Connect Financial Service Brokers chief executive Paul Tynan said in a statement he expects more large players to exit the financial advice space.
“It simply comes down to the institutions believing that a single, standalone, perfect business model was achievable and the utopian structure could successfully address the complexities of delivering advice in the modern era,” he said.
“The situation was compounded further with management and their battery of consultants striving to develop strategies and infrastructures without the benefit of ‘hands-on’ advice experience and lacking this intimate understanding and appreciation – their efforts were doomed to fail.”
Mr Tynan added that modern financial advice firms must be flexible and fast in order to anticipate and satisfy the growing diversity and complexity of client needs.
“Large institutions just don’t have the capacity to respond quickly and lack resources to support every project and priority within its structure,” he said.
“Technology has been the game changer and tool that helps to build much-needed flexibility required to create a virtual servicing model. But it’s not cheap, especially for the institutions that have accumulated an overwhelming array of legacy products and associated outdated platforms as they acquired the businesses of their competitors.
“Institutions have always seen financial planning as distribution for their proprietary products or as a way to maintain clients in these channels. What institutions will do with these planning businesses and their future strategy will depend on who owns the client.”
Paul Tynan is right about the complexity, though I have the feeling that the ability to sell large numbers of products through the advice channel still has a substantial monetary value.
The biggest reason that I can see why large companies may leave the advice space is the string of scandals that arise from this conflicted (salespeople representing themselves as advisers) model. CBA’s entire business suffered a reputation loss from its adviser based sales channel. That makes the adviser based sales business line much more risky as it can unpredictably depress the value of the entire business and damage the reputation of senior management all by itself.
From a client’s perspective, the benefits flowing through from digital innovaton are many but one that should never be underestimated is a better awareness of how the industry works. Understandabley, many reject the concept of being ‘owned’. They want choice, they want engagement and they want transparency.