Speaking on an upcoming ifa podcast, Midwinter head of product Ivon Gower said the advice practices of the future were moving beyond an “all or nothing kind of service model for clients”.
“We are starting to see that rather than advisers asking, do we charge an upfront fee and never see the client again or do we charge a quite large ongoing fee?” he said.
Mr Gower believes the industry is now seeing this kind of hybrid model emerge.
“As part of that advisers can charge an upfront fee for initial advice and then a lower retainer model, a hybrid that removes the barrier to advice,” he said.
“As part of that, the client can then start to get a foot in the door with financial advice and experience the initial value advisers can offer.
“Advisers can then with a sort of smaller ongoing fee look at the client’s situation and that becomes the responsibility of the adviser to identify opportunities for the clients.”
Mr Gower said that to the extent advisers are demonstrating that opportunity, the client can then make a decision whether they want to go with that, “if they decide advisers can charge a bit more, or if they decide not to, there is no obligation from that adviser to keep pushing that path”.
Midwinter head of distribution Andrew Whelan said that it is still early days if advisers want to take up the hybrid model when it comes to fees.
“Advisers are hungry for different models, options and systems for clients and they are so under the gun from a compliance point of view,” he said.
“They have actually been shedding clients rather than thinking about how can I get my advice in the hands of more clients and frankly I think that is a technology problem to solve rather than an advice problem.”
With the many compliance documents required to present a piece of advice to clients, it’s easy for advisers to get bogged down by these complexities and Mr Whelan and Mr Gower believe that technology needs to make the process easier for advisers while ticking compliance boxes.
Mr Whelan said that it is a big question and challenge, but the key is understanding how advisers use the products.
“Our challenge is what we can do to limit the amount of time people are spending in the back office trying to optimise a client’s three to seven goals whilst configuring how to get the operating model right,” he said.
“How we can get that goal optimisation working as a standalone function, getting a client walking into an office knowing what they can or can’t do in an hour rather than a four-hour really complex situation done by a paraplanner in the back office. I think that model is going to die a slow death.”
Mr Gower said interestingly and not surprisingly, not many people are coming to an adviser saying they want to protect their wealth as their goal, which is often seen as the adviser’s job to implement risk management strategies.
“What we are seeing is more and more clients are coming in who want to optimise their goals and there is an opportunity for advisers to look at that and supplement within the strategy,” he said.
“To charge there needs to be value and there is value in just helping people understand what their objectives are, helping them set their objectives at a realistic level, whether it’s too high or too low, shorter or long-term and helping clients have that plan.
“All these things are not just financial planning things but human things, lifestyle sort of goals that are critical in having a full and successful financially healthy future.”
Now grandfathering is gone, Treasury can reverse their daft legislation & remove Opt In’s, so that small clients can be serviced in a cost efficient manner. Funny how the tied agency Intrafund personal advisers don’t have to do opt ins, but the retail advisers do. The playing field is as level as the Himalayas at the moment. This is the most incredible discrimination against non-intrafund advisers who are trying to service low income families.
All clients on ongoing service require an advice document annually according to asic. Therefore we can not afford to service small clients on retainer. As long as asic ties all ongoing fees to a document we cant service smaller clients on a ongoing basis. These smaller clients are not profitable on a ongoing basis no matter what systems you have. If we could charge a small admin fee, then great, but we cant. You need to understand the day to day workings to make comments like in the above article, the lack of understanding of the asic lookback programme is evident here.
Spot on, it’s a thinly veiled product flog to get MidWinter in your front door. Even if you charge a one off fee and never see the client again you’re on the hook for the advice for probably 10 years now, knowing ASIC. How is that a good risk adjusted return? And as you rightly say, if a document has to be produced then a small OGS client is a liability and a time suck, barring those ones that will be good clients down the track.