As advisers move to a fee-for-service remuneration model and more holistic mindset, their role is not to secure investment returns but to stop clients from making poor investment decisions, says Vanguard’s Robin Bowerman.
Speaking to ifa, Bowerman said the traditional mindset of financial advisers to help clients achieve investment returns and beat market benchmarks was “built on shifting sands” and does not reflect the new world order.
“The benchmark for advisers is no longer the S&P300 or equivalent index; it’s about what the client would have done with their money had they not been with an adviser,” he said.
“So in some ways the most valuable thing an adviser can do is to stop clients making dumb decisions – quick market timing, panic reactions – it’s about being a behavioural coach, where we think advisers can add a lot of ‘alpha’.
“However, this can also be a difficult thing to charge for, so getting that proposition right and explaining to people how that is valuable is one of the biggest challenges advisers face.”
Bowerman, who is head of market strategy and communications at Vanguard Investments and regularly conducts seminars with financial advisers, says the move to a more value-focused advice model is not solely regulation-driven.
“The best advisers were moving to fee-for-service regardless of FOFA, it was happening as an industry trend anyway,” he said. “It’s been happening in the US without FOFA.”
Research indicates clients are now less demanding of investment selection advice and want broader decision-making and financial goal assistance, Bowerman said.
“Eighty per cent of the value-add to clients centres on asset allocation, estate planning, insurance needs, risk profiling – the actual needs of the client – not the investment selection, which is about 20 per cent of the value.”
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has refer...
FASEA has announced its August exam sessions will only be offered remotely for V...
A major platform provider has made changes to its functionality to make it easie...