‘Real opportunity’ for institutions to advise mass affluent market: Viola

Following the royal commission-driven exodus of financial advisers over recent years, one of the few areas that most in the sector aren’t struggling with is finding clients, with Viola Private Wealth executive chairman Charlie Viola arguing that there are “enough clients for everybody”.

Speaking on a recent episode of The ifa Show, Viola explained that advice is a “fantastic business” to be in because there are “more people getting wealthier and you’ve got less people who actually do it”.

“They’re great businesses to own … the problem we have or the problem in our world fundamentally, is that we all want the same type of client,” he said.

“I think if we’re all being really honest, we all want the client with $2 million to $100 million [or] $200 million. We all find it hard commercially – because of regulations, staff costs, compliance costs, governance expense – to look after people with three or four or five hundred grand.

“There is a significant cohort of clients who we need to find a solution for.”

Noting that his view may be controversial among financial advisers, Viola said industry super funds and major institutions have a “real opportunity and job to do for that mass affluent space”.

“Especially where the major asset that’s being looked after is the super monies, I think there is a real opportunity for those, especially the industry funds, to look after that mass affluent space that genuinely needs help, genuinely needs someone to do the planning for them around, ‘How long does it take for me to pay my mortgage off, how much insurance do I need, how much should I be contributing to super?’” he added.

“Because it’s difficult for someone like me with my cost overheads and the types of clients that we want, to be able to look after those clients.”

The government’s Delivering Better Financial Outcomes (DBFO) reforms, which seek to expand the ability for super funds and other institutions to provide financial advice to members, have been a dragged-out process that resulted in just half of the remaining measures being detailed ahead of the federal election.

New Financial Services Minister Daniel Mulino has stressed that getting advice reform across the line is a “top two or three” priority, but understands stakeholders need to see the full package.

“I certainly don’t want to delay this. I’m looking to work on this as a real priority, and this is one of my top two or three priorities at the moment, but I’m also conscious that it is complex,” Mulino said at an FSC event last month.

“I’m conscious that there are a wide range of views and I totally acknowledge and thank all the various players for trying to find the maximum overlap, the maximum area of consensus possible.

“But I’m also conscious of the detail matters in an area like this. I want to get this right, but the next step will be to put out the disclosure legislation on what you might call 2B, so that people can then fully digest all those elements deeply.”

The reforms as they stand, however, have faced broad criticism from bodies such as the Financial Advice Association Australia, with the concerns largely focused on the scale of what can be collectively charged and a lack of clarity around who within a super fund will be able to offer this level of advice.

According to Viola, the biggest issue on this front is “putting enough resources and enough regulation” in place to enable these organisations to “service that cohort of the market but do it in a really effective way that really benefits them”.

“We need to come up with a way of servicing that part of the market and ensuring that Australians are getting really good advice around debt reduction, wealth accumulation, insurance needs, super contributions,” he said.

“Then ultimately, everybody needs to be comfortable that when the client’s got more money and needs more sophisticated investment advice, that it can come to our part of the market.”

For a large sector of the market that have somewhere between $300,000 and $500,000 in their super, Viola added that being invested through their fund in a “homogenous way” can often be a positive outcome.

“You’re getting good quality managers, good quality due diligence, it’s very heavily regulated, you’re getting access to infrastructure assets and private equity assets and all sorts of stuff,” he said.

“There is enough choice without being the misery of choice within there. And you’re not being belted on fees. So, in reality, that cohort should be being looked after by that type of organisation.

“Then when people want to take a greater hold, when people want to have greater optionality or want to take advantage of what’s available in our part of the market, that’s the point to go and get advice from someone where you’re then willing to pay for it because you’ve got the means to do so.”

To hear more from Charlie Viola, tune in here.