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Industry too focused on debt and investments, says former adviser

The financial advice industry needs to pivot away from a traditional focus on “lump sums of money” or risk being disrupted, says a former adviser turned published author.

Upon the launch of his new book, How to Fund Your Ideal Lifestyle, financial wellness advocate and former Hillross adviser Clayton Daniel told ifa some of the assumptions of the professional finance community are increasingly out of touch with consumers.

“The entire financial system is based on lump sums of money - either debt or investments. Why? Simple - percentage based fees/commissions. Every single financial institution makes more money the bigger the investment or loan. Therefore, all research, product development, incentives - every single thing is tailored towards lump sums of money,” Mr Daniel said.

“Now that's fine for the institution, I don't have a problem with them making money, but spending and lifestyle makes up 75 per cent of the thoughts, decisions, stresses that people experience.”

However, the author said that while the issue of cash flow coaching has been largely “ignored” by the financial industry, there are advisers who are wising up to the importance of providing advice that is more closely related to consumer priorities.

“The good news is there are advisers now who are focusing on [spending and lifestyle],” he said.

“With the world changing so very quickly these days, I see the automation of the majority of work financial advisers do over the next decade. If the industry doesn't pivot away from where it has come from, we may see an ‘Uber v taxi’ scenario. By focusing on what people are interested in - their day-to-day money - advisers have a much better chance at adapting to the new world of advice.”


Mr Daniel’s book focuses on the issue of ‘decision fatigue’ that the former adviser says is a major hurdle for clients reaching their lifestyle goals and objectives.
While aimed primarily at “high-earning, low asset” individuals, advisers may see some relevance in his research, Mr Daniel suggested.

“If I was reading this book as an adviser, I may not choose to use the framework I provide, or ask the questions I ask, or even agree to the investment philosophies I provide, but it could be worth reading from a point of view where advice is heading in the future,” he said.

Mr Daniel is a co-founder of XY Adviser, a subsidiary of which published the new book.