Adviser from a Dealer Group (eg. Mercer Wealth, Charter)
1
Independent Planner/Adviser (eg. Joe Smith - Independent Financial Adviser)
2
Financial Planner/Adviser from a Bank (eg. Westpac, ANZ, ING)
3
Financial Planner/Adviser from a Superannuation fund (eg. REST)
4
Financial Planner/Adviser from an Insurance company (eg. NRMA)
5
Don’t know
6
Other – please specify: ____________________________________
5. How many years have you spent with your most recent financial planner/adviser?
1-2 years
3-5 years
6-9 years
10 years or more
6. How many financial planners/advisers did you use before your current one?
None
One
Two
Three or more
7. Did your most recent financial planner/adviser provide you with an Australian Financial Services
Licence (ASFL) number?
Yes
No
Don’t know
1
2
3
8. Did your most recent financial planner/adviser provide you with a Financial Services Guide (FSG)?
Yes
No
Don’t know
1
9.
2
3
How did you pay your financial planner/adviser? (tick all that are appropriate)
No payment required
1
Fees
2
Upfront commission (s) earned from products
3
Trailing commission (s) earned from products
4
Don’t know
5
Other – please specify:__________________________________
324
10.
Did you receive a Statement of Advice?
Yes 
If yes, did you: Read it thoroughly
No 
11.
4
1
Read it quickly
2
Not read it
(If no, go to Question 12)
Was the Statement of Advice you received (tick one box only):
Useless
12.
1
1
Useful but not relevant
2
Useful and relevant
3
Place a tick in the column that best corresponds with the behaviour exhibited by your most
current financial planner/adviser.
a. Reliable
Strongly
Disagree
1
Disagree
2
Neutral
3
Agree
4
Strongly
Agree
5
b. Honest
c. Responsible
d. Caring
e. Professional
f. Patient
g. Flexible
h. Trustworthy
i.
Marketing Oneself
j.
Listening
k. Communicative
l.
Empathetic
m. Tactful
n. Friendly/Approachable
o. Relationship building
p. Ethical
q. Acting with Integrity
r. Dependable
s. Nurturing
t. Benevolent
13. Place a tick in the column that best corresponds with the standard of skill exhibited by your most
current financial planner/adviser.
a. Time Management
Very Poor
1
325
Poor
2
Satisfactory
3
Good
4
Excellent
5
3
b. Verbal Communication
c. Written Communication
d. Problem Solving
e. Technical Knowledge
f. Numeracy
g. Social/Ethical Awareness
14. Are you aware of the qualifications of your current financial planner/adviser?
Yes
No
1
2
15. To your knowledge, is your financial planner/adviser a member of a professional body?
If yes, please list the name of the professional body below:
Yes 1
No 2 Don’t know 3
____________________________________________
16. Place a tick in the column that best indicates the extent to which you agree or disagree with the
following statements as they relate to you and your financial adviser in a financial advice context.
Strongly
Disagree
1
a. My adviser has proven to be trustworthy and I am
willing to let him/her engage in financial activities on
my behalf that I do not completely understand.
b. I feel comfortable sharing personal information
with my adviser.
c. Though times may change and the future is
uncertain, I know my adviser will always be ready and
willing to offer me strength and support.
d. I am never certain that my adviser won’t do
something with my financial assets that I dislike.
e. My adviser is very unpredictable. I never know how
he/she is going to act.
f. I feel very uncomfortable about the advice my
adviser provides for my future.
g. I have found that my adviser is dependable,
especially in helping meet my goals.
h. My adviser behaves in a very consistent manner.
i. When making an important financial decision in a
situation I have never encountered before, I know my
adviser would be concerned about my welfare.
j. I can rely on my adviser to do the things he/she has
promised to do.
k. When my adviser explains things that may seem
rather unlikely, I am confident that he/she is telling
the truth.
326
Disagree
Neutral
Agree
2
3
4
Strongly
Agree
5
l. I am certain that my adviser would not be involved
in fraudulent activities.
m. My adviser does a good job of explaining his/her
suggestions for achieving my financial goals.
n. My adviser provides me with timely information
regarding new investments and/or how changes in tax
laws may affect me.
o. My adviser shows a genuine care and interest in my
personal circumstances.
p. My adviser has performed well in providing me
with financial advice best suited to my circumstances.
Please proceed to Question 18.
17.
(Only to be answered if you answered “No” to Question 2)
Why have you chosen not to seek financial advice from an authorised planner/adviser?
(You may tick more than one box).
Have not thought about it
1
Not enough time
2
Don’t know how to find one
3
Not enough money to invest
4
Too expensive
5
Don’t need advice
6
Don’t trust them
7
Other, please state: ___________________________
18.
Please indicate your age (in years) as at January 1, 2012:
19.
Please indicate if you are male or female:
327
Male
1
Female
2
20.
What is your main occupational group? Please tick one box only.
Professional (eg. accountant, doctor, teacher)
1
Technician/Trades Worker (eg. mechanic)
2
Community/Personal Service (eg. police officer, travel agent)
3
Clerical and Administrative (eg. receptionist, data entry clerk)
4
Sales Worker
5
Machinery Operator/Driver
6
Labourer
7
Other, please specify: ________________________________
21. What is the postcode for the area you currently live?
22. Please use the space below to add any additional information you feel is relevant to the research.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
328
Appendix C9: Coding Sheet for Client Questionnaire 2
Survey
Variable
Ref
Respons
SPSS Variable
Coding
Coding instructions and notes
number assigned to each survey
Each survey to be given a consecutive
Name
Identification number
ID
e
identifying number for cross reference
number
1a
Trustworthy
FPsTrustworthy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1b
Experience
10yrexp
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1c
Large Firms More
largefirms
1= Strongly Disagree
Trustworthy
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1d
More importance on
TechImportant
1= Strongly Disagree
technical competence
2= Disagree
329
3= Neutral
4= Agree
5= Strongly Agree
1e
Reputation important
reputation
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1f
Trust more if shared
interests
1= Strongly Disagree
same personal
interests
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1g
Govt banning
govt
1= Strongly Disagree
commissions makes
Fps more trustworthy
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1h
Quals more
quals
1= Strongly Disagree
trustworthy
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
330
1i
GFC increased trust
GFCinc
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1j
Prefer flat fee
FlatFee
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1k
Fps more trustworthy
GFC trust
1= Strongly Disagree
now than before GFC
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1l
Members of prof body
ProfBody
1= Strongly Disagree
are more trustworthy
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1m
Could not trust if didnt
PersValues
1= Strongly Disagree
agree with personal
values
2= Disagree
3= Neutral
331
4= Agree
5= Strongly Agree
1n
Easy to trust people
EasyTrust
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
2
Sought advice from
Soughtadvice
1= no
Go to Q 17
2= yes
Continue
FP
3
Year last sought
YearAdvice
Enter four digit year as stated
FP Type
1= Dealer Group
advice
4
Type of Financial
eg. Mercer Wealth, Charter
Planner
2= Independent
3= Bank
eg. Westpac, Commonwealth
4= Superannuation Fund
eg. REST
5= Insurance Company
eg. NRMA
6= Don't know
7= Office Protective Commission
8= Dealer Grp+ Independent+Bank
9= Provided by employer for redundancy
10=
5
Yrs with current
YrsAdviser
1= 1-2 yrs
Adviser
2 = 3-5 yrs
3 = 6-9 yrs
332
4 = 10 yrs or more
6
Planners before
PrevAdvisers
1= none
current
2=1
3=2
4 = three or more
7
AFSL provided
AFSL
1= Yes
2= No
3= Don't know
8
FSG provided
FSG
1= Yes
2= No
3= Don't know
9
Type of Payment
Payment
1= No payment
2= Fees
3= Upfront commission
4 = Trailing commission
5 = Don’t know
6 = Fees+upfront commission+trailing commission
7 = Fees+trailing commission
8 = Upfront+trailing commission
10
Did they receive an
ReadSOA
1= Read SOA thoroughly
SOA
2= Read SOA quickly
3 = Did not read SOA
4=No
11
Usefulness of SOA
SOAusefulness
5= Don’t know if recd SOA
Go to Q12
1= Useless
Leave blank if not answered
333
2= Useful but not relevant
3= Useful and relevant
12a
Behaviour of FP
Reliable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12b
Honest
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12c
Responsible
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12d
Caring
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12e
Professional
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
334
12f
Patient
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12g
Flexible
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12h
Trustworthy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12i
Marketing Oneself
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12j
Listening
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12k
Communicative
1= Strongly Disagree
2= Disagree
335
3= Neutral
4= Agree
5= Strongly Agree
12l
Empathy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12m
Tactful
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12n
FriendlyApproacha
1= Strongly Disagree
ble
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12o
RelationshipBuildin
1= Strongly Disagree
g
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12p
Ethical
1= Strongly Disagree
2= Disagree
336
3= Neutral
4= Agree
5= Strongly Agree
12q
Integrity
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12r
Dependable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12s
Nurturing
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
12t
Benevolent
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13a
Skill of FP
TimeMgt
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
337
5= Strongly Agree
13b
Verbal
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13c
Written
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13d
ProbSolv
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13e
Technical
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13d
Numeracy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
13e
SocialEthical
1= Strongly Disagree
338
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
14
Qualifications of FP
FPQuals
1= Yes
2 = No
15a
Member of Prof Body
ProfBody
1=Yes
2=No
3=Don't know
15b
Name of Prof Body
NameProfBody
1= ICAA/CA
Here respondent confused with quals and
prof body
2= FPA
3= CPA
4=AFA
6=Dont know
16a
Proven trustworthy
ProveTrustworthy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16b
Comfortable sharing
Comfortable
1= Strongly Disagree
personal information
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
339
16c
Support in times of
TimesChange
1= Strongly Disagree
change
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16d
Never certain wont do
Dislike
1= Strongly Disagree
something I dislike
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16e
Unpredictable
Unpredictable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16f
Uncomfortable
Uncomfortable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16g
Dependable
AdviserDepend
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
340
16h
Consistent
Consistent
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16i
Welfare
Welfare
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16j
Rely
Rely
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16k
Confident
Confident
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16l
Fraud
Fraud
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16m
Good job explaining
GoodJob
1= Strongly Disagree
suggestions for goals
341
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16n
Timely information
Timely
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16o
Genuine care and
Care
1= Strongly Disagree
interest
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
16p
Performed well
Performed
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
17a - e
Why has respondent
WhyNoAdviceSoug
chosen not to seek
ht
1= Have not thought about it
Only answered by those who responded "no"
to Q2
financial advice?
2= Not enough time
Can choose more than one (up to 5)
3= Don't know how to find one
4= Not enough money to invest
5= Too expensive
342
6= Don't need advice
7= Don't trust them
8= Manage my own finances well
9= Mortgage first before thinking of other investments or retirement
10= Leave finances up to partner
18
Age
Age
Enter age as provided
19
Gender
Gender
1= Male
2= Female
20ab
Occupational Group
Occupation
1= Professional eg. Accountant, Doctor, Teacher
Recoded to ABS category
2= Technician/Trades Worker eg. Mechanic
Recoded to ABS category
3= Community/Personal Service eg. Police Officer, travel agent
Recoded to ABS category
4= Clerical and Administrative eg. Receptionist, data entry clerk
Recoded to ABS category
5= Sales Worker
Recoded to ABS category
6= Machinery Operator/Driver
Recoded to ABS category
7= Labourer
Recoded to ABS category
8= Pensioner
Recoded to ABS category
9= Student
Recoded to ABS category
10 = Other not specified
Recoded to ABS category
11 = Govt welfare
Recoded to ABS category
12 = Health
Recoded to ABS category
13 = Child care
Recoded to ABS category
14=Retired
Recoded to ABS category
15=Farm Business
Recoded to ABS category
16=Self-employed
Recoded to ABS category
17= Retail
Recoded to ABS category
The above raw codes recoded to the ABS based categories
343
outlined below:
ABS Based Category Codes
Raw Codes
1 = Professionals (incl Managers)
1, 12, 17
2=Technicians and Trades Workers
2
3= Community and Personal Service Workers
3, 13
4=Clerical And Administrative Workers
4
5=Sales Workers
5
6=Machinery Operators and Drivers
6
7=Labourers
7
8=Retired/Pensioner
8, 14
9=Government Welfare
11
10=Student
9
11=Home Duties
21
Postcode
Postcode
12=Not specified
10
14=Entrepreneur
16
15=Farmer
15
Enter four digit code as stated
344
Appendix C10: Coding of Open-ended/Free responses: Client
Questionnaire 2
Question 22
1 = Good advice received from my FP
2 = It has taken time to pluck up courage to see a FP
3= Stories friends told us previously put us off seeking advice.
4=The advice I have received from my planners has left me in a quite comfortable position.
5=I’m self-funded retired
6=Financial info from press and internet brokers.
7=Fees are very high
8=Banks appear to have wider knowledge of investment opportunities but expensive
9= The question you ask me - you sent to me- an accountant demonstrate you do not have the faintest idea
how the rip off occurs at any salesman -that's all they are - in category of 2nd hand car salesman. 90% have
no formal qualifications whatsoever - left school aged 15/16...worked in whole variety of selling job.
Fundamentally they are LAZY - Difficult problem - they run. The stars are amongst are driven by ego and
greed and congratulate themselves on how commission they earn. They get a gold star even from their own
association. They have not the faintest regard for their client. They see them once/sign them up/then live on
trailing commission. The whole "planning" industry is driven by banks and insurance companies who give
out licences like confetti-so called representatives. The insurance companies LOST life insurance because
of their greed of cheating people with salesman selling door to door on huge commissions. Ultimately the
people rebelled but luckily compulsory superannuation was invented and what a pot of gold that was to
Insurance Companies and Banks. Howard stood by and encouraged the banks and insurers to rip off the
super guarantee. Do your research with cold hard figures. I have a client who pays $8000 dollars fees for a
pension of $40000p.a. PLUS she pays them a guarantee fee. That is 20% margin a fantastic margin for any
business. I have another client who lost $32000 Tax Refund because adviser told her the opposite advice to
what she should have done. Look at the figures the more they lose of a client's money - the more money
they make - they then take people savings from other accounts plus more commission to cover up the
losses. Look at their 5 year average AFTER fees/AFTER TAX/it is appalling - the last 20 years. {on PIS}
10= You are on the wrong track. You don’t realise so called F Plan - are in the main uneducated, lazy
salesman - male or female - they are driven by ego-they can’t spell 'ethics'. It is the Directors NOT the foot
soldiers who are the thieves. For 200 years world-wide stockbrokers, bankers, accountants never worked on
commissions but insurance companies always did so - a big reward for a big con. All your questions are fluff
on the top. Get down to the hidden commissions not revealed. Go to case studies, collate and dissect
hundreds of failures. AUSTRALIA is known the world over as the best con artists in the world. You sent this
to an Accountant - all accountants have a fundamental dislike to all thieves and deceitful salesman.
Accountants have never been allowed Commissions. Good accountants have not got time to chase stock
markets-leave that to stockbrokers for last 200 years. Accountants are bean counters - I am one of them - by
their nature they are not risk takers. Very few own shares themselves! They are not competitors to Fin Plan
Salesman. Accountants nurture clients for years - families of 2-3 generations. Fin Plan. - hit and run. Please
read my comments. Come down out of the IVORY Tower and get down to the real world of greed and
deceit. Nowhere in the paper have you addressed who are the targets - why are con artists so successful.
345
Because: They are bludging on people 65 years plus. People that age have a relaxed mind set, They don’t
want 20 pages of a PDS - they want honesty and care. - Every advice should be monitored by a Social Type
worker to see if the client has the faintest idea of what they were sold. "Social" monitors should
wander/select at random and act on behalf of Government to check the verbose lies and risks not disclosed
by salesman. The TAX office is so bluntly rude and offensive threatening letters sent to retirees. The
pensions they get is THEIR OWN MONEY. INSULTING THREATENING LETTERS PUT OUT OF TAX
OFFICE every day - they have a mindset every one is a thief - lazy public servants - scared of big tax
dodges so they hammer the little people. 65-70 years old are NOT TAX dodges - they are looking for peace
and good health and bugger the figures - Great says the "financial planner" - here's another sucker!! Ill bleed
him for everything I can squeeze out of him and I’ll never see them again but Ill set him up for anything from
which I get a trailing commission - until he dies I am on a winner and I don’t have to front him again. It is a
culture of greed sponsored and glorified by the Insurance Companies and banks sucking money by stealth
out of old people pockets.
11= I can deal with my own investments without paying someone else to lose my money
12= the role of ASIC and APRA as regulatory bodies
13= Don’t care about relationship building or nurturing or benevolence in Q12
14=We find most financial advisers act with more self-interest in products offered and are rarely proactive in
advising market trends
15= Do not have all financial statements e.t.c as husband manages paperwork.
16=Sometimes feel that the investments recommended are also what is best for his company
17= Currently do not have a financial planner
18=The information provided only (as requested) pertains to my current financial adviser. My previous
financial adviser was responsible for very bad financial and professional advice. Their engagement process
and advice has given me a high distrust of the industry as a whole.
346
Appendix C11: Sample of stamped C5 Envelope (Client Questionnaire 2)
347
Appendix C12: Unaddressed Mail Service (UMS) details (client
questionnaire 2)
Unfortunately the UMS service was unsuccessful in delivering all 1,381 questionnaires as
originally intended. Bundles of unopened questionnaires were returned to the University
undelivered. In addition, these bundles were sent back from various delivery points/mail
distribution centres stating “Please show a return address on mail you post” as shown in
Figure C12-1 below.
Figure C12-0-1 Sample of returned UMS mail
The returned mail raised some concerns as due to UMS rules, no return address was allowed
to be included on the envelope (hence the reduced postage costs as the service does not
include a ‘return to sender’ service). Telephone and email correspondence with the NSW
Commercial Sales Executive (Local Government/Education and Not for Profit) at Australia
Post in addition to the UWS Logistics Manager revealed that a number of delivery points had
misunderstood that the mail was lodged via UMS and instead processed the mail as though it
were regular mail. A thorough investigation as to why the mail was not processed as intended
348
via the unaddressed delivery service was undertaken by the Unaddressed Booking Unit of
Australia Post in September 2012, resulting in the following outcome (advised via email
dated 29 September 2012):
•
A booking of this type does not fall into the normal guidelines for UMS.
•
The relatively small number of delivery points (most UMS deliveries are on a much
larger scale – for example 200,000 delivery points).
•
The ‘design’ of the items ‘looked’ like a normal envelope thus entering the normal
addressed mail delivery network causing items to be returned back (noting that much
UMS mail is in the format of a brochure, pamphlet or flyer).
•
The postage paid imprint may have also been a factor as although permitted under
UMS rules, unaddressed mail does not usually have a postage paid imprint.
It was not possible for each individual article involved with UMS to be tracked, however the
extremely low response rate seems to indicate that it was possible that the majority of items
were not delivered as requested.
349
Appendix C13: ASIC Australian Financial Service Licence Authorisations
FIN - Provide financial product advice
GENFIN - Provide general financial product advice only
WSALE - Provide general financial product advice to wholesale clients
DEAL - Deal in a financial product
ARRANGE - Arrange for a person to deal in a financial product
ISSUE - issue apply for acquire vary or dispose of a financial product
APPLY - apply for acquire vary or dispose of a financial product
UNDERWR - Underwriting an issue of securities or interests ...
MARKET - Make a market in a financial product
SCHEME - Operate a registered scheme
IDPS - investor directed portfolio service
NONIDPS - custodial or depository service that is not an IDPS
Source: ASIC AFS Representatives Report, December 3, 2012
350
Appendix C14: Script for financial adviser invitation
Locked Bag 1797
Penrith NSW 2751 Australia
School of Business
Re: PhD study on ‘The Changing Role of Trust in Personal Financial Planning’
Dear Sir/Madam,
I am currently conducting a study as part of a PhD investigating the changing role of trust in
the relationship between client and financial adviser. It is hoped that the study will make a
positive contribution towards the growth of financial planning as a profession.
You are invited to participate in the study which involves completing a short questionnaire
about your experiences in providing personal financial advice to clients, as well as how you
think about social problems. Your feedback will be invaluable to this independent study
which is not sponsored or funded by any industry institution.
The information you provide will be kept confidential and individual participants will not be
identified. Once you have read the attached participant information sheet, please complete
and return the questionnaire in the reply-paid envelope provided (no postage stamp
necessary) by 15th August 2013.
If you would also be interested in participating in an interview, please complete the section
below and return with your questionnaire.
Thank you for participating in this important research project.
Kind regards,
Michelle
Michelle Cull
PhD Candidate
Phone: 02 46 203519
Email: m.cull@uws.edu.au
Interest in interview participation
If you are interested in participating in the interview phase of this research project, please enter your
details below and return with your questionnaire in the reply paid envelope provided. Note that your
contact details will not be stored with or linked with your questionnaire results in any way.
Name: _______________________________________________________________
Phone: _______________________________________________________________
Email: ________________________________________________________________
Postal Address: ____________________________________________________________________
Thank you for your interest. You will soon receive more information about the interview phase of the
project and how you can participate.
351
Appendix C15: Financial Adviser Questionnaire
THE CHANGING ROLE OF TRUST IN PERSONAL FINANCIAL PLANNING
Before completing this questionnaire, please ensure you have read and understood the attached Participant
Information Sheet. A consent form is not required as completion of the questionnaire will signify consent.
There are two parts to the questionnaire. The first part relates to the financial planning environment and the
second part is concerned with how you define the issues in a social problem.
Once completed, please return in the reply paid envelope by [insert date]. Thank you for participating.
PART A: The Financial Planning Environment
1.Select the column that best indicates the extent to which you agree or disagree with the following statements.
Strongly
Disagree
1
Disagree
Neutral
Agree
2
3
4
a. Financial planners are trustworthy.
b. A financial planner with less than 10 years of experience
is more trustworthy than one with more than 10 years of
experience.
c. Large firms that offer financial advice are more
trustworthy than small firms that offer financial advice.
d. Clients should place more importance on technical
competence than ethical values when choosing a financial
planner.
e. Most people can be trusted.
f. The public reputation of a firm is important to clients
when choosing a financial planner they can trust.
g. Government legislation banning commissions makes
financial planners more trustworthy.
h. If I found a bag of money on the street, I would seriously
think about keeping it.
i. Qualifications such as a university degree make a financial
planner more trustworthy.
j. The Global Financial Crisis (GFC) increased clients’ trust in
financial planners.
k. I would support a fee for advice model rather than one
that is commission based.
l. Financial planners are more trustworthy now than they
were before the Global Financial Crisis (GFC).
m. Financial planners who are members of a recognised
professional body are more trustworthy.
n. I have never told a lie.
o. I believe that people are basically honest.
2.
Have you ever worked as a financial planner/adviser?
No
1
Proceed to Part B (page 4)
Yes
352
2
Proceed to the next question.
Strongly
Agree
5
3.
What type of employer do you currently work for (or did you work for most recently)?
Advice business with a Dealer Group as licensee (eg. Mercer Wealth, Charter)
1
Accounting practice with a Dealer Group as licensee (eg. Mercer Wealth, Charter)
2
Bank (eg. Westpac, ANZ, ING)
3
Superannuation fund (eg. REST)
4
Insurance company (eg. NRMA)
5
Independent Planner/Adviser
6
Don’t know
7
Other – please specify: ____________________________________
8
4. State the month and year you last provided financial advice (MM/YY).
(eg January 2012 would be 01/12).
5. How many years have you worked as a financial adviser?
1-2 years
3-5 years
6-9 years
10 years or more
6. How many employers have you worked for in a financial advising role?
One
Two
Three
7.
8.
/
Four or more
What is the basis of how you were remunerated when you most recently provided financial advice?
(Select all that are appropriate. Feel free to attach details. )
Fee, retainer
1
Fee, hourly
2
Upfront commission (s) earned from products
3
Trailing commission (s) earned from products
4
Percentage of assets under management
5
Other – please specify:__________________________________
6
Select the column that best corresponds with the behaviour exhibited by you when dealing with clients.
a.
Reliable
b.
Honest
c.
Responsible
d.
Caring
e.
Professional
f.
Patient
g.
Flexible
h.
Trustworthy
i.
Marketing Oneself
j.
Listening
k.
Communicative
l.
Empathetic
Strongly
Disagree
1
353
Disagree
Neutral
Agree
2
3
4
Strongly
Agree
5
m. Tactful
n.
Friendly/Approachable
o.
Relationship building
p.
Ethical
q.
Acting with Integrity
r.
Dependable
s.
Nurturing
t.
Benevolent
9. Select the column that best corresponds with the standard of skill exhibited by you when dealing with clients.
a.
Time Management
b.
Verbal Communication
c.
Written Communication
d.
Problem Solving
e.
Technical Knowledge
f.
Numeracy
g.
Social/Ethical Awareness
Very Poor
1
10. What professional body are you a member of?
Poor
2
Satisfactory
3
Good
4
Excellent
5
(Select all that apply)
Association of Financial Services (AFA)
1
CPA Australia
2
Financial Planning Association (FPA)
3
Financial Services Institute of Australasia (FINSIA)
4
Institute of Chartered Accountants in Australia
5
None
6
Other – please specify:__________________________________
7
11. Select the column that best indicates the extent to which you agree or disagree with the following statements
as they relate to you in the workplace.
354
Strongly
Disagree
1
Disagree
Neutral
Agree
2
3
4
Strongly
Agree
5
a. I have proven to be trustworthy with my clients.
b. My clients feel comfortable sharing personal information
with me.
c. Though times may change and the future is uncertain, I
will always be ready and willing to offer strength and
support to my clients.
d. My clients believe I show a genuine care and interest in
their personal circumstances.
e. I am very unpredictable. My client rarely knows how I am
going to act.
f. I openly share personal information with my clients.
g. My clients would regard me as dependable, especially in
helping my clients meet their goals.
h. Whenever my clients have to make an important
financial decision in a situation they have never
encountered before, I am concerned about their welfare.
i. My clients can rely on me to do the things I have
promised to do.
j. Even if my clients’ investment returns are negative, my
clients are confident I act with their best interest in mind.
k. I provide my clients with timely information regarding
new investments and/or how changes in tax laws may
affect them.
l. I have made considerable emotional investments in my
relationships with clients.
m. I frequently do extra things for my clients I know I won’t
be rewarded for but which make my cooperative efforts
with my clients more productive.
n. I have never told a lie.
o. I love the feeling of a job well done.
p. I have never forgotten to show up for an appointment.
PART B Defining Issues in a Social Problem (Copyright, 1979, James Rest. All rights reserved.)
This section is aimed at understanding how you people think about social problems. Different people have different
opinions about what is right and wrong. There are no ‘right’ answers to such problems in the way that math
problems have right answers. Several stories about social problems will be described. After each story, there will be
a list of questions. You will be asked to rate and rank the questions in terms of how important each one seems to
you.
Example – ‘Frank and the car’
Frank Jones has been thinking about buying a car. He is married, has two small children and earns an average
income. The car he buys will be his family’s only car. It will be used mostly to get to work and drive around town,
but sometimes for vacation trips also. In trying to decide what car to buy Frank Jones realised there were a lot of
questions to consider. For instance, should he buy a larger used car or a smaller new car for the same amount of
money? Other questions occur to him.
355
Firstly, imagine that you are asked to indicate your recommendation for what Frank should do. If you tend to favour
one action over another, indicate which one. If you do not favour either action, mark ‘can’t decide’. Example:
 Buy new car
 Can’t decide
 Buy used car
Second, read which issue is the most important to you in making up your mind. In this example, 6 items are given.
On a rating scale of 1 to 5 (1 = Great, 2= Much, 3= Some, 4=Little, 5=No) rate the importance of the item (issue).
Assume you thought that items #1, #4 and #6 (below) had no importance, #2 and #5 were of great importance and
item # 3 had some importance. Then you would complete as shown below.
Great
Rate the following 6 items in terms of importance
Much
Some
Little
No
1. Whether the car dealer was in the same block as where Frank lives.
2. Would a used car be more economical in the long run than a used car.


3. Whether the colour was green, Frank’s favourite colour.

4. Whether the cubic inch displacement was at least 200.
5. Would a large, roomy car be better than a compact car.


6.Whether the front connibilies were differential.

Further, the questionnaire will ask you to rank the questions in order of importance. You will be required to fill in
the bubble that represents the item in first importance (of those given to you to choose from), then second most
important, third most important and fourth most important. You would usually rate the items that you found as
‘great’ importance in the above section (e.g. item #5) as the most important in this section. You are asked to
indicate your top four choices. You might fill out this part as follows.
Consider the 6 issues above and rank which issues are the most important.
1
2
3
Most important item
4
5
6

Second most important item

Third most important

Fourth most important

Note that in the sample responses, item #5 was considered the most important and item 2 the second most
important. Note that some of the items may seem irrelevant to you (as in item #1) or not make sense to you – in
that case, rate the item as ‘no’ importance and do not rank the item. Note that in the stories that follow, there will
be 12 items for each story, not six. Please make sure to consider all 12 items that are printed after each story.
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Story 1 “Heinz and the drug”
In Europe a woman was near death from a special kind of cancer. There was one drug that doctors thought might
save her. It was in the form of radium that a pharmacist in the same town had recently discovered. The drug was
expensive to make, but the pharmacist was charging ten times what the drug cost to make. He paid $2,000 for the
radium and charged $20,000 for a small dose of the drug. The sick woman’s husband, Heinz, went to everyone he
knew to borrow the money, but he could only get together about $10,000, which is half of what it cost. He told the
pharmacist that his wife was dying, and asked him to sell it cheaper or let him pay later. But the pharmacist said ‘No,
I discovered the drug and I’m going to make money from it.’ So Heinz got desperate and began to think about
breaking into the man’s store to steal the drug for his wife. Should Heinz steal the drug?
 Should Steal
 Can’t decide
 Should not steal
Great
Rate the following 12 items in terms of importance
1.
Whether a community’s laws are going to be upheld.
2.
Isn’t it only natural for a loving husband to care so much for his
wife that he’d steal?
Is Heinz willing to risk getting shot as a burglar or going to jail
for the chance that stealing the drug might help?
Whether Heinz is a professional wrestler, or has considerable
influence with professional wrestlers.
Whether Heinz is stealing for himself or doing this solely to help
someone else.
Whether the pharmacist’s rights to his invention have been
respected.
3.
4.
5.
6.
Much
Some
Little
No
7.
Whether the essence of living is more encompassing than the
termination of dying, socially and individually.
8. What values are going to be the basis for governing how
people act towards each other.
9. Whether the pharmacist is going to be allowed to hide behind a
worthless law which only protects the rich anyhow.
10. Whether the law in this case is getting in the way of the most
basic claim of any member of society.
11. Whether the pharmacist deserves to be robbed for being so
greedy and cruel.
12. Would stealing in such a case bring about more total good for
the whole society or not.
Rank which issues are the most important
1
2
3
4
5
6
7
8
9
10
11
12
Most important item
Second most important item
Third most important
Fourth most important
Story 2 ‘Escaped Prisoner’
A man had been sentenced to prison for 10 years. After one year, however, he escaped from prison, moved to a
new area of the country and took on the name of Thompson. For eight years he worked hard, and gradually he
saved enough money to buy his own business. He was fair to his customers, gave his employees top wages, and
gave most of his own profits to charity. Then one day, Mrs Jones, an old neighbour, recognised him as the man who
had escaped from prison eight years before and whom the police had been looking for. Should Mrs Jones report Mr
Thompson to the police and have him sent back to prison?
357
 Should report him
 Can’t decide
 Should not report him
Great
Rate the following 12 items in terms of importance
1.
Hasn’t Mr Thompson been good enough for such a long time to
prove he isn’t a bad person?
2.
Every time someone escapes punishment for a crime, doesn’t
that just encourage more crime?
3.
Wouldn’t we be better off without prisons and the oppression
of our legal system?
4.
Has Mr Thompson really paid his debt to society?
5.
Would society be failing what Mr Thompson should fairly
respect?
What benefits would prisons be apart from society, especially
for a charitable man?
6.
7.
8.
9.
Much
Some
Little
No
How could anyone be so cruel and heartless as to send Mr
Thompson to prison?
Would it be fair to all the prisoners who had to serve out their
full sentences if Mr Thompson was let off?
Was Mrs Jones a good friend of Mr Thompson?
10. Wouldn’t it be a citizen’s duty to report an escaped criminal
regardless of the circumstances?
11. How would the will of the people and the public good best be
served?
12. Would going to prison do any good for Mr Thompson or
protect anybody?
Rank which issues are the most important
1
Most important item
Second most important item
Third most important
Fourth most important
358
2
3
4
5
6
7
8
9
10
11
12
Story 3 – ‘Newspaper’
Fred, a senior in high school, wanted to publish a newspaper for students so that he could express many of his
opinions. He wanted to speak out against the use of the military in international disputes and to speak out against
some of the school’s rules, like the rule forbidding boys to wear long hair.
When Fred started his newspaper, he asked his principal for permission. The principal said it would be alright if
before every publication Fred would turn in all his articles for the principal’s approval. Fred agreed and turned in
several articles for approval. The principal approved all of them and Fred published two issues of the paper in the
next two weeks.
But the principal had not expected that Fred’s newspaper would receive so much attention. Students were so
excited by the paper that they began to organise protests against the hair regulation and other school rules. Angry
parents objected to Fred’s opinions. They phoned the principal telling him that the newspaper was unpatriotic and
should not be published. As a result of this rising excitement, the principal ordered Fred to stop publishing. He gave
as a reason that Fred’s activities were disruptive to the operation of the school. Should the principal stop the
newspaper?
 Should stop it
 Can’t decide
 Should not stop it
Great
Rate the following 12 items in terms of importance
1.
Much
Some
Little
No
Is the principal responsible to students or to parents?
2.
Did the principal give his word that the newspaper could be
published for a long time or did he just promise to approve the
newspaper one issue at a time?
3. Would the students start protesting even more if the principal
stopped the newspaper?
4. When the welfare of the school is threatened, does the principal
have the right to give orders to students?
5. Does the principal have the freedom of speech to say ‘no’ in this
case?
6. If the principal stopped the newspaper would he be preventing full
discussion of important problems?
7. Whether the principal’s order would make Fred lose faith in the
principal.
8. Whether Fred was really loyal to his school and patriotic to his
country.
9. What effect would stopping the paper have on the student’s
education in critical thinking and judgement?
10. Whether Fred was in any way violating the rights of others in
publishing his own opinions.
11. Whether the principal should be influenced by some angry parents
when it is the principal that knows best what is going on in the
school.
12. Whether Fred was using the newspaper to stir up hatred and
discontent.
Rank which issues are the most important
1
Most important item
Second most important item
Third most important
Fourth most important
359
2
3
4
5
6
7
8
9
10
11
12
Please provide the following information about yourself:
1.
None 1
2.
Which of the following professional designations do you hold? (Select all that apply).
CPA 2
CFP 3
FPA 4
CA 5
FPS 6
Other:________________ 7
What educational qualifications do you hold? (Select all that apply).
Year 10 of High School
1
Year 12 of High School, or equivalent
2
Certificate III/IV in Financial Services
3
Diploma in Financial Services
4
Advanced Diploma in Financial Services
5
Bachelors Degree in Accounting
6
Bachelors Degree in Finance
7
Masters Degree in Accounting
8
Masters Degree in Finance
9
Masters Degree in Financial Planning
10
Other, please state: ___________________________
11
3.
Please indicate your age (in years) as at January 1, 2013:
4.
Please indicate if you are male or female:
5.
What is the postcode for the area you currently live?
6.
Is English your first language?
Male 1
Yes
Female 2
No
If no, please state: _________________________________________
7.
Please add any additional information you feel is relevant to the research.
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
____________________________________________________________________________________
Thank you for taking the time to participate in this study.
360
Appendix C16: Participant Information Sheet – Financial Adviser
Questionnaire/ Financial Adviser Interview
Human Research Ethics Committee
Office of Research Services
Participant Information Sheet (General)
Project Title: The changing role of trust in personal financial planning.
Who is carrying out the study?
You are invited to participate in a study conducted by chief investigator, Michelle Cull, PhD
candidate in the School of Business. The research will form the basis of her PhD thesis at
the University of Western Sydney under the supervision of Professor Gabriel Donleavy.
What is the study about?
The purpose is to investigate the changing role of trust in the relationship between
client and adviser.
What does the study involve?
The study involves completion of a short questionnaire about your experiences in providing
personal financial advice to clients as well as how you think about social problems.
How much time will the study take?
The study should take between 20 to 30 minutes to complete.
Will the study benefit me?
The study may not have any immediate benefits for you but by participating you may
indirectly benefit through improved client-adviser relationships and the further development
of the financial planning profession.
Will the study involve any discomfort for me?
No, other than a small sacrifice of your time.
How is this study being paid for?
The study is being funded as part of the normal provisions for PhD students.
Will anyone else know the results? How will the results be disseminated?
All aspects of the study, including results, will be confidential and only the researcher/s will
have access to information you provide. Results will be disseminated as part of a PhD thesis
and a report of the study may be submitted for publication but individual participants will not
be identified.
Can I withdraw from the study?
Participation is entirely voluntary: you are not obliged to be involved and - if you do
participate -you can withdraw at any time without giving any reason and without any
consequences.
Can I tell other people about the study?
Yes, you can tell other people about the study by providing them with the chief investigator's
contact details. They can contact the chief investigator to discuss their participation in the
research project and obtain an information sheet.
361
What if I require further information?
When you have read this information, MICHELLE CULL will discuss it with you further and
answer any questions you may have. If you would like to know more at any stage, please
feel free to contact her on 02 46203519.
What if I have a complaint?
This study has been approved by the University of Western Sydney Human Research Ethics
Committee.The Approval number is H9490.
If you have any complaints or reservations about the ethical conduct of this research, you
may contact the Ethics Committee through the Office of Research Services on Tel +61 2
4736 0229 Fax +61 2 4736 0013 or email humanethics@uws.edu.au.
Any issues you raise will be treated in confidence and investigated fully, and you will be
informed of the outcome.
If you agree to participate in this study, you may be asked to sign the Participant Consent
Form.
362
Appendix C17: Participant Consent Form (Interviews)
Human Research Ethics Committee
Office of Research Services
Participant Consent Form
Project Title: The Changing Role of Trust in Personal Financial Planning
I,…………………………, consent to participate in the research project titled 'The Changing
Role of Trust in Personal Financial Planning'.
I acknowledge that:
I have read the participant information sheet and have been given the opportunity to discuss
the information and my involvement in the project with the researcher/s.
The procedures required for the project and the time involved have been explained to me,
and any questions I have about the project have been answered to my satisfaction.
I consent to the researcher making an audio recording of my discussions as part of any
interviews that may take place between myself and the researcher.
I understand that my involvement is confidential and that the information gained during the
study may be published but no information about me will be used in any way that reveals my
identity.
I understand that I can withdraw from the study at any time, without affecting my relationship
with the researcher/s now or in the future.
Signed:
Name:
Date:
Return Address:
Mrs Michelle Cull
School of Business
Locked Bag 1797
Penrith NSW 2751
This study has been approved by the University of Western Sydney Human Research Ethics
Committee. The Approval number is: H9490
If you have any complaints or reservations about the ethical conduct of this research, you
may contact the Ethics Committee through the Office of Research Services on Tel +61 2
4736 0229 Fax +61 2 4736 0013 or email humanethics@uws.edu.au. Any issues you raise
will be treated in confidence and investigated fully, and you will be informed of the outcome.
363
Appendix C18: Coding Sheet for Financial Adviser Questionnaire
Survey
Variable
SPSS Variable Name
Coding
Coding instructions and notes
Identification number
ID
number assigned to each survey
Each survey to be given a consecutive identifying number for cross
Ref
Respons
e number
1a
reference
Trustworthiness of
Trustworthy
1= Strongly Disagree
FPs
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1b
Less than10 yrs exp
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1c
Large firms
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1d
Technical
1= Strongly Disagree
competence
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
364
1e
Most people trusted
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1f
Public reputation
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1g
Govt legislation
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1h
Keep bag of money
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1i
Quals
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1j
GFC inc client trust
1= Strongly Disagree
2= Disagree
365
3= Neutral
4= Agree
5= Strongly Agree
1k
Fee for advice
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1l
FPs since GFC
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1m
Prof body
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1n
Never told lie
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
1o
People basically
1= Strongly Disagree
honest
2= Disagree
3= Neutral
366
4= Agree
5= Strongly Agree
2
Have you ever
WorkedAsFP
1= No
Proceed to B1
2= Yes
Proceed to Q3
1= Dealer Group
Only answered by those who responded "yes" to Q2
worked as FP?
3
What type of
EmployerType
employer do you
currently work for (or
did most recently)?
2= Accounting Practice
3= Bank
4= Superannuation fund
5= Insurance
6 = Independent planner/adviser
7 = Don't know
8 = Self employed
3B
OtherEmployerType
OtherEmplType
As above
4a
Month of advice
MonthAdvice
Enter 2 digit month
4b
Year of advice
YearAdvice
Enter 2 digit year
5
How many yrs have
YrsFPRole
1 = 1-2
you worked in FP
2 = 3-5
role?
3= 6-9
4= 10 plus
6
Number of employers
EmployerNum
1=1
2=2
3= 3
4= 4 plus
367
7a -7d
Basis of
RemunBasis
1 = Fee, retainer
Up to four. Choose code or leave blank.
2 = Fee, hourly
12= insurance commission
Remuneration
3= Upfront commission from products
4- Trailing commission from products
5 - Percentage of assets under mgt
6 - Upfront flat dollar preparation fee
7-Flat fee for service
8-Salary
9 - Combination of 1-5 at different times
10 - hourly plus % of new business
11= share brokerage
8a
Behaviour of FP
Reliable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8b
Honest
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8c
Responsible
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
368
8d
Caring
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8e
Professional
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8f
Patient
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8g
Flexible
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8h
Trustworthy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8i
Marketing Oneself
1= Strongly Disagree
2= Disagree
369
3= Neutral
4= Agree
5= Strongly Agree
8j
Listening
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8k
Communicative
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8l
Empathy
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8m
Tactful
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8n
FriendlyApproachable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
370
5= Strongly Agree
8o
RelshipBlding
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8p
Ethical
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8q
Acting with Integrity
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8r
Dependable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8s
Nurturing
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
8t
Benevolent
1= Strongly Disagree
371
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
9a
Standard of Skill
Time Mgt
1=Very Poor
2=Poor
3=Satisfactory
4=Good
5=Excellent
9b
Verbal Commn
1=Very Poor
2=Poor
3=Satisfactory
4=Good
5=Excellent
9c
Written Commn
1=Very Poor
2=Poor
3=Satisfactory
4=Good
5=Excellent
9d
Problem Solving
1=Very Poor
2=Poor
3=Satisfactory
4=Good
5=Excellent
9e
Tech
1=Very Poor
2=Poor
3=Satisfactory
372
4=Good
5=Excellent
9f
Numeracy
1=Very Poor
2=Poor
3=Satisfactory
4=Good
5=Excellent
9g
Social/Ethical
1=Very Poor
2=Poor
3=Satisfactory
4=Good
5=Excellent
10a
Professional
ProfBody1
1=AFA
Can select more than one
membership
2=CPA
10b
ProfBody2
3=FPA
11=ASFA
4=FINSIA
12=FBAA 13 = AFP14=FAICD
5=ICAA
8 = IPA
6=None
9 = SPAA
7=ANZIIF
10= registered tax agent
1=AFA
Can select more than one
2=CPA
3=FPA
11=ASFA
4=FINSIA
12=FBAA 13 = AFP14=FAICD
5=ICAA
8 = IPA
6=None
9 = SPAA
7=ANZIIF
10= registered tax agent
373
10c
ProfBody3
1=AFA
Can select more than one
2=CPA
10d
11a
Workplace
3=FPA
11=ASFA
4=FINSIA
12=FBAA 13 = AFP14=FAICD
5=ICAA
8 = IPA
6=None
9 = SPAA
7=ANZIIF
10= registered tax agent
ProfBody4
As above
ProvenTrustworthy
1= Strongly Disagree
Statements
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11b
ClientsComfortable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11c
Strength to clients
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11d
Genuine care
1= Strongly Disagree
6= both 2 and 4 selected
2= Disagree
3= Neutral
374
4= Agree
5= Strongly Agree
11e
Unpredictable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11f
Openly share info
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11g
Dependable
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11h
Welfare
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11i
Rely on promises
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
375
11j
Client best interest
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11k
Timely info
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11l
Emotional Investment
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11m
Extra things
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11n
Never told lie
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
11o
Job well done
1= Strongly Disagree
2= Disagree
376
3= Neutral
4= Agree
5= Strongly Agree
11p
Never forgotten appt
1= Strongly Disagree
2= Disagree
3= Neutral
4= Agree
5= Strongly Agree
B100
Heinz and the drug
HeinzDecision
1 = Should steal
2 = Can't decide
3= Should not steal
B101
Heinz and the drug
Community Law
1= Great
2= Much
3= Some
4= Little
5= No
B102
Loving husband
1= Great
2= Much
3= Some
4= Little
5= No
B103
Getting shot
1= Great
2= Much
3= Some
4= Little
5= No
B104
Professional Wrestler
1= Great
377
2= Much
3= Some
4= Little
5= No
B105
Stealing for himself
1= Great
2= Much
3= Some
4= Little
5= No
B106
Right to invention
1= Great
2= Much
3= Some
4= Little
5= No
B107
Essence of living
1= Great
2= Much
3= Some
4= Little
5= No
B108
Values
1= Great
2= Much
3= Some
4= Little
5= No
B109
Hide behind law
1= Great
2= Much
3= Some
378
4= Little
5= No
B110
Basic claim
1= Great
2= Much
3= Some
4= Little
5= No
B111
Pharmacist deserving
1= Great
2= Much
3= Some
4= Little
5= No
B112
Total good
1= Great
2= Much
3= Some
4= Little
5= No
B1R1
Heinz Rank1
Number between 1 and 12
B1R2
Heinz Rank2
Number between 1 and 12
B1R3
Heinz Rank3
Number between 1 and 12
B1R4
Heinz Rank4
Number between 1 and 12
PrisonerDecision
1 = Should report
B200
Ranking
Escaped Prisoner
2 = Can't decide
3= Should not report him
B201
Escaped Prisoner
Not bad person
1= Great
2= Much
3= Some
379
Insert number corresponding to ranked item
4= Little
5= No
B202
Escape punishment
1= Great
2= Much
3= Some
4= Little
5= No
B203
Legal system
1= Great
2= Much
3= Some
4= Little
5= No
B204
Paid debt to society
1= Great
2= Much
3= Some
4= Little
5= No
B205
Fairly respect
1= Great
2= Much
3= Some
4= Little
5= No
B206
What benefits
1= Great
2= Much
3= Some
4= Little
5= No
380
B207
Cruel and heartless
1= Great
2= Much
3= Some
4= Little
5= No
B208
Fair to other prisoners
1= Great
2= Much
3= Some
4= Little
5= No
B209
Good friend
1= Great
2= Much
3= Some
4= Little
5= No
B210
Citizen duty
1= Great
2= Much
3= Some
4= Little
5= No
B211
Will of people
1= Great
2= Much
3= Some
4= Little
5= No
B212
Protect anybody
1= Great
2= Much
381
3= Some
4= Little
5= No
B2R1
PrisonerRank1
Number between 1 and 12
B2R2
PrisonerRank2
Number between 1 and 12
B2R3
PrisonerRank3
Number between 1 and 12
B2R4
PrisonerRank4
Number between 1 and 12
NewspaperDecision
1 = Should stop it
B300
Ranking
Newspaper
2 = Can't decide
3= Should not stop it
B301
Newspaper
Principal responsible
1= Great
2= Much
3= Some
4= Little
5= No
B302
Give his word
1= Great
2= Much
3= Some
4= Little
5= No
B303
Protest more if
1= Great
stopped
2= Much
3= Some
4= Little
5= No
B304
Welfare
1= Great
382
Insert number corresponding to ranked item
2= Much
3= Some
4= Little
5= No
B305
Principal FOS
1= Great
2= Much
3= Some
4= Little
5= No
B306
Prevent full
1= Great
discussion
2= Much
3= Some
4= Little
5= No
B307
Fred lose Faith
1= Great
2= Much
3= Some
4= Little
5= No
B308
Fred loyal
1= Great
2= Much
3= Some
4= Little
5= No
B309
Student education
1= Great
2= Much
383
3= Some
4= Little
5= No
B310
Violating rights
1= Great
2= Much
3= Some
4= Little
5= No
B311
Angry parents
1= Great
2= Much
3= Some
4= Little
5= No
B312
Stir up hatred
1= Great
2= Much
3= Some
4= Little
5= No
B3R1
Npaper Rank1
Number between 1 and 12
B3R2
Npaper Rank2
Number between 1 and 12
B3R3
Npaper Rank3
Number between 1 and 12
B3R4
Npaper Rank4
Number between 1 and 12
Prof1
1 = None
C1a
Ranking
Professional desig
Insert number corresponding to ranked item
First box ticked
2=CPA
3=CFP
18 = RG146 licence and lawyer
4=FPA
19 = ADFS 20= Tier2 21 =SAFIN 22 =FAICD
5=CA
11= Fellow IPA (FIPA)
384
6=FPS
12= Specialist Adviser with SPAA
7 =SIA (Aff)
13=SSA
8=CertIV Retail Mgt
14= Other not specified 15 =FSRAct 2001
9=ANZIIF (Senior)
16=RTA
17=AASFA (Associate of Association of Superannuation Funds of
Australia
10 = CIP (Certified Insurance Professional)
C1b
Professional desig
Prof2
1 = None
2nd box ticked
2=CPA
Leave blank if only one selected
3=CFP
18 = RG146 licence and lawyer
4=FPA
19 = ADFS 20= Tier2 21 =SAFIN 22 =FAICD
5=CA
11= Fellow IPA (FIPA)
6=FPS
12= Specialist Adviser with SPAA
7 =SIA (Aff)
13=SSA
8=CertIV Retail Mgt
14= Other not specified 15 =FSRAct 2001
9=ANZIIF (Senior)
16=RTA
17=AASFA (Associate of Association of Superannuation Funds of
Australia
10 = CIP (Certified Insurance Professional)
C1c
Professional desig
Prof3
1 = None
3rd box ticked
2=CPA
Leave blank if only one selected
3=CFP
18 = RG146 licence and lawyer
4=FPA
19 = ADFS 20= Tier2 21 =SAFIN 22 =FAICD
5=CA
11= Fellow IPA (FIPA)
6=FPS
12= Specialist Adviser with SPAA
7 =SIA (Aff)
13=SSA
8=CertIV Retail Mgt
14= Other not specified 15 =FSRAct 2001
385
9=ANZIIF (Senior)
16=RTA
17=AASFA (Associate of Association of Superannuation Funds of
Australia
10 = CIP (Certified Insurance
18=DFP
Professional)
C2a
Educational quals
Education 1
1=Yr10
1st box ticked
2=Yr12
3=Cert III/IV FS
27= BArts/LLB
4=DFS
28=Other post grad
5=ADFS
29=AAII
6=Bachelors degree in Accounting
7=Bachelors degree in Finance/FP
Might need to split
8=Masters degree in Accounting
9=Masters degree in Finance
18= Certificate in Superannuation Mgt
10=Masters degree in FP
19=Bachelor of Economics
11=Grad Dip Applied
20= Masters degree in Commerce
Finance/Investment
C2b
Educational quals
Education 2
12=PY
21=(Newcastle uni) Law of Death Duty, Gift Duty & Estate Planning
13=MBA
22=LLB
14=Bachelor degree in another field
23=Graduate Diploma in Financial Planning (FINSIA)
15=Dip Ed
24=AMC/Licensed credit adviser
16=Diploma in another field
25=Grad Mgt Qual
17=Bachelor of Commerce
26=Masters degree -other
1=Yr10
2nd box ticked
2=Yr12
Leave blank if only one selected
3=Cert III/IV FS
27= BArts/LLB
4=DFS
28=Other post grad
386
5=ADFS
29=AAII
6=Bachelors degree in Accounting
7=Bachelors degree in FP
8=Masters degree in Accounting
9=Masters degree in Finance
18= Certificate in Superannuation Mgt
10=Masters degree in FP
19=Bachelor of Economics
11=Grad Dip Applied
20= Masters degree in Commerce
Finance/Investment
C2c&d
Educational quals
Education 3
12=PY
21=(Newcastle uni) Law of Death Duty, Gift Duty & Estate Planning
13=MBA
22=LLB
14=Bachelor degree in another field
23=Graduate Diploma in Financial Planning (FINSIA)
15=Dip Ed
24=AMC/Licensed credit adviser
16=Diploma in another field
25=Grad Mgt Qual
17=Bachelor of Commerce
26=Masters degree -other
1=Yr10
3rd box ticked
2=Yr12
Leave blank if only one selected
3=Cert III/IV FS
27= BArts/LLB
4=DFS
28=Other post grad
5=ADFS
29=AAII
6=Bachelors degree in Accounting
7=Bachelors degree in FP
8=Masters degree in Accounting
9=Masters degree in Finance
18= Certificate in Superannuation Mgt
10=Masters degree in FP
19=Bachelor of Economics
11=Grad Dip Applied
20= Masters degree in Commerce
Finance/Investment
12=PY
21=(Newcastle uni) Law of Death Duty, Gift Duty & Estate Planning
387
13=MBA
22=LLB
14=Bachelor degree in another field
23=Graduate Diploma in Financial Planning (FINSIA)
15=Dip Ed
24=AMC/Licensed credit adviser
16=Diploma in another field
25=Grad Mgt Qual
17=Bachelor of Commerce
26=Masters degree -other
C3
Age
Age
Enter age in years
C4
Gender
Gender
1= Male, 2=Female
C5
Postcode
Postcode
Enter 4 digit postcode
C6
Language
Language
1 = English
(if ticked "Yes" to Is English your 1st language?)
2= Chinese
5= croatian
3=Khmer (Cambodian)
4=Cantonese
388
Appendix C19: Coding of Open- Ended/Free Responses for Financial
Adviser Questionnaire
1=Good luck with PhD
2=Used to work as bank teller, only allowed to open accounts but not provide advice
3=Westpac bank had no compassion for me when my husband died so left and purchased
newsagency
4=Persistence Determination and Honesty are Omnipotent not Educated Deralict
5 = The majority of FPs are good
6= Honest people always put their client's first but as with any industry always small
proportion who don't
7=You might find it helpful to spend a few days at a planner's office to see how they operate.
You would have no difficulty finding one that would welcome you.
8=All industry/prof have untrustworthy people
9 = More accountants in jail than planners
10 = The media uses biased and untrustworthy reporting
11=The profession/industry does not do enough education
12= The FPA is a waste of money
13-=Struggled with the structure of questions of some of the stories
14=Experience in FP, Stockbroking, Banking, Insurance, Lending/finance, Senior
Management
15 = I believe that life experience carries a lot of weight in the overall advice process. You
cannot put an old head on young shoulders when it comes to a client's journey through all
phases of their life.
389
16=Sorry I may have rushed through this
17 = Generally I think clients trust their adviser
18=It takes one rogue adviser to bring down a group through perceived association
19= The no.1 need in any relationship is trust
20= My clients like that I was brought up in the country as they see me as being down to
earth and trustworthy.
21=Rethink your questions you are asking for answers that can’t be given to the information
you have provided. Your questions are ambiguous and will probably solicit the wrong
response so I have stopped answering them sorry ( in regards to DIT)
22=The role of trust has always been there between clients and advisers however public
perception is different.
23= Advisers have an obligation of trust and should be held accountable for breach of that
trust.
24=Semi-retired
25= Once in 40 years (regards to 11 p "I have never forgotten to show up for an
appointment")
26=Not sure what you are getting at. My wife had cancer twice and we have lost our eldest
son (last year). Are you a communist?? (With regards to DIT Heinz Story 1)
27=It would seem as though you feel that ethics are more important than helping people save,
grow their wealth, protect their living standards, managing their estates and providing
retirement incomes. Where were the questions regarding any of these?
28=Where were the questions regarding the amount of referrals you receive, surely the
ultimate test of trust?
29= National Dealer, locally owned branch (regards to Q3 type of employer)
30= There would be other options first (regards to DIT Heinz story 1)
31=Some very difficult hypothetical questions have been raised here.
390
32=Own license (AFSL - re Q3)
33=I believe that making a degree compulsory for all advisers will help improve trust as the
advisers who go down this path or already have are serious about long-term careers in
planning and helping clients for life. i.e. Compared to some current planners in the industry
who have come across from a sales background and are just in it for a quick sale ($) and are
not really concerned about the long term financial health of a client. You see this many times
with bank planners who have no education but are slick sales people preying on the less
savvy client to make a quick buck. My parents were a victim of this.
34=Lack of SIC based licensing in the real estate industry to protect consumers and their
largely valued assets
35= Have been in the industry since 1980 still working full time as a financial planner
36= It is more difficult to be a 'competent' financial planner than an 'ethical' planner. In my
opinion there are many more ethical planners than competent ones which is unfortunately to
the detriment of clients.
37= 37 years in finance
38= Found the formulation of opinions around the questions hard to articulate and the manner
of reporting clumsy. But it’s your study - hope this helps.
39=Acting in the best interests of clients is paramount
40 = Some questions need to be reviewed. When you ask 'either/or' you can only answer one
way (refers to DIT 3 q2)
41= This industry has invested zero time in people psychology or personal growth. It should
be an entire subject and the basis of the customer relationship!
42= The problem is where the money is invested
43=Fund managers - no accountability after defined benefits abolished
44= CEO's bonuses 'granted' by fund managers in exchange for favours – e.g. preferred
capital raisings as most fund managers are owned by banks
45= "Mums and Dads" ripped off by CEO's excessive pay/fund managers adding no value
391
and getting more money to invest anyway through a rising SGC contribution scheme.
46=We really feel as financial planners that the current government, media, FPA and unions
have all contributed to the poor reputation of financial planners.
47= A very small proportion of the industry is rotten and the campaign waged against the
industry is simply corruption very much at work!
48=I don't believe you can assess ethical integrity through self-assessment tools. Very low
validity and reliability, if I recall my Business school uni days. Your ethics case studies lack
context - how can I answer in an ethical fashion if I cannot ask further questions. The world
is grey (and corrupt) not black/white good/bad.
49= Q1(l): How does failure of monetary system have a correlation with 'trustworthiness' of
FPs? If talking about 'perception of trustworthiness' makes much more sense.
50 = There are many financial planners of my age and experience who have served their
client for 30yrs without a complaint. We continuously are branded with the same stigma as
those who have entered the industry and wronged clients. Many like me receive no payment
or recognition for ensuring that our aged clients utility bills are paid, home insured and tax
returns completed.
100= Q1n: I know of no-one who has never told a lie.
101= Q1o: Honest perhaps, but non-delusional? No way.
102= [DIT]
Story 1
(1) Laws only control the good people. The corrupt elite will ignore/cover up/challenge
the laws to suit themselves. Law of personal integrity matters; government laws just
as likely to be corrupt.
(2) 1(2) Priority 1: Care for family.
(3) 1(6) IP is a con.
(4) 1(7) Don't understand.
(5) 1(8) Not applied equally.
(6) 1(9) leading q.1 (ranking)
(7) Strength predicts outcome. Ability to manipulate structure.
392
Story 2
(1) Should know WHAT crime to give ethical context.
(2) 2(1) Redemption!
(3) 2(3) What....& have anarchy?
(4) 2(4) Through service.
(5) 2(5 & 6) Don't understand.
(6) 2(8) Nothing in this world is 'fair'- it is a human concept usually applied when one
party feels that it is not securing enough resources relative to other players.
(7) 2(11) will of people not often served.
(8) 2(12) Obviously not.
Story 3
(1) Both.
(2) 3(2) Semantics.
(3) 3(3) How would I know??
(4) 3(7) You will lose faith sooner or later.
(5) 3 (ranking) Most important: Freedom to challenge status quo.
393
Appendix C20: Matching of research questions to themes addressed by
data collection instruments.
(CQ1 = Client Questionnaire 1, CQ2 = Client Questionnaire 2, FAQ = Financial Adviser Questionnaire, SCI= Client
Interview, SFI = Financial Adviser Interview)
Theme
Demographics
If/when advice sought
Organisational structure of
planner/adviser firm
Regulation of Advice
Remuneration
Usefulness of SOA
Behavioural Skills as
antecedents of trust
No advice sought
Ethics
Integrity
Dependable
Benevolent
Competence
CQ1 Ref
CQ2 Ref
FAQ Ref
1,2,3,4
5,6
7
8,9
10, 15
11, 12
13 (a – o)
29
2, 6, 7
1g, 1j
8(a-o), 1n,
1o
3, 19
10, 28
26
1d,
12p,13g
12q
12r, 16a
1d, 8p, 9g,
Part B
1h, 8q
8r, 11a,
11p
8t
1d, 9a-g,
11o, C1,
C11k
15
1i, 1m, C1,
C2
1j, 1l
1g
1b, 4, 5, 6
12
13
14
4
GFC
Legislation
Experience of adviser
1i,1k
1g
1b
Business Size and type
Business Reputation
Common interests/shared
values
Adapted Trust Scale –
Dependability, Predictability,
Faith
Communication
1c
1e
1f, 1m
1v
1f
16a-16l
11a-e,
11g-I, 11k,
11p
9b-c, 11k
13b, 13
c, 16m-n
16d, 16k
12s, 16i,
16o
1a, 1n
11j
8s, 11d,
11h, 11l,
11m
1a, ae
Trust elements
Trust issues
Relationship between ethics
and trust
Prospect of gain v loss
Emotional investment
394
Research
Question
RQ3
RQ1
RQ3
RQ3
RQ4
RQ1, RQ3
RQ1,RQ3
14
Credentials
General vs Specific Trust
Responsibility for developing
ethics and trust
Organisation Culture
SFI Ref
1g, 1k, 7
12t
1d, 13a13g, 14,
15, 16n,
16p
1h, 1l
Confidence
Genuine Care /Nurturing
SCI Ref
13, 14
RQ1
RQ1, RQ5
RQ1, RQ2
RQ1
RQ1
RQ1, RQ2
23, 24
25, 26
1
2, 12,
25
22,23,
24
1, 3, 8
4
RQ1, RQ3,
RQ5
RQ6
RQ3
RQ1,
RQ2,RQ3
RQ3
RQ3
RQ1
RQ1,RQ2
8, 9
9
RQ1
20
18, 19
RQ1
RQ1, RQ2
18
17
RQ1,RQ3
RQ2
5
5, 6, 7
10, 16
11
17
15
11
16
RQ2, RQ3,
RQ5
RQ1
RQ1
RQ5
21
22
20, 21
RQ1, RQ6
RQ1
Appendix C21: Interview Checklist – Clients
TOPIC GUIDE
KEY ISSUES FOR DISCUSSION
FP VISIT
When?
Why? Motivation.
How?
Choice
EXPERIENCE
Years
Region? Australia - State - Urban/Country?
Types of adviser/s
Best and worst experiences
BUSINESS TYPE
Type of business
Previous types of FP Businesses
Differences/Similarities
Insurance/independent/bank/dealer group
Size of firm - employees/clients
ORGANISATIONAL CULTURE
Go the extra mile - provide extra services to clients
Ethical Culture
Transparency
Reward and recognition
Leadership
Regulation and the law
Engagement with prof bodies
Training
INTERACTION WITH CLIENTS
Extra work for clients
Frequency of interaction
Mode of interaction - in person, telephone, email, letter
Measuring success of interaction
Satisfaction
Sharing of common interests
CLIENT TRUST
Do clients trust their FPs?
Trust issues - generally, personally, industry, organisation
Examples
Measurement
Importance
Relevance
QUALS/PROF MEMBERSHIP
Quals
Professional memberships
Importance
relevance to trust and ethics
ETHICAL BEHAVIOUR
Meaning
example of ethical and unethical
TRUST
Meaning
395
Example/s
BEHAVING ETHICALLY AND TRUST
Linked?
Does ethical behaviour increase trust? Why/Why not?
Responsibility of FPs in building ethical behaviour and trust.
Perceptions of clients
PERSONAL CIRCUMSTANCES OF CLIENTS
Genuine interest
Sharing of personal info by clients
Examples/stories
EXTERNAL INFLUENCES
GFC - client and adviser impact
Regulation
Education
EMOTION
Felt
Shown
Circumstances
DEMOGRAPHICS
Gender
Age
Postcode
396
Appendix C22: Interview Checklist – Financial Advisers
TOPIC GUIDE
KEY ISSUES FOR DISCUSSION
CAREER ENTRY
When?
Why? Motivation.
How?
EXPERIENCE
Years
Role/s
Region? Australia - State - Urban/Country?
Types of clients
PLACE OF EMPLOYMENT
Type of employer
Previous places of employment
Differences/Similarities
ORGANISATIONAL CULTURE
Go the extra mile - provide extra services to clients
Ethical Culture
Transparency
Reward and recognition
Leadership
Regulation and the law
Engagement with prof bodies
Training
INTERACTION WITH CLIENTS
Extra work for clients
Frequency of interaction
Mode of interaction - in person, telephone, email, letter
Measuring success of interaction
Satisfaction
Type of clients
CLIENT TRUST
Do clients trust them?
Trust issues - generally, personally, industry,organisation
examples
Measurement
Importance
Relevance
QUALS/PROF MEMBERSHIP
Quals
Professional memberships
importance
relevance to trust and ethics
TYPE OF FIRM
Insurance/independent/bank/dealer group
Size of firm - employees/clients
CODE OF ETHICS
Organisation - Yes/no
Importance
Relevance
Profession - yes/no
397
BEHAVING ETHICALLY AND TRUST
Linked?
Does ethical behaviour increase trust? Why/Why not?
Responsibility of FPs in building ethical behaviour and trust.
Perceptions of clients
PERSONAL CIRCUMSTANCES OF CLIENTS
Genuine interest
Sharing of personal info by clients
Examples/stories
EXTERNAL INFLUENCES
GFC - client and adviser impact
Regulation
Education
EMOTION
Felt
Shown
Circumstances
DEMOGRAPHICS
Gender
Age
Postcode
398
Appendix C23: Full transcript of a client interview
240414_1600
FULL TRANSCRIPT
Interviewer:
So once again, thank you very much for offering some of your time to be part
of the interview. I have sent you some of the questions that I will be asking
you today…
Interviewee: Yes, I printed those out.
Interviewer:
So I might jump around a bit. I might not stay in the same order but if there’s
anything at any time that you want to elaborate on, feel free to do so. Just to
get a bit of background, when did you first visit a Financial Adviser?
Interviewee: I think it was in about, some time in ’91 before my late husband and I went to
live in Hong Kong. We hadn’t done much about our finances so we went to
someone who was recommended to us before we went to live overseas.
Interviewer:
Who recommended the Adviser? Was it a family friend?
Interviewee: I think it was someone up at the University who’d been using him.
Interviewer:
So how many years then has that been? That was ’91 then, wasn’t it? So…
Interviewee: Yes, so it’s about… I’ve worked it out, it’s about 23 years, isn’t it?
Interviewer:
It is. Wow.
Interviewee: He actually left and went to Melbourne and since then we’ve had [name of
adviser] who I think was part of the business later on, [name of adviser].
Interviewer:
Yes. And would you regard both experiences with both Advisers as just
purely professional or over the years did the Advisers become your friend as
well?
Interviewee: Well the first man, he was very nice and we trusted him. That was purely
professional because we didn’t actually meet him very much because we were
away most of the time. But with [name of adviser], well I don’t socialise with
him because he’s a lot younger than me but he’ll answer my emails whenever I
send them and we talk about other things besides financial things. Because
he’s a marathon runner and likes to run so we talk about that and other things
too, yes.
Interviewer:
So you do have some common interests?
Interviewee: Well I’m not a runner. But you know, we just make comments about things,
yes.
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Interviewer:
And do you feel that [name of adviser] provides you with other services that
maybe you’re aware that you’re not really paying for?
Interviewee: Yes, I can have as much contact with him as I like and he always answers my
emails promptly. So I don’t usually ask him about other things, mainly
financial things or… But he is very supportive, yes.
Interviewer:
So how often do you think you interact with one another, roughly?
Interviewee: In a year?
Interviewer:
Yes.
Interviewee: Well I probably have two visits and then sometimes phone calls. Probably
about six or seven times a year. It depends what’s happening. If I want to tell
him something I send an email and he always answers back pretty promptly.
Interviewer:
And how do you feel about the interaction? Are you happy with how it works
at the moment?
Interviewee: Oh yes. He’s very good, yes.
Interviewer:
Can you maybe give me an example of one of your best experiences with an
Adviser and one of your worst experiences?
Interviewee: Well I looked at that question. I haven’t really had any worst experiences.
Interviewer:
That’s good.
Interviewee: Because you know, I’ve been dealing with him for a long time. Well, the best
ones I suppose it’s just that we can communicate fairly well and don’t have
any problems, so I suppose that’s a good experience, isn’t it?
Interviewer:
Yes. And what sort of elements would you say build trust with your Financial
Adviser?
Interviewee: I think the ability to relate to people, not be critical and to take your needs into
consideration. I think also because [name of adviser] actually has been living
in [name of city] for a long time and I think he probably went to school with
my children, so we know the family background a little bit, yes. Because
[name of city] is a fairly, well it’s a big city but word gets around so you know
who to trust and who not to trust. Sorry, I haven’t really answered that
question, have I?
Interviewer:
No, that’s okay. What about, if you were to detect any trust issues, how would
you do that?
Interviewee: I’d confront him about it. But I haven’t had to do that at all. If I don’t agree
with something, well I say that I don’t agree with it. For example, if he
wanted me to invest in something that I wasn’t happy with, then I wouldn’t go
ahead with it and he’d respect my wishes.
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Interviewer:
I’ve asked this question to some other clients as well and I seem to be getting
similar answers. I wonder if you have the same. Do you know what your
Financial Adviser’s qualifications are?
Interviewee: Yes. He’s got a Business Economics Degree from, I think, La Trobe up here
at the university. He’s a member of the Financial Planning Association and
there was another one which is similar to that, I think. So he’s well qualified.
Interviewer:
Is that important to you?
Interviewee: I think so, yes.
Interviewer:
With the firm then that [name of adviser] works for, do you see that as being a
large or a small firm in comparison to others?
Interviewee: Well I think he actually, I think it’s a bit like a franchise. It is a large firm but
he runs it as a separate entity as far as I know. I think it’s amalgamated with
[name of dealer group] or somebody like that. So they probably do have some
influence on him but I’ve always found him to be a fairly ethical sort of a
person to deal with. He’s never actually pushed things that we weren’t happy
with.
Interviewer:
Does the identity of the firm and who they’re associated with affect any of the
trust that you have with [name of adviser] himself?
Interviewee: Not really. I suppose if it was a firm that I had found out that’s had some
crooked dealings or something I wouldn’t be very happy but as far as I know
it’s fairly ethical.
Interviewer:
What does ethical behaviour consist of to you?
Interviewee: It means taking your needs into consideration, doing the best for you and being
honest and not doing things that are just going to benefit him but benefit his
clients as well. And also if we’re talking about ethical investing or investing
in companies that look at sustainability and things like that, so that… I think
it’s a very difficult situation because we’re all caught up with our
superannuation in companies that invest in things like coal mining and things
that we don’t agree with but invariably we are all part of that, aren’t we? And
that’s a difficult issue for me but I don’t know what the answer is. The things
that we have done is to have two managed funds from [name of investment
company] which is an ethical investment company. They don’t invest in coal
mining or gambling or things like that.
Interviewer:
So is this something that you expressed to [name of adviser] that you wanted
for your investment?
Interviewee: I think he probably knows just from our conversations. I don’t really know.
We haven’t really discussed it but I think he’d probably know which side of
politics I was on. I don’t know.
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Interviewer:
So what does trust mean to you then? We’ve talked a bit about ethical
behaviour. How would you determine whether your trust someone? What
does it mean to you?
Interviewee: I think that you can usually tell by talking to a person and you get that feeling
of trust or whether they’re trying to push their own barrow or whether they’re
working in your best interests as well. Obviously he has to do what’s best for
him as well, but just that feeling that he wouldn’t do anything dishonest. He’s
got his reputation to think of. And just talking to him generally, you get that
feeling. You know when you talk to somebody that you meet for the first time
and you either relate to them or you don’t? Well I think I relate to him fairly
well.
Interviewer:
So would you say then - you mentioned it was a feeling - would you say that
trust to you is primarily based on a feeling which is more like an emotion
rather than like factual things?
Interviewee: I think probably both but it’s a bit like empathy, isn’t it? You get that feeling
that you can relate well to someone and that they’ve got your best interests at
heart.
Interviewer:
You mentioned earlier that you knew the qualifications that your Adviser had
and whether you thought it was important. So how does that affect trust? Is
that important? If [name of adviser] did not have those qualifications, would
you have that same level of trust, do you feel?
Interviewee: I probably wouldn’t be dealing with him because you read about so many
accounts where people just set themselves up as Financial Advisers and don’t
really know what they’re talking about or just are working in their own
interests and then people get stung, don’t they? So I probably wouldn’t deal
with him if he didn’t have those qualifications. We knew that he had the
Degree, etcetera, when we first met him.
Interviewer:
So for you to have that first meeting, some of those other things like the
qualifications and the word of mouth, the reputation were important.
Interviewee: Yes.
Interviewer:
But for you to continue to trust with him, it was based on more how you
related with him as a person.
Interviewee: Yes.
Interviewer:
Do you feel like [name of adviser] is genuinely interested in your personal
circumstances?
Interviewee: I think he probably is but he’s got lots of clients and he’s probably got his own
family issues to deal with so he probably wouldn’t want to get too involved,
would he? But I think he’s a very caring person, yes.
Interviewer:
And do you share anything about your personal life with him?
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Interviewee: Only a little bit. I don’t think it’s appropriate to… He’s not a Counsellor and
they’re issues that I have to deal with so he can’t change anything. But I’ve
shared a couple of things with him, yes.
Interviewer:
Are you able to give me some examples of the types of things that you would
share? And those that you wouldn’t?
Interviewee: Just about family issues, you know. Most people have those, don’t they?
Interviewer:
And do you feel that that’s important to the advice that he’s providing you?
Interviewee: Yes because being elderly, if I’ve got a Lawyer as an Executor and he deals
with that Lawyer too so he’ll need to know, he says, although they will do
most of the work when I die and the money is distributed. So he needs to
know a little bit about the family, how many children I’ve got and how we
relate to each other.
Interviewer:
So when you make an appointment to go and see [name of adviser], what sorts
of things go through your mind first up when you’re actually making the
appointment?
Interviewee: Well he usually contacts me and says it’s time to come in. So I just come with
all my information, bank statements and things like that. I do read the
business pages in The Age. I skip-read most of them but I think I know
basically what’s going on so I come with that information. I have a look at
things I might want to invest in or… But my portfolio is fairly simple. It
doesn’t change a lot. I’m not one who buys and sells shares all the time.
Interviewer:
And what about after your appointment? What sorts of things go through your
mind then?
Interviewee: I usually come away feeling quite comfortable with the appointment and I
have a look at what’s recommended and what I need to do. He’s been very
good in sorting out things like Power of Attorney and referring us to a Lawyer,
things like that. So there’s not really a lot that I have to do but I’m aware of
where my money is invested. The other day he told me I needed to spend a bit
more money but I said well I come from the generation where you didn’t
actually spend or tried not spend a lot, you saved it. So we had a laugh about
that, yes.
Interviewer:
Do you ever become emotional or have you been emotional with either of the
Advisers that you have visited?
Interviewee: No. Not really, no.
Interviewer:
What about with the GFC? How did you react to all of that?
Interviewee: Well I didn’t actually do anything. I think if my husband had still been alive
he would have probably panicked because he used to take a great interest in it.
But I think I probably just put some money into fixed deposit. I just was of the
thought that if you had enough to live and eat and a house to live in, then you
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were doing pretty well. So I didn’t panic because the share market tends to go
up again. I don’t even really know how much we lost. But a lot of it’s only
paper money, isn’t it? Shares go up and come down but if you haven’t sold
them then you don’t make a loss or a profit.
Interviewer:
So how did your Adviser deal with those issues? Were you contacted by him
at all?
Interviewee: I think, wasn’t there a downturn after ’91? Was it ’93 or ’94 or something,
and Joe, who was the Adviser at the time advised us to put some money into
fixed deposit because we weren’t really following the market when we were in
Hong Kong. So we didn’t really lose a lot of money then. Well we didn’t
have much to lose so it didn’t really matter.
Interviewer:
Have you heard anything about the Future of Financial Advice legislation?
Interviewee: Yes, don’t talk to me about this government. I think they’re doing the wrong
thing because you hear stories about how people lost their life savings and
their homes because of crooked Financial Advisers and I think this
government is trying to water down the, what’s it called, the FOFA or
something. But I think it’s on hold at the moment, isn’t it, as far as I know?
Interviewer:
Yes. They’ve delayed some of the amendments that were going to be put
through. Do you know what some of those amendments were?
Interviewee: I did look them up but I can’t remember. No, I can’t really remember. But if
they’re going to do anything, I’d probably have a look on the internet and see
what was actually going on.
Interviewer:
So just going back to how you pay for your service, for your financial advice,
one of the changes that the previous government had introduced after the GFC
and the collapse of some large organisations that provided financial advice like
Storm Financial, you’ve probably heard about that. Well this was why the
legislation started to become introduced, was back then. And one of the things
that they were looking at was proposing that they ban all the commission
payments that Advisers earn and that they instead charge a fee for service. So
what do you think of that? Do you think that that was a positive step or not?
Interviewee: What, to ban all of the commissions?
Interviewer:
Yes.
Interviewee: No I don’t think that’s a really positive step because, well I’m only looking at
it from my perspective because we’d never actually, except when my husband
died I paid [name of adviser] to do all the changing over, etcetera. We’ve
never actually paid money to him except through the commissions and they’re
not really high. I mean, I’m not sure whether I pay about $2,000.00 a year, but
to me, it’s worth every penny because I’m on a part pension with Centrelink
and he deals with them all of the time. He does everything. So he tells me
what I need to do and that’s quite a minefield so I wouldn’t want to be dealing
with them. So no, I don’t think they should ban all the commissions but I
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think people should be aware of how much they’re paying. And now they do
send letters out to say how much you’re paying per month.
Interviewer:
Do you think that it would stop some of the unethical Advisers?
Interviewee: If they stopped the commissions?
Interviewer:
Yes.
Interviewee: Yes, I think it depends on how much the commission is. People need to find
out what they’re paying for because I think some companies really push their
own products and the percentage is quite high whereas we’ve always discussed
how much we would actually be paying. So I don’t think you could do away
with it altogether because then how are Financial Advisers going to earn their
money unless you pay them $400.00 or $500.00 an hour, which I think some
of them do charge now, don’t they?
Interviewer:
Well, then that’s the thing, isn’t it, that there’s a lot of different models out
there.
Interviewee: Yes. I think at one stage they were going to charge us and if we had any
queries we could contact them and my late husband, contacted [name of
adviser] and I think they just waived it and we just did what we’d always been
doing. So whether that’s because we’re long-term clients, I don’t know.
Interviewer:
With this interview, I can’t believe you’ve answered almost all of my
questions already. It’s great, thank you.
Interviewee: Oh that’s good. Some of them are a bit waffly, but will you have enough
information to do what you want to do?
Interviewer:
Yes I think so. I just wondered if you could tell me though, if you have any
thoughts as to why some people might say that they don’t see a Financial
Adviser because they think they don’t have enough money to invest. What
would you say to those people?
Interviewee: Well it depends on if they’ve got superannuation. I don’t know. I think it
depends on whether they’re good savers and whether they’re really au fait with
the financial system because it can be a minefield. I think it depends, it
depends on whether they think it’s too much to pay. You know, if you’re very
poor, well you wouldn’t go and see a Financial Adviser and probably if you
just had superannuation you might not need to go. But I think in our case it
put us on the straight and narrow. Although we had good incomes, we did
things like taking the children overseas and we used to spend it. We bought
our house but we didn’t actually save for our old age. So I think us going to a
Financial Adviser was very beneficial.
Interviewer:
Also in regards to that, how do you see the role of the professional body?
You’ve mentioned that your Adviser is a member of the Financial Planning
Association. What do you know about that professional body?
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Interviewee: Well I don’t know much about it but I would presume it’s a bit like the
registration bodies of other organisations like Nurses and Teachers and that
they work in the interests of their members but also in the interests of their
clients that they’re serving. So I would see that as an important organisation in
that respect.
Interviewer:
And is it important to you that [name of adviser] is a member of that body?
Interviewee: Yes, to me it shows that he’s a member of a group of people who follow
certain rules. I don’t know what those rules are but I’m sure that they work in
the interests of the Financial Adviser and the client.
Interviewer:
Once again, I’m just trying to make sure I’ve covered everything because I
can’t believe we’ve got through things so quickly. Thank you. Is there
anything else that you think might be relevant to my research which is on trust
between a client and an Adviser?
Interviewee: No. I don’t know. I’ve got friends who have got different Financial Advisers
and they seem to be quite happy with them. I don’t know anybody who has
really lost a lot of money apart from what I’ve read in the paper. But I think
it’s also up to the client to get as much information as they can before they go
and see somebody so that they really know what they’re talking about. So that
you know whether you’re being ripped off or not, to put it crudely.
Interviewer:
So some responsibility lies with the clients as well.
Interviewee: I think so, yes. I can’t believe when I hear the stories of how some people
have lost their money. It’s a bit like those internet scams where people send
money to Russian women. I just can’t believe that they would do that when
there’s so much money involved. I mean, it’s your money and it needs to be
invested in your interests, doesn’t it? And I think it works both ways. You’ve
got to have that information so that you can sort out whether people are doing
the best thing for you or whether they’re trying to bamboozle you.
Interviewer:
Do you think maybe some people go along with those types of scams, that
maybe they’re too trusting? Or do you just think that they’re not educated?
Interviewee: Probably a bit of both. I think they’re probably not educated but in the case of
emotional situations where they’re looking for partners, they’re probably very
unhappy people and they become too trusting. But when you’re investing
money I think it’s up to you to find out what’s going on in the world. It’s a bit
like politics. But you can only learn from what you read, basically in the
newspapers or on the internet.
Interviewer:
I was just going to ask from that response, is there anything that you could
suggest could be done to assist people in the future to seek the right kind of
financial advice? Is there anything that you could say to potential clients or
that maybe the government or the professional bodies could do?
Interviewee: Well if it was a friend, I’d be saying to them, “Get as much information as you
can.” One would hope that governments would have policies in place that
406
would protect consumers but that’s not always the case, well as far as I can see
at the moment.
Interviewer:
Can you give me an example of a policy that you think would protect
consumers better?
Interviewee: Well, probably the legislation that was in place that was brought in by the
Labour government and now it’s going to be watered down. That will allow
for some people to get away with giving financial advice and perhaps without
many qualifications. Also they were talking about bank tellers giving out
financial advice or pushing products. Well I don’t think that’s appropriate.
And I think that legislation should be put in place to protect people from that
sort of pressure.
Interviewer:
Well that’s very good, thank you. You’ve given me some great information
that I can use with my research.
Interviewee: When do you hope to finish?
Interviewer:
I’m hoping to have a draft submitted at the end of the year and the final
submitted maybe February next year. But it can take some time to be
examined so it probably won’t be until the end of next year that I know the
outcome. But I will send information to all of the people who have
volunteered their time to assist so that you can have a read once it’s all
available if you’re interested.
Interviewee: Oh yes, I would be, and I wish you well because I actually supported my
husband when he was doing his PhD so I know what it’s like.
Interviewer:
So what area was his PhD in?
Interviewee: In Educational Psychology.
Interviewer:
Wow. So you do know what’s involved.
Interviewee: I’m not at my best at the moment though so it’s a bit jumbled.
Interviewer:
It hasn’t come across that way at all. I really appreciate your help.
Interviewee: Well I wish you well.
Interviewer:
Yes, you too.
END OF TRANSCRIPT
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APPENDIX D
Chapter 6 Results
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Appendix D1: Cross-tabulation results of demographic groupings against
usefulness of Statement of Advice (SOA): client questionnaire 1
409
410
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Appendix D2: Cross-tabulation results of organisation type and behavioural skills: client questionnaire 1
412