Speaking on a recent ifa podcast, Nigel Baker, chief executive and founder of Scientiam, said he envisions a more adaptable and segmented advice approach that caters to the diverse needs of clients.
“Not everyone needs full advice,” Mr Baker said.
“That’s the reality. Not everyone needs and not everyone needs full advice for the rest of their life. I think the model needs to change,” he noted.
He envisions a more flexible model where advisory services are tailored to the varying needs of clients.
“Some might need full advice for a year or two and it might drop down a bit. And some are happy to hover around at that low-level advice for forever, even though they might be fairly complex, they get it and they can just sort of, I suppose, subscribe to part of that service”.
Mr Baker’s perspective challenges the traditional notion of advisory services as a one-size-fits-all approach. He advocates for a more adaptable system that can cater to different client groups, offering varying levels of service based on individual needs and preferences.
“That can also really make an advisory business really efficient and really, really tier its service levels to numerous client groups rather than, again, at the moment, 95 per cent of advisory firms really just service one type of client. They might say they do more than that, but when you lift a bonnet, they really just got one service offering.”
Mr Baker also emphasised the need for advisers to adapt and utilise technology to better serve their clients.
“There are some amazing advisers out there and they’ve got some great knowledge to share,” he said.
Mr Baker stressed that current practices are falling short of utilising technology’s capabilities, even for a relatively modest clientele. “Even for their current 50 clients, they’re not using much technology just to replicate and share that information and engage those clients,” he highlighted.
“If you ask advisers and say, ‘Well, where do your clients get their information from?’ They’ve got no idea. You go, ‘Well, I bet you that the stuff you send out is probably less than 10 per cent of actually what they read.’
“They’re actually Googling other things, they’re getting other newsletters. You are not even able to, even under your own philosophy, and you’ve got a great story and you’ve got a great investor philosophy, all those sort of things. But they’re getting information from all sorts of sources. Even bringing that into making that more efficient, but then being able to share that with more people and giving people … We see how that can change people’s lives and really help people.”
To hear more from Nigel Baker, tune in here.
You make some excellent points. As a lover of chinese food it is nice to occasionally have the banquet , but more often than not I think most people like to choose their our own menu and order dependent on their neds at the time that chnge form visit to visit
But Garry, ASIC insists that we offer fries with that and multiple reasons why it was not taken up. Nice if the AFSLs took a baseball bat to the regulators.
Of course the old model needs to change. 95% of practices only deal with retirees or pre-retirees because they are the easiest to charge a big upfront and ongoing fee to. Yes they need advice leading up to and at the time of retirement, but very few people should be paying $4k+ p.a. for an annual catch up and a coffee with an Adviser that’s likely using a managed account to invest the money and just tweaking pension payment amounts. I know many Advisers who whole businesses are set up exactly like this. It’s really poor in my opinion. Give people advice to get themselves into retirement, set them up with products that they can manage on their own, and then offer them an adhoc review if they need it. This will never happen unfortunately because the value of such a business wouldn’t be anywhere near the 2.5x on offer at the moment.
It shouldn’t cost $4k plus to provide ongoing advice. It does but that isn’t due to the adviser, its the compliance requirements. 95% of advisers target the retiree / pre-retiree market because they need to eat / make a profit. Let’s fix the compliance fiasco and let the market work it out.
I don’t agree that the compliance requirements for ongoing reviews are that onerous. Most retirees who are paying an ongoing fee receive an annual meeting with their Adviser, where they discuss portfolio performance, longevity of the retirement savings etc. A file note and possibly a short ROA would be the compliance requirement. What’s the client actually getting for their $4k? not much in my opinion. Pre-retirees maybe different if they are using TTR’s or need help with updating contribution strategies, even still, a short ROA is generally all that’s needed.
“A file note and possibly a short ROA would be the compliance requirement.”
Seriously? In Australia?
You’ve obviously never gone through what ASIC expects the obligations to be — not in their original requirements but what they have subsequently added. I’ve had to refund fees on the basis that I didn’t do a full fact find and comprehensive review. What you are saying is what they should be, not what they are. I personally agree that what you are doing is sufficient but I’m not ASIC, AFCA or called Hayne.
Was that as a result of an ASIC audit or your licensee? I’m not self-licensed but licensed through a small group. Large licensee’s create a lot of unnecessary work for Advisers because they need to cater to the lowest common denominator. The Corps Act doesn’t define Fact Find or Review, those documents don’t even need to exist. If you do a detailed file note and produce an ROA after a review meeting then you’re fine. If your licensee requires you to do more then get out and go to a smaller group.
I’ll take a guess that Anonymous might be self-licensed….
So when legislation changes like recently like the work test, how is a client supposed to know that they should be looking at doing something now to potentially reduce tax to non-financial dependents in the future if they don’t have the annual catch up coffee with their financial adviser?
Yes financial advisers need to make a profit, but they are also not allowed to cold call for potential clients, so if there is no ongoing relationship then there is no ongoing advice when required. This is a just a one off example.
“not everyone needs full advice” but what if the adviser is obliged to consider broader long-term interests and likely circumstances? See Nigel, we cannot just give the client what they want. We’re obliged to our AFSLs, AFCA and ASIC… and then make the client jump through hoops, document in chapter & verse the limited scope, to protect our AFSL, not the client. Surprisingly, Google does not have to to comply with Standard 6.
The issue is that he is right but advisers can’t do it. Most clients don’t need full advice, most advisers don’t want to give advice in areas where they don’t really add value but ASIC / AFCA / Licensee’s and the new version of AFCA basically make scaled advice impossible. If they got rid of Standard 6 and didn’t change anything else we still couldn’t do it.
You mean, we’re damned if we do and damned if we don’t. No wonder we’re fed up.
Nigel is right and this is probably no better emphasised by the “motivated” push to have industry funds provided with the principal avenue for easy advice. It would appear to many in the Financial Services professions that whilst the Minister could be partly correct in having the ability to have the easy form of advice provided by a low cost method and heavily promoted as such Financial Professionals such as Accountants and even Solicitors are finding it increasing difficult to explain the value of full advice comprehensive advice. Which is interesting that nobody seems to be promoting the value of full comprehensive advice in a public forum, such that the Minister commands when promoting the advice provision by the industry funds. In 30 years of working in Financial Services profession I have yet to see any industry body, investment institution or even the various associations advertise, actively promote in a meaningful way the value proposition offered by financial advisers and why the cost of advice are what they are. So to that extent maybe we are headed down the path of climbing over each other to attain clients in a race to the bottom.