Speaking to ifa on a recent episode of The ifa Show podcast, MLC general manager of distribution Geoff Rogers explained that in the current environment advisers have little time to consider their business strategy.
“A lot of an adviser’s time is spent seeing clients and preparing advice documents. Which is a bit of a paradox, because since the royal commission and FASEA this industry is probably going through its greatest period of change,” Mr Rogers said.
“I’ve been in this industry for 32 years. I’ve seen a lot of change. Yet advisers are now finding themselves having to do a lot of work just to maintain revenue. The issue then becomes can you find that space right now to step back from your business?”
Mr Rogers urged all advisers to do a diagnostic on their practice as soon as possible to see where the revenue is coming from, noting that the mix of commissions and fees will certainly change.
“You’ve got to consider your costs and value proposition and how you might want that to change. All of those things need to be talked about,” he said.
“You can go through a checklist and get ready and set for how your business might transform through this period. Normally you can adapt to what’s going on around you. This time around, it’s just far more extensive than people realise.”
One of the key trends MLC believes will play out as a result of these changes is advisers “going upmarket”, or servicing wealthier clients. Mr Rogers believes this is a natural result of fees for service replacing commission revenue.
“If you’re using a fee for advice and that advice fee might be averaging $5,000 or $6,000 a year, you’ll generally find that you will end up with a segment who can afford it,” he said.
“Generally, what we are finding is as the fee for advice concept becomes far more commonplace, there will be a change. Then the issue becomes the clients in adviser businesses right now who still want to receive advice. One way of connecting would be through technology. In the UK they have made massive progress in using technology to keep mass market clients engaged.”
While Mr Rogers maintains that the fundamentals for financial advice in Australia are strong – superannuation is growing and demand for advice is high – many advisers have decided to leave the profession.
The Adviser Ratings Musical Chairs report found that 1,750 advisers left the industry in the June quarter, leaving just 25,470 advisers across Australia.
This equates to a 6.4 per cent decline in total adviser numbers for the quarter and is in line with the continuing fragmentation of the industry.
In December 2018, there was a large spike of new advisers due to new and returning adviser registrations prior to FASEA obligations coming into effect.
Fee for service – that’s great – so what about the working mom’s and dad’s who can’t afford these advice fees?? – who by the way need the advice and insurance more than most. Is the Government or Royal commission going to step in and offer them free advice or more so when they don’t have any insurance due to the un-affordability of the advice fee, who is going to take responsibility and look after these families!!!
“We cannot solve our problems with the same thinking we used when we created them” – Albert Einstein. Advice from fund managers won’t be part of the solution.
Yes, clearly the bank-owned wealth managers are in a position to offer guidance on this…..
Let’s see – divestment, margin compression, and compensation are 3 of their strategies that come to mind.
The FP industry is going to die like the dodo.
It is unsustainable in its current ‘compliance is everything’ inviroment.
It’s over.
MLC have their own challenges. How will they remain relevant to clients and advisers faced with the competition of industry funds and IMA/SMAs? How will they retain their relationship with existing aligned advisers and their clients ? What is their long term succession plan solution to keep clients in the MLC family ?
Government worrying about reducing life commissions what a f… n joke what about a royal commission into the rorting through crown casino the biggest crooks in the country turning blind eye to money laundering and corruption because they must be on pay role as well absolute disgrace go after the small business man it is easier
It goes without saying that this is a period where the most significant changes are sweeping through our profession. There have been significant column inches across the trade press devoted to product providers espousing the need for advisers to be continually working on, as well as in their businesses- we know this. Perhaps the best support to the advice process that a product provider (such as MLC) can provide during these times, is to work on its own internal efficiency. Rework caused by product provider delay and error is the most significant external impact on the profitability of my business, and I know I’m not alone in this. Four years ago advisers using MLC products, particularly the investment platform products, were promised that they would reap the benefit of the reinvestment of the sale of MLC insurance business into Nippon Life. Fast forward to the present and MLC advice platforms are little changed in either features or efficiency (error and defect reduction). This has left the way clear for new and innovative competitors (Netwealth, Hub24 etc) to steal the march through a focus on technology and error minimisation. As a result they now are a serious challenge to the inflows going to the “big end of town”. It is therefore becoming a little tiresome to hear distribution heads pontificate about how we as advisers should be running our practices. So much could be achieved for advisers by traditional product providers investing in their own businesses, financially as well as putting the appropriate thought framework around their own continual improvement (Kaizen, Lean, Agile- there’s plenty of solid frameworks to explore).