Speaking at the AIOFP Annual Conference in Adelaide on Thursday, MLC general manager of wealth distribution Geoff Rogers explained that despite rising compliance costs and licensee fees, there is a viable future for financial planning practices to develop profitable business models.
“Some firms are growing quite rapidly, not withstanding the challenges,” Mr Rogers said. “There is profit in financial planning practices. It has become a little harder, but there is profit there.”
Mr Rogers acknowledged the banning of grandfathered commissions and the amount of time involved in meeting the FASEA education and ethics requirements. He also noted that almost 3,000 advisers have left the industry in the last financial year.
“A number less quoted is the number of advisers who entered the industry. It is less than 10 per cent. It is becoming much longer to become an adviser,” he said.
“Licensee fees are increasing. As the volume rebates and subsidies come out of the licensing system, licensees have to survive on the services they provide to advisers and what those advisers pay for them.”
According to Investment Trends, the reliance among advice practices on grandfathered revenue has reduced from 14 per cent in 2013 to 9 per cent in 2017. Mr Rogers stated that all fees would soon fees come from clients, most likely not set on assets.
“But no one has said that the revenue needs to be less in the future. No one has said that. There is no law that fixes a price for advice. We should not forget that.”
The MLC leader believes the silver lining in the royal commission recommendations is the annual opt-in agreement, which has led a number of practices to successfully reduce costs, streamline processes and lift profitability.
Under the current regime, advisers must provide a stack of documents to their clients including a client service contract, opt-in form, FDS, SOAs, ROAs and FSGs.
“It is a complicated system. Lots can go wrong,” Mr Rogers said. “But with the concept of an annual agreement set in advance, all you may need under that structure is a 12-month contract. Substantially simpler models are a major opportunity that advisers can implement immediately to reduce costs.
“I know some people have left this industry and some people have committed suicide. But there is no reason, as difficult as it might be for some firms, why we [can’t] all ultimately thrive as a result of this change. The clients will be better off, you will be better off and we will be a far better industry.”
Flippant response to people taking their own lives Geoff . Your a disgrace
Mr Rogers, denial is not just a river in Egypt.
“There is no law that fixes a price for advice”
No, but ASIC is introducing requirements to switch to 12-month service contracts that [b]itemise[/b][b][/b] service components and [b]fees for each component[/b][b][/b].
It doesn’t take a genius or an MBA to figure out this commoditises ongoing services (at least in part).
The overall fee pressures are down, which means commoditisation.
Customisation is for HNW clients, esp those with significant intergenerational wealth transfers beyond the family home.
IMO, Mr Rogers is way off. Good luck with that NAB/MLC.
Is ASIC actually doing that? Or is your dealer group pushing you to do that and saying it’s due to ASIC?
A lot of dealer group compliance requirements are driven by internal business rules and/or a misinterpretation of the law.
What’s a few suicides matter if it means profitability, hey Geoff! What a peanut.
I believe that some AFSL’s are now charging as much as $75,000.00 for the first AR. I don’t know what you get for that, BUT , it’s eye watering regardless of how well you’re doing. The author above has little or no experience in our world, and i find the cavalier attitude (by Government) in switching off income while dramatically increasing (compliance) costs while telling us it’s all fro our own good is the height of Hubris! the multitude of business which have failed under this so called reform agenda will translate to more lost jobs and a higher level of under insurance. but who said commonsense was in play here?
Geoff Rogers, you are a gutless coward.
Mate, put your name to comment and we might take you seriously, I have over a a thousand clients [ many of which have been with us for over 30 years ], and they don’t mistrust me, they mistrust the BANKS and politicians, they HATE the union owned industry funds and they see us as their only source of guidance in our industry, if being a so called “Professional” means we have to shut our doors because we can afford to operate who are going to help them.
A thousand clients?? If you are telling the truth I hope a) your firm has multiple advisers OR b) you are not charging all these clients an ongoing fee. Geoff Rogers is a peanut for sure (particularly the last paragraph), but it is physically impossible for one person to service that many clients.
He is right. If we become professionals the current level of mistrust and red tape will reduce and income could well go up. The question is how large the future profession will be. Hundreds of advisers, a small number of thousands, similar to now at mid 20 thousands financial advisers?
100% agree. With increase in robo type advice and other client direct access there won’t be a need for as many advisers. But this that we will have will command greater respect and no doubt be more profitable at a better client cost.
What Planet are these guys on, or what are they smoking, “There is profit in financial planning practices” my business income has been slashed by 30% and in two months time by another 10%, my costs have increased by 20% with all the new fees we are being charged, I send 50% of my time on compliance, 25% of my time studying, clients do not want to be charged a fee when they have been happy with how they have paid for our services in the past, and then they are hit with increased premiums so they cancelling the insurance policies, they can’t afford to pay extra into their super funds because they are flat out affording to live, so investing is a dream, and now we have FASEA who want to stop all forms of “conflicting remuneration”, I have seen 40 years of work flushed down the toilet because the BANKS screwed up our industry, over 3000 have left the industry, wait for next year when the real exodus will begin, and insurance companies have no one else to blame.
I cant believe that someone would actually say that – “I know some people have left this industry and some people have committed suicide. But there is no reason, as difficult as it might be for some firms, why we [can’t] all ultimately thrive as a result of this change. The clients will be better off, you will be better off and we will be a far better industry.”
All just a number to Mr Lloyd and replaceable . He doesn’t mention the advises that have just been made redundant and the mental health of the ignorant tribe that remain. Keep screwing with people’s health and their families Geoff you do it so well. I guess it’s easier to remain ignorant. Helps build resilience maybe?
Sorry Geoffrey, just read your profile. You’re not qualified to be talking about anything to do with financial advice! Not licensed, no FP qualifications or experience. 14 years at NAB and formerly the GM of NAB FP? Amazing!. No wonder it’s a mess!
“There is profit in financial planning practices. It has become a little harder, but there is profit there.” Licencee fees for my practice have increased by 45% pa recently. In anyone’s eyes this is a significant impact on profitability. I know I’m definitely not on my own. It’s great for a product rep who’s never run a business to tell us that things are “a little harder”; In the real world where you are balancing additional cost and time of meeting educational standards, as well as navigating compliance regimes where the auditor has little to no guidance from the regulator about what is acceptable, particularly in the area of the Code of Ethics (with no code monitoring body), things are more than just “a little harder”. What’s you’re guidance here, Geoff?