the role of trust in personal financial planning

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:……………………………………

i

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

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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

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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


5.5.2 Survey Design.............................................................................................. 79


5.5.4 Methods of Data Analysis ........................................................................... 83


5.6 Financial Adviser Questionnaire ........................................................... 84


5.6.2 Survey Design.............................................................................................. 86


5.6.4 Method of Data Analysis ............................................................................. 90


5.7 Interviews .............................................................................................. 93


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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




6.4 Financial adviser questionnaire ........................................................... 160

6.4.1 Response Rate .......................................................................................... 160




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

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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

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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

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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

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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

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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

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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

xiii

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

xiv

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)

xv

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.

xvi

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

xvii

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 types 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.

Chapter 1: Introduction

1

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


2

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


3

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?


4

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


5

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 client-

adviser 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


6

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


7

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


8

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


9

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.


10

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:

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:

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 inter-

relationships among often conflicting objectives.

(FPSB, 2006 in FPA, 2013a)


11

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.

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.

12

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).

13


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

14


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

15


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

16


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

17


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

18


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 Details A degree qualification • 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. Professional year • Structured mentoring program

• Includes the competent and ethical application of knowledge and professional behaviour

• Must satisfactorily pass structured assessment component National Registration Exam • 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

19


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 Abbreviation Association for Financial Professionals AFP Association of Financial Advisers AFA Association of Superannuation Funds of Australia ASFA Australian and New Zealand Institute of Insurance and Finance ANZIIF Australian Financial Markets Association AFMA Australian Institute of Company Directors AICD Australian Institute of Company Directors AICD CPA Australia Ltd CPA Australia Finance Brokers Association of Australia FBAA Financial Planning Association of Australia FPA Financial Services Institute of Australasia FINSIA Institute of Chartered Accountants Australia (since amalgamated with the New Zealand Institute of Chartered Accountants to become Chartered Accountants Australia and New Zealand) ICAA ( CA) Securities Institute of Australia SIA Superannuation Professionals Association of Australia SPAA The Institute of Public Accountants IPA

Although the FPA is recognised as the peak professional body for financial planning, the

20


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

21


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

22


(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

23


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

24


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.

Chapter 3: Literature Review

25

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.


26

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:


27

• 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).


28

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 cognition1 (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.


29

Table 3-1 Elements of behavioural trust

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.

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


30

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):


31

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,


32

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


33

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.


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 Anderson and Weitz 1989 Support provided, common goals, cultural similarity, competence, age of

relationship, communication Manufacturer and sales agents

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 Deshpande 1992

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 1995

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 & Iacobucci (Eds) 2000

Shared values, goal congruence, cooperation, age of relationship, expertise, interpersonal characteristics, relational selling behaviour

Service relationships

Kirchmajer and Patterson 2003 Interpersonal communication (communications clarity, social communications and information provision)

Small to Medium enterprise (SME) professional services providers

Johnson and Grayson 2005 Expertise, product performance, firm reputation, satisfaction with previous interactions, similarity

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


35

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.

Figure 3-1 Antecedents of trust

Antecedents of Trust

Communication effectiveness

Frequency of

Interaction

Satisfaction with

previous interaction

Reputation

Age of

relationship Competence

Perceived organisational characteristics

Caring/ concern

Reliability

Honest/ integrity


36

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.

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

Generalised trust

Character-based trust

Systems/ Institution-based trust

Process-based trust

Client Trust

Derived from social norms

Driven by personal

characteristics

Driven by law, regulations,

codes, professionalism

Driven by repeated

interaction, reputation,

interpersonal skills


37

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


38

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


39

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


40

competing issues surrounding the social context of accounting and of organisations more

generally. A further study by Ponemon in 1992 supports the existence of selection-

socialisation 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.


41

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,


42

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


43

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


44

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


45

was still ‘product-based’ but was moving towards an ‘advice-based’ system (op cit, pp. 70-

71). 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


46

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


47

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.


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


49

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.


50

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


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


51

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.

52

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.

Figure 4-1 Theories of trust underpinning this study

Social Psychology

Sociology

Management

Marketing Trust

53


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

54


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.

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

Moral Awareness

Moral Reasoning

Moral Motivation

Implementation

55


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).

56


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).

57


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.

58


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.

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

Character-istics

Vulnerability

Honesty

Faith

Integrity

Reliability

Competence

Predictability

Personal factors

Credentials

Caring

Honest

Ethical

Listening

Reliable

Society factors

Social norms

Reputation

Systems factors

Business model

Organisation type

Legislation

Professional regulation

Process factors

Benevolence

Interpersonal skills

Interaction

Competence

Shared values

Propensity to trust

Calculus-based

Identification- based TRUST

59


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 client-

adviser 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; Shockley-

Zalabak, 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

60


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;

61


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 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?

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

62


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.

63

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

64


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.

Figure 5-1 The inter-relationship of philosophical assumptions, research topic and methodology.

Methodology

Philosophical Assumptions

Research

Findings

Research Methods Used

Research Question/

Research Topic

65


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 (1st mailing)

March 2013 (2nd mailing)

FAQ Financial Adviser Questionnaire February – March 2013 (1st mailing)

July - August 2013 (2nd 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

66


relationship. Such theories provide the basis for the study in analysing the role of trust in


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 Research Instrument Respondents RQ1: What characteristics of trust are evident in personal financial planning?

CQ1, CQ2, FAQ, SCI, SFI

Clients Potential Clients Financial Advisers

RQ2: How do financial advisers perceive their role in developing trust with their client?

FAQ, SFI Financial Advisers

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?



RQ5: What is the relationship between ethical behaviour and trust?

FAQ, SCI, SFI Clients Financial Advisers

RQ6: How have recent changes in the financial planning environment impacted on the role of trust?

CQ2, FAQ, SCI, SFI 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

67


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.

68


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 one-

thousand 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 cross-

section 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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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 Research Question Demographics 1,2,3,4 RQ3 If/when advice sought 5,6 Criteria for

subsequent survey questions

Organisational structure of planner/adviser firm 7 RQ3 Regulation of Advice 8,9 RQ3 Remuneration 10, 15 RQ4 Usefulness of SOA 11, 12 RQ1, RQ3 Behavioural Skills as antecedents of trust (for further details see Table 3-6)

13 (a – o) RQ1,RQ3

No advice sought 14 Criteria for subsequent survey questions

Free response 16 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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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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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 Details Introduction Was the purpose of the survey clear? Did it have credibility? Is confidentiality assured? Instructions Were they easy to understand? Sequencing Correct numbering of questions and pages – were any questions missed? Response choice Inclusion of all possible responses for all types of respondents. Were there enough

options or more than one response chosen? Readability/Layout Were the questions easy to read and follow? Meaning What did the respondent think the question was asking – did it match the intention of the

question? Word choice 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?

Perplexity Were there any questions where the respondent was likely to hesitate (for example, re-reading a question, a puzzled look, changing their answer) which may indicate possible confusion?

Time to complete 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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Table 5-5 Analysis of Questionnaire Concerns or Errors from Observational Study

Items with Concerns or Errors Q. No.

Person 1 Person 2 Person 3

a. Title meaning* Intro

b. Credibility* Intro

c. Confidentiality* Intro

d. Willingness to respond if received in mail* Intro

e. Occupation – hesitation before writing response/unsuitable response

4

f. Use of the word “authorised” – misleading for terms >6 yrs .(i.e. before Financial Services Reform)

5

g. 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

( 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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• 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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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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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.

1. Preparation 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

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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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Table 5-7 Data screening procedure: client questionnaire 1

Procedure Method Result 1. Checked accuracy of data for

any out-of –range entries or other data entry errors

• Frequency tables • Descriptive statistics

Gender – one case entered as code ‘3’ (queer) for gender.

2. Examined missing data – is it systematic or random?

• Look for evidence of differential mortality

Missing data is ‘user defined’.

3. Looked for outliers • Histograms • Boxplots • Confirm by obtaining z

scores.

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

4. Checked for normality/parametric test assumptions

• Histograms • Descriptive statistics –

skewness and kurtosis • Shapiro-Wilk test • Repeat tests after

dealing with 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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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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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)


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)

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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 client-

planner relationship.

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Table 5-8 Additional themes addressed by client questionnaire 2

A complete copy of the second client questionnaire is contained in Appendix C8.


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

Theme Reference to Previous Research Questionnaire Reference

Research Question

Ethical Lewis and Weigert 1985; Shockley-Zalabak 2011; Fulmer & Gelfand 2012

1d, 12p,13g RQ1, RQ5

Integrity Lewis and Weigert 1985; Mayer, Davis and Schoorman 1995

12q RQ1

Dependable Johnson-George and Swap 1982; Rempel, Holmes and Zanna1985; Rousseau et al 1998; Svennson 2004; Johnson and Grayson 2005

12r, 16a RQ1

Benevolent Lewis and Weigert 1985; Rempel, Holmes and Zanna1985; Mayer, Davis and Schoorman 1995; Nooteboom 2002; Johnson and Grayson 2005

12t RQ1

Competence Mayer, Davis and Schoorman 1995; Nooteboom 2002; Svennson 2004; Jackling and Sullivan 2007

1d, 13a-13g, 14, 15, 16n, 16p

RQ1

Credentials Zucker 1986; McAllister 1995; Johnson and Grayson 2005; Sharpe et al 2007

1h, 1l RQ1, RQ3

GFC Schoorman et al 2007; Kim et al 2009 Fulmer and Gelfand 2012

1i,1k RQ6

Legislation Child and Mollering 2003; Rao, Pearce & Xin 2005; Fulmer and Gelfand 2012

1g RQ3

Experience of adviser Bigel 1998 1b RQ1, RQ3 Business Size Rousseau et al 1998 1c RQ3 Business Reputation Rousseau et al 1998; Stewart 2003; Lin et al

2011 1e RQ3

Common interests/shared values

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

1f, 1m RQ1

Adapted Trust Scale – Dependability, Predictability, Faith

Rempel, Holmes and Zanna 1985; Crosby et al 1990; Moorman, Zaltman and Deshpande 1992; Christiansen and DeVaney 1998

16a-16l RQ1

Communication Anderson and Weitz 1989; Anderson and Narus 1990; Moorman Deshpande and Zaltman 1993; Morgan and Hunt 1994; Christiansen and DeVaney 1998

13b, 13 c, 16m-n RQ1

Confidence Crosby et al 1990; Moorman, Zaltman and Deshpande 1992; Sharma and Patterson 1999

16d, 16k RQ1

Genuine Care /Nurturing Rempel, Holmes and Zanna 1985; Sharma and Patterson 1999; Nooteboom 2002

12s, 16i, 16o RQ1

Remuneration None found – additional question to that in client questionnaire 1

1g, 1j RQ4

General vs Specific Trust Validity check 1a, 1n RQ1,RQ3

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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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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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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.


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


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

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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

86


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.ctrl-

state=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


https://connectonline.asic.gov.au/RegistrySearch/faces/landing/ProfessionalRegisters.jspx?_afrLoop=9390051447098164&_afrWindowMode=0&_adf.ctrl-state=oom4a6bvo_4



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Table 5-11 Matching of questions in client questionnaire and financial adviser questionnaire

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

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

Theme Financial Adviser Questionnaire (FAQ) Reference

Client Questionnaire 2 (CQ2) Reference

Research Question (RQ)

Part A Part C Behavioural Skills 8a-o 12a-12o RQ1, RQ3 Ethical 1d, 8p, 9g 1d, 12p,13g RQ1, RQ5 Integrity 8q 12q RQ1 Dependable 8r, 11a 12r, 16a RQ1 Benevolent 8t 12t RQ1 Competence 1d, 9a-g, 1, 11k 1d, 13a-13g, 14, 15, 16n,

16p RQ1

Credentials 1i, 1m 1, 2 1h, 1l RQ1, RQ3 GFC 1j, 1l 1i,1k RQ6 Legislation 1g 1g RQ3 Experience of adviser 1b 1b RQ1, RQ3 Business Size 1c 1c RQ3 Business Reputation 1f 1e RQ3 Adapted Trust Scale – Dependability, Predictability, Faith

11a-e, 11g-i, 11k 16a-16l RQ1

Communication 9b, 9c, 11k 13b, 13 c, 16m-n RQ1 Confidence 11j 16d, 16k RQ1 Genuine Care /Nurturing 8s, 11d, 11h 12s, 16i, 16o, RQ1 Remuneration 1g, 1k, 7 1g, 1j RQ4 General vs Specific Trust 1a, 1e, 1a, 1n RQ1,RQ3

Theme Reference to Literature FAQ Reference Research Question

Integrity Hoffman 2002 p92 Part A -1h RQ2 Honesty Hoffman 2002 p54, p90 Part A - 1n, 1o RQ2 Work history Bigel 1998 Part A- 4, 5, 6 RQ2 Genuine care/Nurturing McAllister 1995 p37, p39 Part A – 11l, 11m RQ2 Validity check Hoffman 2002 p54 Part A – 11n RQ2 Competence Hoffman 2002 p95 Part A- 11o RQ2 Dependability Hoffman 2002 p95 Part A – 11p RQ2 Ethical Development (DIT1)

Rest 1979 Part B RQ5

Education Zucker 1986, Bigel 1998, Sharpe et al 2007 Part C – 1, 2 RQ5

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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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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.


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

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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 1 2 3 4 5 6 7+ Total

1st Mail-out Completed and returned

1 10 1 12 7 1 28 60

1st Mail-out Returned to Sender

0 66 103 37 6 4 6 222

2nd Mail-out Completed and returned

0 5 6 4 0 0 0 16

2nd Mail-out Returned to Sender

0 5 4 4 0 0 1 14

5.6.4 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.

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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

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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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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.


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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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

95


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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• 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?

Rempel, Holmes and Zanna1985; Sharma and Patterson 1999, Nooteboom 2002

4 Are you aware of any common interests you share with your financial adviser? Can you provide some examples?

Zajonc (1968, 1980), Frank 1998, McAllister 1995, Gaudine and Thorne 2001

5 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?

Adapted from McAllister 1995 p.37-39

6 Tell me a little about your best experience/s with financial advisers.

N/a

7 Tell me a little about your worst experience/s with financial advisers.

N/a

8 On average, how often does your financial adviser interact with you? In person? Via telephone? Via email? Via letters? Other?

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 How would you detect if there were any trust issues with a financial adviser? (Note here propensity to trust/institutional trust/interpersonal trust)

Rotter 1980, Goldberg 1999, Mayer, Davis and Schoorman 1995,

12 Tell me what you know about your financial adviser's qualifications or professional memberships? Do you think it is important - why or why not?

Sharpe et al 2007, McAllister 1995, Johnson and Grayson 2005

13 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).

Rousseau et al 1998

14 Does the identity of the firm affect your trust? Rousseau et al 1998; Lin et al 2011; Stewart 2003.

15 Explain what ethical behaviour consists of to you. Lewis and Weigert 1985

16 Explain what trust means to you. Rempel, Holmes and Zanna1985; Christiansen and DeVaney 1998

17 Do you think that behaving ethically always increases trust? Why or why not?

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?

Brien 1998

19 Is your financial adviser genuinely interested in your personal circumstances?

Rempel, Holmes and Zanna 1985

20 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?

Zajonc (1968, 1980), Frank 1998, McAllister 1995, Gaudine and Thorne 2001

21 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)

Williams 2007

22 Have you ever been emotional about things when your financial adviser is providing advice to you? If yes - can you give an example?

Sharma & Patterson 1999, Clark and Waddell 1985, McAllister 1995 p.29, Rempel, Holmes and Zanna 1985, Holmes 1978, Holmes and Rempel 1989, Williams 2007.

23 Explain how you reacted to the GFC. Fulmer and Gelfand 2012; Kim et al 2009; Schoorman et al 2007

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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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Table 5-16 Interview questions: financial advisers

Question Literature reference/s

1 How many years’ experience do you have as a financial adviser?

Bigel 1998

2 What are your qualifications/professional memberships? Sharpe et al 2007

3 How long have you been at your current place of employment?

Bigel 1998

4 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)

Rousseau et al 1998

5 Describe what the organisational culture is like where you work.

Trevino 1986, Frank 1998, Rest 1984, Carroll 1987, Christenson 2008, Shockley-Zalabak 2011

6 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?


7 How frequently do you do extra things for your clients that maybe you won’t be rewarded for? Why/Why not?


8 Tell me a little bit about how you became a financial adviser?

Zucker 1986, McAllister 1995, Johnson and Grayson 2005

9 On average, how often do you interact with your clients? In person? Via telephone? Via email? Via letters? Other?

Lewis and Weigert 1985; Fulmer and Gelfand 2012

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 Have your clients asked you about your qualifications of professional memberships? Do you think it is important to your clients - why or why not?

Sharpe et al 2007, McAllister 1995, Johnson and Grayson 2005

13 Does your organisation have a code of ethics? Trevino 1986, Carroll 1987, Christenson 2008

14 Explain what ethical behaviour consists of to you. Lewis and Weigert 1985, Rest 1994

15 Explain what trust means to you. Rempel, Holmes and Zanna 1985; Christiansen and DeVaney 1998

16 Do you think that behaving ethically always increases trust? Why or why not?

Shockley-Zalabak, P., 2011; Fulmer & Gelfand 2012

17 What do you believe should be a financial adviser's responsibilities for building ethical behaviour and trust?

Brien 1998

18 Are you genuinely interested in the personal circumstances of your clients?

Rempel, Holmes and Zanna 1985

19 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?

Zajonc (1968,1980), Frank 1998, McAllister 1995, Gaudine and Thorne 2001

20 Tell me about any experiences you can recall where clients have been emotional.

Zajonc 1980, Nooteboom 2002

21 Have you ever felt emotional when providing advice to clients? If yes - can you give an example?

Holmes 1978, Clark and Waddell 1985, Rempel, Holmes and Zanna1985, , Holmes and Rempel 1989, McAllister 1995 p.29, Sharma & Patterson 1999,Williams 2007.

22 Explain how most of your clients reacted to the GFC. 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?

Fulmer and Gelfand 2012 (Also Child and Mollering 2003; Rao, Pearce & Xin 2005)

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25 What are your thoughts on education requirements for advisers?

Zucker 1986; McAllister 1995; Johnson and Grayson 2005; Sharpe et al 2007

26 Have you ever visited a financial adviser for your own personal advice?

Crosby et al 1990; Moorman, Zaltman and Deshpande 1992; Sharma and Patterson 1999

27 A survey recently conducted by myself revealed …… Why do you think that might be?

N/a

28 Demographics –age, gender, location N/a

5.7.3 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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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.

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.

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

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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 Set-up client and adviser folders in Leximancer to allow for folder and file tagging Step 2 Apply dialogue tags Step 3 Ensure correct settings for prose (e.g. zero for spoken language) Step 4 Group together singular and plural words; upper and lower case forms of the same word as

single concepts (e.g. adviser, advisers) Step 5 Conduct raw first cut analysis for pure discovery Step 6 Examine raw results and explore data in initial run to understand data and compare with

manual analysis Step 7 Explore thesaurus and links to data Step 8 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

Step 9 Run project and view concept map, adjusting visible concepts and theme size to aid analysis Step 10 Re-cluster map several times and inspect map on each occasion to ensure the cluster map is

representative and revise parameters where required. Step 11 Examine themes, concepts and connectivity and conduct further analysis through pathways

and queries in map explorer. Step 12 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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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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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 re-

identifiable 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 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 (pre-GFC)

Sought Advice Frequency Percent Valid Percent Cumulative Percent

Valid No 90 50.3 51.7 51.7 Yes 84 46.9 48.3 100.0 Total 174 97.2 100.0

Missing 99 5 2.8 Total 179 100.0

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 (pre-GFC)

Frequency Percent Valid Percent Cumulative Percent

Valid

Strongly Disagree 3 1.7 1.8 1.8 Disagree 14 7.8 8.5 10.3 Neutral 50 27.9 30.3 40.6 Agree 57 31.8 34.5 75.2 Strongly Agree 41 22.9 24.8 100.0 Total 165 92.2 100.0

Missing 99 13 7.3 System 1 .6 Total 14 7.8

Total 179 100.0

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

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.

21

30

20

25

32

18

0

5

10

15

20

25

30

35

AFSL (Australian FinancialServices Licence)

FSG (Financial ServicesGuide)

No.

of r

espo

nden

ts

Information provided

Provided

Not provided

Don’t Know

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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 Minimum Maximum Mean Std. Deviation

FABS 74 15 75 54.23 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

Behaviour N

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 cross-

tabulated 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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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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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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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 (�̅� = 51.65) was significantly lower than the mean for all other

organisation types providing financial advice (�̅� = 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

Theme

1 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 fees3) but accept no

responsibility if their information4 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 open-

ended 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

Strongly Disagree

Disagree Neutral Agree Strongly Agree

1 salesman trust specific deliver Professional 2 Bad products superannuation products investments 3 Trust bank husband salesman cost 4 investments qualifications professional specific 5 Bank paid payment 6 qualifications reliable bank 7 Cost qualifications feel 8 research money 9 cost self 10 self qualifications 11 payment research 12 bank cost 13 money

Only four clients who ‘strongly agreed’ that their adviser was trustworthy provided open-

ended 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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Chapter 6: Results

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.


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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Chapter 6: Results

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 over-

representation 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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Chapter 6: Results

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 post-

GFC. 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’.

Figure 6-15 Reasons why respondents have not sought financial advice: client questionnaire 2


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.

0

1

2

3

4

5

Have notthoughtabout it

Notenough

time

Dont knowhow to find

one

Notenough

money toinvest

Tooexpensive

Don't needadvice

Dont trustthem

Freq

uenc

y of

resp

onse

Reason why advice not sought

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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.

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.

10 11

2 2

6 5

0

2

4

6

8

10

12

AFSL FSG

No.

of r

espo

nden

ts

Information provided

Yes

No

Don't Know

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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


FABS 17 43 75 56.59 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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Chapter 6: Results

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


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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Chapter 6: Results

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.


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 cross-

tabulated 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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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 Independent Variable

Results (1 = strongly disagree; 5= strongly

agree) ‘Qualifications such as a university degree make a financial planner more trustworthy.’

Professional body

Clients with FPA advisers rated this lower (𝑥� = 2) than advisers with CPA (𝑥� = 3.5) or ICAA (𝑥� = 4) membership.

Organisation type

All types of organisation types 𝑥� < 3 except for super funds (𝑥� = 4) .

‘Government legislation banning commissions makes financial planners more trustworthy.’

Remuneration method

Only clients who remunerated their FPs with trailing commissions disagreed.

Years with planner

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).

‘More importance should be placed on technical competence than ethical values when choosing a financial planner.’

Year client last sought advice

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.

A financial planner with less than 10 years of experience is more trustworthy than one with more than 10 years of experience.’

Years with planner

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).

‘The Global Financial Crisis (GFC) increased my trust in financial planners.’

Years with planner

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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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 cross-

tabulated 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


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


Theme

1 People 2 Salesman 3 Qualifications 4 Money 5 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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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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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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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 Completed Returned to Sender

Response Rate

1st Mail 1500 60 222 4.7%

2nd Mail 200 16 14 8.6%

Total 1700 76 236 5.2%

A total of 76 usable financial adviser questionnaires were received, providing a response

rate of 5.2%.


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 (Hartge-

Hazelman, 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.


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-for-

service 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


FABS 64 54 75 65.05 5.187

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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 (�̅� = 4.48) in the questionnaire,

compared with clients who rated their adviser’s problem solving skills lowest (�̅� = 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, �̅� = 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, �̅� =

3.71) but clients generally did not agree with this statement (𝑥� = 3, M = 3, �̅� = 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, �̅� = 2.55) but client respondents (refer

section 6.3) agreed with this statement (𝑥� = 4, M = 4, �̅� = 3.57). The Likert scale results for

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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 (�̅� = 4.66,

(𝑥� = 5), reliable (�̅� = 4.57), and caring (�̅� = 4.48) toward their clients. Furthermore,

financial adviser respondents strongly agreed that clients would feel comfortable sharing

personal information with them (�̅� = 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


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.


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 N

Time Management Verbal Written

Problem Solving Technical Numeracy

Social/ Ethical

Awareness Fee for Service 25 4.00 4.00 4.00 4.00 4.00 4.00 4.00

Commission 6 5.00 4.50 5.00 5.00 4.00 5.00 4.00

% of FUM 4 3.50 4.50 4.50 5.00 5.00 5.00 4.50

Salary 3 4.00 3.00 4.00 4.00 4.00 4.00 4.00 Combination of fee and commission 21 4.00 4.00 4.00 5.00 4.00 4.00 4.00 Fee plus % new business 2 4.00 4.50 4.50 4.50 4.50 4.00 4.50 Salary plus % of FUM 4 3.50 4.50 5.00 4.00 4.00 4.50 4.00

Total 65 4.00 4.00 4.00 4.00 4.00 4.00 4.00

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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).


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; 𝜒2 (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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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, 𝜂𝑝2 = 0.14. Tukey HSD post hoc

comparisons revealed the most significant difference to be between independent advisers

and accounting practices (�̅�𝐷𝐷𝐷𝐷 = 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, 𝜂𝑝2 = 0.11. Tukey HSD post hoc comparisons revealed the most

significant difference to be between independent advisers and dealer groups (�̅�𝐷𝐷𝐷𝐷 =

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, 𝜂𝑝2 = 0.05 with Tukey HSD post hoc comparisons revealing the only

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significant difference to be between independent advisers and dealer groups (�̅�𝐷𝐷𝐷𝐷 =

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’,

𝜒2 (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, 𝑟2 = 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, 𝜂𝑝2 = 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,

�̅�𝐷𝐷𝐷𝐷 = 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).


A Kruskal-Wallis nonparametric test showed a significant difference among professional

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designation groups for trust factor ‘Government legislation banning commissions makes

financial planners more trustworthy’, 𝜒2 (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’, 𝜒2 (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’, 𝜒2 (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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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 59 Missing 7

Excluded (M>4) 10 Mean 28.64 Median 30.00 Mode 36.67 Std. Deviation 12.41 Minimum .00 Maximum 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 cut-

off 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)

1st Quartile 2nd Quartile 3rd Quartile 4th Quartile P Score 0-22 23-34 35-46 47 and higher No. of cases 16 23 15 5 Percent of cases 27.12% 38.98% 25.42% 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) P score (this study) P score (Bigel 2000)

1-2 yrs 28.33 38.98 3-5 yrs 22.00 6-9 yrs 30.91 39.31 10 or more yrs 27.58 33.94


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’. Twenty-

seven 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


Theme

1 Clients 2 Trust 3 Industry 4 Life 5 People 6 Feel 7 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

Theme Connectivity Concepts (in order of significance)

1 adviser 100% adviser, financial, legislation 2 people 65% people, advice, information, wanted, qualifications 3 things 54% things, money, need, tax 4 best 22% best, interests, moment 5 time 21% time, pay 6 thought 19% thought, market 7 bank 13% bank, work 8 trust 12% trust, saying 9 professional 06% professional, feel 10 year 04% year 11 ethical 03% ethical 12 commissions 02% 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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Chapter 6: Results

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]



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


Theme Connectivity Concepts (in order of significance)

1 people 100% people, things, time, need, look, work, insurance, long, saying, take, investment, life, whole

2 clients 49% clients, best, deal, become, issues, number, fact 3 business 11% business, Global Financial Crisis, terms 4 year 09% year, service, fee 5 money 07% money, course 6 industry 04% industry 7 trust 03% trust 8 feel 02% feel 9 started 02% 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-to-

face 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 face-

to-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-to-

face 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 fully-

fledged 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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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 self-

rated 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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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.

Chapter 7: Discussion

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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


216

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.

Figure 7-1 Characteristics of trust identified by clients of personal financial advisers

Characteristics of Trust in Personal Financial Planning

Vulnerability/ Risk

Faith

Competence

Best interests Honesty

Accountability

Feeling


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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


218

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:



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


219

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]


220

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:


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) ((�̅� = 51.65) in CQ1

than all other organisation types (�̅� = 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


221

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


222

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 post-

GFC.

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]



working in your best interests as well... You get that feeling that you can relate well


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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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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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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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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:



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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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 (�̅� = 4.48) in

the questionnaire, compared with clients who rated their adviser’s problem solving skills

lowest (�̅� = 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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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, �̅� = 3.71) but clients generally did not

agree with this statement (𝑥� = 3, M = 3, �̅� = 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 (�̅� = 4.57), and caring (�̅� = 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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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


230

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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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, �̅� = 3.5) and CQ2 (𝑥� = 3, �̅� = 3.58) differed slightly and CQ2

indicated that clients generally found their advisers to behave ethically (𝑥� = 4, �̅� = 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.


232

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, �̅� = 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:



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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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 (𝜒2 (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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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

Statement/measure Median Mean

1a Financial planners are trustworthy 3 3.00 1e The public reputation of a firm is important when choosing a

financial planner you can trust. 4 4.00

1n I find it easy to trust people 3 2.76 12h Behaviour of most recent adviser : ‘trustworthy’ 4 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 open-

ended 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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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


236

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 (�̅� = 51.65) to be significantly

lower (p = 0.035) than the mean for all other organisation types providing financial advice

(�̅� = 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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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, �̅� = 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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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


239

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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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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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.


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Figure 7-2 Factors influencing trust in personal financial planning

7.5 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

Individual factors

Listening skills

Reliability

Honesty

Genuine Care

Ethical behaviour

Demographic factors

Qualifications

Work experience

Society factors

Social norms

General trust

Reputation

Systems factors

Remuneration type

Organisation type

Legislation

Professional regulation

Process factors

Interaction

Age of relationship

Technical competence

Interpersonal skills

Benevolence


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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:



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:


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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, �̅� = 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


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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


246

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


247

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


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there are still people that make mistakes. [Interviewee 102]



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:


249

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.


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Table 7-3 DIT P-scores from comparison studies

Study Region/ Country

Sample Description Data Collection Method

Mean P (%)Score

Abdolmohammadi and Baker (2006)

North Eastern United States

Accounting students in final unit of study

In person – forced ranking using computer punch cards

35.68

Allen and Ng (2001)

United States

AICPA members Mail Survey 31.03 (Partners/ Proprietors)

Armstrong (1987) United States

CPAs Mail Survey 38.5

Bigel (1998) United States

CFP licensees Mail survey 38.01

Bigel (2000) United States

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)

Doyle, Hughes and Summers (2013)

Ireland Tax practitioners and non -specialists

Mail survey 31.168 (Non-specialists) 31.6 (Tax practitioners)

Eynon, Hill and Stevens (1997)

United States

Licensed CPAs who are sole proprietors and small firm practitioners

Mail survey 36.9

Herington and Weaver (2008)

Australia Undergraduate and postgraduate business students

Survey self-completed in classroom setting

38.99

Lampe and Finn (1992)

United States

Auditing students and auditors in accounting firms

Experimental survey completed under observation

34.5 (Auditing class of university students) 40.9 (Practicing CPA Auditors)

Ponemon (1992) United States

CPAs Mail survey 38.02

Shaub (1994) United States

CPAs Mail survey and conducted in classroom setting

41.3

Current Study Australia Financial service representatives on ASIC’s Professional Register of AFSL holders and authorised representatives

Mail survey 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


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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, �̅� = 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


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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


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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


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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 open-

ended 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:


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


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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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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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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 self-

ratings in Table 6-28 indicate that advisers ranked the skill of ‘problem solving’ the highest

of all other competence-based skills (�̅� = 4.48) in the questionnaire, compared with clients

who rated their adviser’s problem solving skills lowest (�̅� = 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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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 self-

reported 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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[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


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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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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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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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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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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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 self-

ratings 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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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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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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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

269


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.

270

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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

290

APPENDIX A

Chapter 2 Context of the Study

291

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

292

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.

293

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>

http://www.austlii.edu.au/au/legis/cth/consol_act/ica1984220/notes.html

http://www.comlaw.gov.au/Details/C2004C00970

http://www.comlaw.gov.au/Series/C2004A04633

294

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.

295

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;

296

• 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

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• 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

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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.

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APPENDIX B

Chapter 3 Literature Review

300

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’

301

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)’ .

302

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.

303

Appendix B2: An overview of the multidimensional construct of trust (Svensson, 2004, p.473)

304

APPENDIX C

Chapter 5 Methodology

305

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: ________________________________

306

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 2 3

9. Did your financial planner/adviser provide you with a Financial Services Guide (FSG)?

Yes No Don’t know 1 2 3

10. 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:__________________________________

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11. Did you receive a Statement of Advice?

Yes I read it thoroughly 1 I had a quick read 2 I did not read it 3 No 4 (Go to Question 13)

12. Was the Statement of Advice you received (tick one box only): Useless 1 Useful but not relevant 2 Useful and relevant 3 13. Place a tick in the column that best corresponds with the behaviour of your

most current financial planner/adviser.

Strongly Disagree 1

Disagree 2

Neutral 3 Agree 4

Strongly Agree 5

Reliable

Honest

Responsible

Caring

Professional

Patient

Flexible

Trustworthy

Marketing Oneself

Listening

Communicative

Empathy

Tactful

Friendly/ Approachable

Relationship building

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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 Disagree Neutral Agree Strongly Agree 1 2 3 4 5 16. (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.

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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

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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.

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Appendix C4: Coding Sheet for Client Questionnaire 1 CODEBOOK FOR CLIENT SURVEY 1

Survey

Ref

Variable SPSS Variable Name Coding Coding instructions and notes

Respons

e number

Identification number ID number assigned to each survey Each survey to be given a consecutive identifying

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,

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

312

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

313

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

5 Sought advice from FP Soughtadvice 1= no Go to Q 15

2= yes Continue

6 Year last sought

advice

YearSoughtAdvice Enter four digit year as stated

7 Type of Financial

Planner

TypeofFP 1= Dealer Group eg. Mercer Wealth, Charter

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

314

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

8 AFSL provided AFSLprovided 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

SOA

ReadSOA 1= Read SOA thoroughly

2= Read SOA quickly

3 = Did not read SOA

4 = No Go to Q14

12 Usefulness of SOA SOAusefulness 1= Useless Leave blank if not answered

315

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

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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

317

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

chosen not to seek

financial advice?

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)

318

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

commissions on

financial advice

provided

InfluenceOfCommissi

ons

1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

319

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

320

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?

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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 [email protected]. 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.

322

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: [email protected]

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.

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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

2

Neutral

3

Agree

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?

No 1 Proceed to question 17 on page 5. Yes 2 Proceed to the next question.

3. Please indicate the year you last sought advice (eg. 2010):

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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 2 3

9. 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:__________________________________

325

10. Did you receive a Statement of Advice?

Yes If yes, did you: Read it thoroughly 1 Read it quickly 2 Not read it 3

No 4 (If no, go to Question 12)

11. Was the Statement of Advice you received (tick one box only): Useless 1 1 Useful but not relevant 2 Useful and relevant 3 12. Place a tick in the column that best corresponds with the behaviour exhibited by your most

current financial planner/adviser.

Strongly Disagree

1

Disagree

2

Neutral

3

Agree

4

Strongly Agree

5

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

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. Very Poor

1 Poor

2 Satisfactory

3 Good

4 Excellent

5 a. Time Management

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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

Disagree

2

Neutral

3

Agree

4

Strongly Agree

5 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.

327

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: Male 1 Female 2

328

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.

____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________

329

Appendix C9: Coding Sheet for Client Questionnaire 2 Survey Ref

Variable SPSS Variable Name

Coding Coding instructions and notes

Respons

e

number

Identification number ID number assigned to each survey Each survey to be given a consecutive

identifying number for cross reference

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

Trustworthy

largefirms 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

1d More importance on

technical competence

TechImportant 1= Strongly Disagree

2= Disagree

330

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

same personal

interests

interests 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

1g Govt banning

commissions makes

Fps more trustworthy

govt 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

1h Quals more

trustworthy

quals 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

331

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

now than before GFC

GFC trust 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

1l Members of prof body

are more trustworthy

ProfBody 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

1m Could not trust if didnt

agree with personal

values

PersValues 1= Strongly Disagree

2= Disagree

3= Neutral

332

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

FP

Soughtadvice 1= no Go to Q 17

2= yes Continue

3 Year last sought

advice

YearAdvice Enter four digit year as stated

4 Type of Financial

Planner

FP Type 1= Dealer Group eg. Mercer Wealth, Charter

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

Adviser

YrsAdviser 1= 1-2 yrs

2 = 3-5 yrs

3 = 6-9 yrs

333

4 = 10 yrs or more

6 Planners before

current

PrevAdvisers 1= none

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

SOA

ReadSOA 1= Read SOA thoroughly

2= Read SOA quickly

3 = Did not read SOA

4=No

5= Don’t know if recd SOA Go to Q12

11 Usefulness of SOA SOAusefulness 1= Useless Leave blank if not answered

334

2= Useful but not relevant

3= Useful and relevant


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

335


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

336

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

12n FriendlyApproacha

ble


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

12o RelationshipBuildin

g


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

12p Ethical 1= Strongly Disagree

2= Disagree

337

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

338

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

339

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

personal information

Comfortable 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

340

16c Support in times of

change

TimesChange 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

16d Never certain wont do

something I dislike

Dislike 1= Strongly Disagree

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

341

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

suggestions for goals

GoodJob 1= Strongly Disagree

342

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

interest

Care 1= Strongly Disagree

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

chosen not to seek

financial advice?

WhyNoAdviceSoug

ht

1= Have not thought about it Only answered by those who responded "no"

to Q2

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

343

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

344

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

12=Not specified 10

14=Entrepreneur 16

15=Farmer 15

21 Postcode Postcode Enter four digit code as stated

345

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 mean 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.

346

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.

347

Appendix C11: Sample of stamped C5 Envelope (Client Questionnaire 2)

348

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

349

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.

350

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

351

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: [email protected]

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.

352

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

2

Neutral

3

Agree

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. 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 2 Proceed to the next question.

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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 Four or more

7. 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 8. Select the column that best corresponds with the behaviour exhibited by you when dealing with clients.

Strongly Disagree

1

Disagree

2

Neutral

3

Agree

4

Strongly Agree

5 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

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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. Very Poor

1 Poor

2 Satisfactory

3 Good

4 Excellent

5 a. Time Management

b. Verbal Communication

c. Written Communication

d. Problem Solving

e. Technical Knowledge

f. Numeracy

g. Social/Ethical Awareness

10. What professional body are you a member of? (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.

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Strongly Disagree

1

Disagree

2

Neutral

3

Agree

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.

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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.

Rate the following 6 items in terms of importance Great 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 4 5 6

Most important item

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


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?

3. Is Heinz willing to risk getting shot as a burglar or going to jail for the chance that stealing the drug might help?

4. Whether Heinz is a professional wrestler, or has considerable influence with professional wrestlers.

5. Whether Heinz is stealing for himself or doing this solely to help someone else.

6. Whether the pharmacist’s rights to his invention have been respected.

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




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?

358

Should report him Can’t decide Should not report him


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?

6. What benefits would prisons be apart from society, especially for a charitable man?

7. How could anyone be so cruel and heartless as to send Mr Thompson to prison?

8. Would it be fair to all the prisoners who had to serve out their full sentences if Mr Thompson was let off?

9. 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?


Most important item




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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


1. 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.


Most important item




360

Please provide the following information about yourself:

1. Which of the following professional designations do you hold? (Select all that apply).

None 1 CPA 2 CFP 3 FPA 4 CA 5 FPS 6 Other:________________ 7

2. 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: Male 1 Female 2

5. What is the postcode for the area you currently live?

6. Is English your first language? Yes 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.

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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.

362

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 [email protected]. 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.

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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 [email protected]. Any issues you raise will be treated in confidence and investigated fully, and you will be informed of the outcome.

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Appendix C18: Coding Sheet for Financial Adviser Questionnaire Survey Ref

Variable SPSS Variable Name Coding Coding instructions and notes

Respons

e number

Identification number ID number assigned to each survey Each survey to be given a consecutive identifying number for cross

reference

1a Trustworthiness of

FPs

Trustworthy 1= Strongly Disagree

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

competence


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

365

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

366

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

honest


2= Disagree

3= Neutral

367

4= Agree

5= Strongly Agree

2 Have you ever

worked as FP?

WorkedAsFP 1= No Proceed to B1

2= Yes Proceed to Q3

3 What type of

employer do you

currently work for (or

did most recently)?

EmployerType 1= Dealer Group Only answered by those who responded "yes" to Q2

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

you worked in FP

role?

YrsFPRole 1 = 1-2

2 = 3-5

3= 6-9

4= 10 plus

6 Number of employers EmployerNum 1 = 1

2 = 2

3= 3

4= 4 plus

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7a -7d Basis of

Remuneration

RemunBasis 1 = Fee, retainer Up to four. Choose code or leave blank.

2 = Fee, hourly 12= insurance commission

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


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

369


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

370

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree


2= Disagree

3= Neutral

4= Agree

5= Strongly Agree

8n FriendlyApproachable 1= Strongly Disagree

2= Disagree

3= Neutral

4= Agree

371

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

372

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

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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

membership

ProfBody1 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

10b ProfBody2 1=AFA Can select more than one

2=CPA

3=FPA 11=ASFA


5=ICAA 8 = IPA

6=None 9 = SPAA


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10c ProfBody3 1=AFA Can select more than one

2=CPA

3=FPA 11=ASFA


5=ICAA 8 = IPA

6=None 9 = SPAA


10d ProfBody4 As above

11a Workplace

Statements

ProvenTrustworthy 1= Strongly Disagree

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

375

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

376

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

377

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

378

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

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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 Ranking Heinz Rank1 Number between 1 and 12 Insert number corresponding to ranked item

B1R2 Heinz Rank2 Number between 1 and 12



B200 Escaped Prisoner PrisonerDecision 1 = Should report

2 = Can't decide

3= Should not report him

B201 Escaped Prisoner Not bad person 1= Great

2= Much

3= Some

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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

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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

382

3= Some

4= Little

5= No

B2R1 Ranking PrisonerRank1 Number between 1 and 12 Insert number corresponding to ranked item

B2R2 PrisonerRank2 Number between 1 and 12



B300 Newspaper NewspaperDecision 1 = Should stop it

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

stopped

1= Great

2= Much

3= Some

4= Little

5= No

B304 Welfare 1= Great

383

2= Much

3= Some

4= Little

5= No

B305 Principal FOS 1= Great

2= Much

3= Some

4= Little

5= No

B306 Prevent full

discussion

1= Great

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

384

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 Ranking Npaper Rank1 Number between 1 and 12 Insert number corresponding to ranked item

B3R2 Npaper Rank2 Number between 1 and 12



C1a Professional desig Prof1 1 = None 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)

385

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





7 =SIA (Aff) 13=SSA




Australia

10 = CIP (Certified Insurance Professional)

C1c Professional desig Prof3 1 = None 3rd box ticked

2=CPA Leave blank if only one selected





7 =SIA (Aff) 13=SSA


386



Australia

10 = CIP (Certified Insurance

Professional)

18=DFP

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

Finance/Investment

20= Masters degree in Commerce

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

C2b Educational quals Education 2 1=Yr10 2nd box ticked

2=Yr12 Leave blank if only one selected



387

5=ADFS 29=AAII


7=Bachelors degree in FP




11=Grad Dip Applied

Finance/Investment



13=MBA 22=LLB





C2c&d Educational quals Education 3 1=Yr10 3rd box ticked

2=Yr12 Leave blank if only one selected



5=ADFS 29=AAII


7=Bachelors degree in FP




11=Grad Dip Applied

Finance/Investment



388

13=MBA 22=LLB





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

389

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.

390

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.

391

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

392

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.

393

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.

394

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 CQ1 Ref CQ2 Ref FAQ Ref SCI Ref SFI Ref Research Question

Demographics 1,2,3,4 29 10, 28 RQ3 If/when advice sought 5,6 2, 6, 7 26 RQ1 Organisational structure of planner/adviser firm

7 RQ3

Regulation of Advice 8,9 RQ3 Remuneration 10, 15 1g, 1j 1g, 1k, 7 RQ4 Usefulness of SOA 11, 12 RQ1, RQ3 Behavioural Skills as antecedents of trust

13 (a – o) 8(a-o), 1n, 1o

3, 19 RQ1,RQ3

No advice sought 14 RQ1 Ethics 1d,

12p,13g 1d, 8p, 9g, Part B

15 13, 14 RQ1, RQ5

Integrity 12q 1h, 8q RQ1, RQ2 Dependable 12r, 16a 8r, 11a,

11p RQ1

Benevolent 12t 8t RQ1 Competence 1d, 13a-

13g, 14, 15, 16n, 16p

1d, 9a-g, 11o, C1, C11k

RQ1, RQ2

Credentials 1h, 1l 1i, 1m, C1, C2

12 2, 12, 25

RQ1, RQ3, RQ5

GFC 1i,1k 1j, 1l 23, 24 22,23, RQ6 Legislation 1g 1g 25, 26 24 RQ3 Experience of adviser 1b 1b, 4, 5, 6 1 1, 3, 8 RQ1,

RQ2,RQ3 Business Size and type 1c 1v 13 4 RQ3 Business Reputation 1e 1f 14 RQ3 Common interests/shared values

1f, 1m 4 RQ1

Adapted Trust Scale – Dependability, Predictability, Faith

16a-16l 11a-e, 11g-I, 11k, 11p

RQ1,RQ2

Communication 13b, 13 c, 16m-n

9b-c, 11k 8, 9 9 RQ1

Confidence 16d, 16k 11j RQ1 Genuine Care /Nurturing 12s, 16i,

16o 8s, 11d, 11h, 11l, 11m

20 18, 19 RQ1, RQ2

General vs Specific Trust 1a, 1n 1a, ae RQ1,RQ3 Responsibility for developing ethics and trust

18 17 RQ2

Organisation Culture 5 5, 6, 7 RQ2, RQ3, RQ5

Trust elements 10, 16 15 RQ1 Trust issues 11 11 RQ1 Relationship between ethics and trust

17 16 RQ5

Prospect of gain v loss 21 RQ1, RQ6 Emotional investment 22 20, 21 RQ1

395

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

396

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

397

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

QUALS/PROF MEMBERSHIP

TYPE OF FIRM

CODE OF ETHICS

Do clients trust them?

Trust issues - generally, personally, industry,organisation

examples

Measurement

Importance

Relevance

Quals

Professional memberships

importance

relevance to trust and ethics

Insurance/independent/bank/dealer group

Size of firm - employees/clients

Organisation - Yes/no

Importance

Relevance

Profession - yes/no

398

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

399

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.

400

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.

401

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.

402

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?

403

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

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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

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Appendix D2: Cross-tabulation results of organisation type and behavioural skills: client questionnaire 1

the role of trust in personal financial planning

Documents