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SFG exec slams 'complex' advice processes

The typical advice process of an Australian financial adviser is poorly designed, high-cost and prone to error, argues SFG head of platforms Toby Potter.

Mr Potter delivered a presentation entitled 'Managed Accounts: The Next Best Thing?' alongside Crystal Wealth executive director John McIlroy at the 2014 FPA Professionals Congress in Adelaide yesterday.

He went through a list of processes currently employed by typical 'suburban' financial planners.

“Advisers must 'know the client', know the product, provide strategic advice, undertake risk profiling, do asset allocation, do manager selection, do security selection (if you're in a direct investment area) and then implement it all,” Mr Potter said.

Next is a handover to platforms, administrators and custodians, he said – followed by ad hoc adjustments by the planner and then followed by a periodic review.

Overall, the process is an extremely “circuitous” and “interlocked” way to get a client from 'point A to point B, Mr Potter said.

“It seems that if you were trying to arrive at a set of processes that are poorly designed, and likely to generate tonnes of error and tonnes of complexity and high cost, this is it,” he said.


The solution presented by Mr Potter and Mr McIlroy revolves around the adoption of managed account structures by financial planning licensees – whether they are managed discretionary accounts (MDAs), separately managed accounts (SMAs) or individually managed accounts (IMAs).

Mr Potter highlighted recent research conducted by Philo Capital Advisers on behalf of the Institute of Managed Account Providers (IMAP) to demonstrate the benefits of managed accounts.

“What [Philo] found is that the capacity of advisers to service clients went up by about 15 clients per adviser [when the practice converted to managed accounts],” he said.

“That represented about a one-third increase in the ability of an adviser to be giving clients [advice] rather than dealing with paperwork,” Mr Potter said.

“The costs of running their business through improved staff efficiencies fell by seven per cent,” he added, noting that there was also a demonstrable increase in revenues.