Speaking to ifa, More4Life Financial Services principal James Walker-Powell said the royal commission has to a large extent been the death of cross-subsidisation of better fee-paying clients to lesser fee-paying clients.
“The advisory practices are realising that they cannot provide real value to those who are not paying a commercial fee, and thus more focus is now on high-net-worth clients, to the exclusion of the masses, making financial planning a luxury item,” Mr Walker-Powell said.
Mr Walker-Powell said that when the AMP board and senior management came under fire from the royal commission, there was an underlying enjoyment from advisers that senior management from financial services companies were finally being called out, rather than what they had always done – that is to push the problems down to the advisers and advocate blame on their troops, rather than take any responsibility themselves.
He said the topic of ‘fees for no service’ that was brought to the attention of the royal commission has put the spotlight on advisers, leaving clients questioning the value for the fees they are paying more than ever before.
“This has resulted in clients who were not getting value for money leaving their adviser and either going it alone, or looking for alternative advice options, such as what they may find in an industry fund network,” Mr Walker-Powell said.
This has been the case for a while now. Advice is not cheap to give if you want to produce good advice. The RC is just going to worsen the compliance burden and make little difference to the client outcome apart from the costs rising – not just for the client but the adviser as well as there is only so much you can charge even a HNW client. HNW clients will pay but low net worth clients want advice for nothing so advisers are obviously draw to HNW clients – that’s always been the case.
Had an individual call want advice on the purchase of an $800,000 investment. Spent three hours modelling his scenario, met him with the mortgage broker, charged for one hour. Client wrote a long letter complaining that he did not feel he should have been charged at all.
Was the potential charge discussed upfront?
Robo-Advice will quickly cater to smaller clients at affordable rates.
Advisers will be left to fight over higher net worth clients where they can actually add value…
this is what it should have said.
looking “less option and less this is what it should have said” for alternative advice options, such as what they may find in an industry fund network, has they don’t have to complete an SOA to do a withdrawal they have less red tape and zero disclosure but we make the banks share data and how they invest masking investment returns said” Mr Walker-Powell
All commissions are on the way out but once hefty fees are the norm, most people either don’t want to pay or can’t afford to.
So financial planning and advice will be reduced to those few people of high net worth while the bulk of Australians will be left to the hoaxters and the scammers.
The only way around this is to pay salaries to advisers but who wants to do that?
All except risk commissions, of course. Even these idiot entities running the place wouldn’t be stupid enough to repeat the debacle in England when they were banned on risk. Couldn’t be THAT stupid.
They will be that stupid, unfortunately. The argument will be that the UK and Australian markets are “different”. It’s all good because people selling over priced residential property, betting scams and FX trading programs will step in and fill the void left by 70% of financial planners leaving.
Cross subsidising from the better clients to other clients is a stupid commercial practice to begin with. I have always endeavoured to offer my services to all clients on the basis of a similar profitability across all of them, not necessarily in $$ terms but certainly in % terms. As a result, the easiest clients for me to win have always been the very best clients, precisely because so many advisers rip them off stupid.
How would be be able to discern such an effect when the RC has not even delivered the final report and we still do not know what, if any, legislative response will follow. Perhaps this is the new policy at More4Life but methinks Mr Walker-Powell presumes too much too soon.
Seven years later Patrick do you presume to much to soon or have you changed your mind ?