Evolving demographics and regulatory changes will enable advisers to become more selective in choosing which clients they wish to deal with, according to Colonial First State (CFS).
Linda Elkins, Colonial First State’s executive general manager, told ifa a number of dealer groups using CFS platforms have already modified their business models to deal with changes to remuneration requirements under Future of Financial Advice (FOFA) legislation.
“Advisers who are confident with their ability to demonstrate value to their client, or are already in a model where they’re gaining consent and charging clients fee for service, shouldn’t have too much difficulty replacing [revenue],” she said.
A “demographic bubble” of retires coming through the system will also ensure a steady stream of new people needing financial advice, meaning there is plenty of scope for new advice businesses, she added.
Upgrades to platforms and advice technology will also help advisers manage those changes through increased efficiency, improved customer segregation and enhanced customer service.
General manager of product and investments at Colonial First State, Peter Chun, said client segregation will become even more critical following implementation of the FOFA reforms.
“Advisers will be more selective who they deal with,” he said. “This retirement boom is about to explode… there’s a big wall of baby boomers that will need to seek advice [in the next 10 years].
“That core group is what advisers will focus on. If they have the right platform to partner with where they can customise their service to deal with more attractive clients, I don’t think FOFA will lead to doom and gloom; it’s actually a really positive opportunity.”
Andrew (assume it is the same Andrew 🙂 )
When you say ‘no wholesale clients’ – at what number do you use for this?
I have a number of wholesale funds (About $1m) as part of my SMSF.
Some comments are,at last, beginning to sound that, at least some advisers are thinking about their clients.
The more you tune into your client base the better adviser you will become.
Your client base,though not formally trained are not as silly as some of the academics. Enjoying the interaction!!!
Although I think if all businesses worked on my model the consumer would win, I also understand and appreciate that there are many ways to do a good job and without differing views we’d have no competition in the market place. I’m happy for others to charge % based fees or entry fees, etc because that just gives my business a point of differentiation and thus far that differentiation has proven to be a strong competitive advantage. My model works for my targeted client base but I’m not naive enough to suggest that no other models work, but I do strongly believe that % based fees are not ideal. If a client has super which I manage and $200k in the bank, and I suggest they add that $200k to their super, because I charge flat fees they know there is no benefit to me of that advice and its 100% based on whats in it for them. If I charged % fees, my fee would go up due to the contribution, how can they be certain my advice is 100% for their benefit and not mine?
When NAB ‘outlawed’ entry fees and replaced them with ‘advice fees’ many planners struggled. But NAB FP management has had the beans to actually manage out a lot of old school planners and been very careful to bring in higher quality advisers that value what they do and charge an appropriate fee and can articulate their value to clients to be able to charge that fee. Many planners (inc. IFA’s) have struggled to change their own mindset and grasp that they exist to provide advice and goal based outcomes for clients and without that belief or the ability to articulate that to a client it’s very hard to charge a reasonable fee with much conviction. Although the change would no doubt be difficult, that doesnt mean it’s not the right way to go. Change is not supposed to be easy, its supposed to be worthwhile.
Dave H
You verify what most of us already know. I wonder if the banks AND others HAD to change to a fee model and abandon the %%% model–what will be the outcome?
#22, thanks for that. I know the perception and by and large don’t disagree, but I do like to point out that there are good planners and not so good planners and the difference is generally the planner, not the organisation they work for. I am happy and proud to note that I run my business within the NAB Financial Planning business and NAB provide their planners the autonomy to run their business as if it were our own. I have developed my own business model (inc. my own service and fee model) and am thankful we have the ability to do this. I have very good friends who work for ANZ and CBA and while they are pretty good planners, they are restricted by their banks policies which include mandatory % based fees at CBA (inc. mandatory ongoing fees even when not desired by client and/or planner) and sadly, ANZ are the most behind the times and still have mandatory ‘entry fees’ which are % based (in addition to ‘plan fees’ for the advice).
I began reading this posting because I wanted some insight into how advisers think. The heading of this article is offensive to investors. just wanted you to know you may be sorting us out to find the easy “risk free targets” rest assured we are grading your performance as well. Moving forward, If you want clients you will need to prove you’re earning your exorbitant fees.
I gave my last adviser 4 years 2004-2008 and he didn’t impress me at all. I have no training in investing so sought someone smarter than me because of all their training. Advisers need to accept that their client base will increasingly become more sophisticated….unless you can add value then you are a lost cause
My first encounters with advisers were with those of a big bank(unnamed) who advised (amazingly) shares int eh bank.. this transparently purely unthinking agency advice put me off for a decade…finally I found an independent advisor, who was not just a branch of the Bank sales team without any detectable independence, and have been very happy ever since. FOFA will force even the Banks to start to do an honest job in their advice, and as they are so very well resourced should be able to do it very well—if they want to. the key issue is ‘should’.. Ill be waiting to see.
Dave H
great to see you on board and by the notes you put forward-in tune with the “real” planners. Great to see a bankie ( sorry for the pun)operating as a fee for service and provide that service without the KPI / fum etc attitude. I knew there would be at least one of you out there.
*** Editor’s Note ***
Hi everyone, and thank you all for your feedback. It looks like we’ve had some lively debate on this story, which is great, but its also raised the issue that there was previously no restriction on multiple users posting under the same user name.
Our IT departments worked on the issue and its now resolved. In the meantime, in the interests of clarity, I have changed the user names of the two posters concerned on this article to ‘Steve 1′ and Steve 2’ so it is clear which commenter is which.
Kind regards,
Chris Kennedy
Deputy Editor
ifa
While I enjoy the banter on this website, on the topic of the article, if I had an initial meeting with James I’d realise very quickly that he’d be near impossible to please and I dont have the time or inclination to try and ‘convert’ such adamant non-believers so I’d choose to end the meeting promptly and not offer my services. He’s a future complaint waiting to happen and I’d need to charge a very big fee to compensate for that risk!
Overall, I don’t ‘sell’ my services to prospective clients, I simply point out how I can help them achieve their tangible and intangible goals and what that will cost them and they then choose whether or not they see value in that and whether or not to ‘buy’ what I’m offering. I don’t try to be everything to everyone. I am confident in what I do and what I charge and you see value in that or you don’t. I’m not here to push the proverbial uphill when so many people instantly WANT to get on board – why chase the naysayers…
Andrew just seen the first ‘steve’ post – what a mess!
So mine was the one with the email in, and not the 1st and 3rd posts.
James, I agree with you. Investors are getting more selective but as the article points out, so are advisers. Looks like we both dodged a bullet.
Andrew – it would appear that there is no restriction on having the same user name. I did not post the second Steve comment 🙁
Bit of a flaw in their IT DB design one thinks!!! Clearly their unique Id is the email account and thus many ‘Steve’s with different email accounts appear as the same person – it sucks!
I engaged an adviser because i wanted to improve my performance.Superannuation is all about SAVING enough to retire, and support longevity.
Nothing I’ve read here makes me more inclined to reengage an adviser.
Some people are happy to go to Macca’s because they are just hungry and just want to meet their need of eating. Other people go to a restaurant because they don’t just want the food, they want the atmosphere, the table service, the wine list, the good company, the ambiance, the finer food, the cleaner amenities, etc.
Different people value different things and a quality financial adviser is not needed/wanted by everyone. But the problem is that many people who refuse to pay for a nice restaurant (or cant afford it) often argue that Macca’s is just as good with the same end result (the full belly). They either don’t value the differences or have not experienced them or just don’t want to pay for them so they convince themselves there is no difference. To each their own, but keep in mind that most people don’t know what they don’t know and that there is a whole lot more to being successful and satisfied with ones finances than just focusing on returns.
James and Steve. YOU’RE RIGHT! Anyone with the internet can buy and sell shares. But then anyone with an oven and food can cook… But do you really think most people can cook a meal at home as well as the best chefs?
As a quality, non-sales driven financial planner I offer my clients the following in addition to using the internet: Advice, 5 star service, guidance, counseling, expert strategies, peace of mind, 2nd opinions, a sounding board for ideas, the ability to outsource time otherwise spent by them, expertise to the level they could never acquire, the ability not to let emotional biases cloud investment decisions, objectivity, non-investment advice (estate planning, etc), and so on. These are the things my clients value above returns and these are the things they pay for.
Andrew, you have just helped my point of view with your nonsense reply of education hours etc. A year 9 student could google all your info offering in minutes and in a few hours of study figure out a strategy. Oh he wont get your birthday or xmas cards & hand holding retric but he will save tens of thousands over his lifetime in saved fees/commissions/engaement contracts.
I bet if you were on the titanic you would of thought the view inspiring at the time & the lack of life boats “just a challenge”. Good luck champ, keep typing those oh so compliant “engagement” letters that look after your business!
Andrew
I did-engage the services of an adviser when starting my SMSF but quickly became disillusioned with his efforts and his exorbitant fees when he was unable to add growth within my fund.If you, as an adviser, do not know what growth is then I made the correct decision when i sacked him. Say 15% or at least better than my own ongoing 12%
James
James
You have missed the point again, but I’ll bite. What growth would you consider worthwhile to engage the services of an adviser.
If advisers wish to partner with “more attractive clients” they had better offer worthwhile growth or suffer extinction.
James
Shorten & Labor opposed LNP efforts to improve corporate governance, implementing Cooper recommendation for indepedent directors but failed. The House of Reps voted 72-68 .Lets hope all union reps keep their grubby hands away from super for the future
Andrew, you sound as if you are the sort of planner I could do with. Drop me a line.
steve.jj.283 AT gmail DOTcom
James & Steve,
Thank you for your insight. I also thank you for creating an opportunity to meet with you at some time in the future. It seems you, like the majority of Australians, have confused superannuation as an investment rather than a tax structure. So whilst I am completing my minimum of 80 hours a year of continued education in the Superannuation arena in order to provide my clients with cutting edge strategy and legislative requirements so that their fund remains compliant, you keep hitting the buy and sell buttons. My best clients have been the ones who thought they could go it alone because they thought it wasn’t rocket science as well.
That’s OK Chris
But many who run their own SMSF have decided long ago that they can achieve better results on their own than with a so called investment adviser. Advisers are going to have to prove their worth if they want clients.
More mother hood cliche statements. Lets be clear about this. The days of advisers reaping fees off old ill informed unsavvy clients are over. Portfolio modelling, managed fund selection & even equity trading & bluevchip share buying can be done by everyone with an internet connection. You can talk advisers choosing clients all you want but in reality, clients will choose whether they even need an adviser anymore. Its not rocket science! Better think up some new reason to use you or you will be fired by most of your client base. Your “engagement” letter nonsense will work for the first 2 or 3 years but not long after that im afraid. Sorry boys n girls, the industry has & will eliminate half of you within the next 5 years & it will get worse from there as compliance leeches destroy the industry year in year out.
can you seriously blame us.
Hardly a revelation that advisers are being selective with their clients. However I dont think its all dollar driven although this is an important factor, after all we have to keep the lights on somehow. Our business selects clients on the amount of long term risk they pose to us. We have turned away half a dozen big dollar clients due to their reluctance to address estate planning and their burning desire to own residential property within their SMSF’s through LRB without considering insurance.
The only effect FOFA is going to have is on the members of the public because they are now being priced out of the market due to the potential compliance risk they pose to a financial planning business.
I remember a time when our business was valued on its ebit and not its ability to maintain its insurability. What the hell has happened to our industry?