Speaking with ifa, financial adviser and PlanningSolo founder Jordan Vaka argued that advisers lack power when dealing with product providers, which can drive up the cost of advice and lead advisers having to decide whether to absorb the costs or pass them on to the client.
“I think the whole thing about the affordability of advice, it’s just this canard that they’ve used to try to shovel through really bad legislation,” Vaka said.
“Legitimate advisers, working with lots of mums and dads, a lot of them are trying to make ends meet because they have this feeling that they need to absorb all these costs that are imposed on them.
“One thing we’re trying to get out of the podcast is tell them that it’s not your responsibility. You’re providing a service, you can pass on those costs, but it’s hard. It’s easier said than done.”
Using a current case as an example, Vaka said bad behaviour of an insurer has led to additional billable hours spent, thus increasing the cost but he feels uncomfortable charging clients for it.
“There’s just so much that’s out of our control. I’m on an insurance case at the moment and it has just gone completely disastrous, and ultimately, it’s all because of the insurer. And we have so little power to try to rectify that,” he said.
“I’m just not comfortable saying to a client, ‘Hey, look, we’ve had to spend four hours trying to headlock this insurer into doing what they should be doing anyway. Pay us $500.’ That doesn’t really feel very fair.
“So, I’m wearing the cost of that because I’m not passing it on to the client and it’s just, it’s a very difficult game sometimes because of that stuff.”
Vaka said there is currently no channel for advisers to make the providers bear the costs so instead, they are left deciding whether to absorb it or pass it on to the client.
“If it’s part of our scope of work, then the cost gets put to the client, as per our agreement. If the cost has nothing to do with a client’s fault, then I feel really uncomfortable passing that on,” he said.
“But there’s just no recourse for the adviser or the practitioner to claim against these institutions that are just not meeting any discernible service standard. They’re just doing whatever the hell they want, because they don’t have to carry the cost. This is really frustrating.”
Pro bono advice
Explaining how his firm strives to provide advice to those who need it but may not be able to afford it, Vaka said his practice offers some advice pro bono in special circumstances.
“I’m a very small firm so it’s very discretionary. We’ve done some work with some people that came out of the royal commission into child abuse but my niche is, ultimately, newly single women coming out of divorce,” he said.
“With our fees, we can help a certain cohort of people but there’s a big cohort we can’t. So we’ll do a few pro bono cases in that instance where we can, but it’s maybe four to six a year.
“We fully price the job and we invoice them the job but we zero it off on the invoice just so that they can see there is a value to it and then that’s us recording our dollar commitment to that.”
While Vaka encourages other advisers to engage in pro bono work, he also wants to ensure advisers are able to balance that with the costs to run a business.
“I think advisers are a very generous bunch. I want more advisers to do the pro bono work, and then charge for the other work appropriately,” he said.
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