Elixir managing director Sue Viskovic told ifa she has not seen a large number of advisers able to determine a scaled advice model for their business.
“The challenge for so many advisers is that when they look at providing scaled and scoped advice it’s single-offer, single-issue advice and it’s very difficult to price it in a way that’s valuable to the client and not a cost to the firm,” Ms Viskovic said.
“I’m tending to see advisers help people understand how to do it themselves using the internet,” she said.
The perception that only the large banks and institutions can deliver an appropriate scaled advice model, she said, is to some degree true.
“They have the scale and will still profit from the small amount of funds under management they generate from clients,” she said.
Practice principal of Meridian Wealth Paul Dunn disagrees, however, having established a profitable scaled advice model for his self-licensed botuique business.
Mr Dunn said advisers can still make a profit from scaled advice when dealing with insurance because there’s always brokerage involved.
“Using risk commissions to offset advisory fees can ensure that clients are receiving the right advice for their circumstances with the adviser getting paid for providing that advice,” Mr Dunn said.
In many cases scaled advice also “opens up the other avenues for more services down the track”, he said.
What’s so hard. It is probable advisers have always been giving scaled advice. The client requests life insurance advice only or superannuation advice only and the adviser provides that advice – that’s scaled advice. If the adviser believes the client requires ‘holistic’ advice, discuss it with the client and act on their response. What you charge a client is matter between you and the client. Read ASIC’s RG244 and the Scaled Advice section in RG175 – it explains what scaled advice is.
It is also difficult to act in a client’s Best Interest when you are scaling advice. By definition you only know a little about them, and not everything. As we know, everything in financial planning affects everything else, so the thing we don’t find out about (as the client doesn’t want to tell us) can then make our advice inappropriate. It’s just not worth the risk in most cases.
Sort of a NO obligation “profitable scaled advice model” for Paul’s business!
So intuitive Paul, using risk commissions to offset advisory fees.
Wow!
Following my earlier comment I have just commence on a file for a client I interviewed last week highlighting the dilemma in scaled advice.
The scope of advice sought is to increase the supefund return as they are worried there won’t have enough on which to retire. A solution to which any adviser (even a bank or industry fund Johnny) should be able to offer a solution to target a better investment outcome.
My initial observation is that the client simply isn’t investing sufficient capital – and no amount of tinkering with the investment strategy will resolve the underlying problem. Further there is a significant unexplained disparity between expenses and income. Already the scope has shifted and the solution needs to be addressed holistically.
This senerio is real life for most advisers who then struggle between proper holistic analysis and the cost constraints imposed by narrowly scoped advice.
scaled advice was in my view for mainly phone based / Industry style funds