A new study has found that the reason clients seek advisory services may not be because they’re struggling to understand their finances or are confused by the information on offer. In fact, it is a person’s self-efficacy that has them knocking.
The study, called ‘Self-Efficacy, Financial Stress, and the Decision to Seek Professional Financial Planning Help,’ looked into behavioural aspects of financial planning, like financial stress and self-efficacy.
It found that the more overall confidence a person had in their ability to undertake and successfully complete an activity, such as financial planning, the more likely that they were to take action to get started.
“Those who believe they can succeed are more likely to seek financial planning help,” said Jodi Letkiewicz, head researcher of the study. “Even people facing significant financial stress were less likely to seek professional advice if they didn’t have sufficient self-efficacy.”
A person’s own belief in their ability to succeed, self-efficacy, was a consistent and strong predictor when it came to determining whether people would seek out financial help.
Using data from the Value of Financial Planning
, the three-year study was commissioned by Financial Planning Standards Council
in conjunction with the Financial Planning Foundation.
This research shows that, while advisors may have thought it was a lack of confidence in oneself to know how to make the most out of their money bringing them to advisors, it’s the opposite. If a person believes they can do something with their money, they’re going to and they’re going to find help to make that happen.
Derek Dedman, chair of the Financial Planning Foundation’s research committee, said the research explained why some people take the step to plan for their financial future.
“And just as importantly, it helps us understand why some don’t take that step, even when they are in real need of financial planning expertise.”
It is low self-efficacy that prevents some people from taking the step to seek assistance in managing finances despite the known benefits of doing so.
The study was funded by the Financial Planning Foundation
, which funds and promotes financial planning research and education for the benefit of the public, financial planners, academia and industry.