The restructuring of the advice industry through regulation, whether regarding qualifications or adviser remuneration is having a profound effect on many advisers, making them re-evaluate their role in the industry’s future. AMP’s freshly announced restructure - which was followed by its chief executive Francesco de Ferrari’s recent comments that someone on $80,000, won’t and shouldn’t afford to pay a full-time adviser on a recurring basis – looks to technology as a large part of the future of advice.
Mr de Ferrari made the comments to a largely investor audience at the Morningstar Individual Investor Conference earlier this month – as reported by ifa. His full comment was:
“If we are honest about making wealth accessible to all Australians, then we have to find another way of delivering it, because face-to-face advice is very expensive. [For someone] on an average of $80,000, they will not be able to afford or shouldn’t pay a full-time adviser on a recurring basis”
To put the comments into context, de Ferrari was in the middle of ‘pitching’ the concept of ‘modular’ advice, which is being explored as part of AMP’s new strategy to service clients in alternative ways. “Modular” would be provided only at critical life stages and would potentially be supported through ‘technology’.
“[We’ll look at] how we use technology and how we move effectively towards a more episodic advice where it’s clear to me that one size doesn’t fit all, and where we need to give clients the opportunity to buy and pay for advice when and how they need it.”
The speech provoked much outrage in the adviser community at several levels, with the ifa following up the story with a piece quoting the MD of Investment Collective, David French, who said the comments showed a “cavernous disconnect between facts and reality”. French went on to mention the benefits on an ‘on-going’ adviser relationship for the average Australian, including dealing with Super, Centrelink and the transition to retirement.
While many advisers have voiced their displeasure at the comments from the AMP chief, they do signal where AMP will concentrate some of their considerable wealth – attempting to create some sort of scaled advice solution that has so far eluded the industry.
The fact is, whether it is valuable and “worth it” or not – many “average” Australian’s do baulk at advice fees, and changes to adviser remuneration including commissions is only likely raise the direct cost of advice, making it more inaccessible. French was quoted as saying “Considering it takes at least a week to interview clients, collect and verify data and write and present a draft SOA, the cost of provision is at least $4,000. Add the cost of structuring and implementation and you are well on the way to five figures.” Without a wholesale change in the perception of your “average punter” regarding the value of advice, it would seem there are relatively few people willing to pay this amount.
When financial advice is delivered at its best, most advisers will refer to the ongoing, long lasting relationship that they possess with their client. They refer to really getting to know their client and being able to understand what their goals are – which can change considerably over time – and to helping devise wholesale strategies to reach these goals.
It is hard to see how ‘technology’ would replace this sort of adviser/client relationship, but it would seem that the fact is - until a client is convinced and ready to pay for full-scale advice, certain interim solutions (explored here, for example), including those purported to be offered by ‘technology’ may be the direction the industry has to take.
If advisers can identify these types of solutions that are cost effective, they may be able to offer help to a prospect - and, for want of a better term - stay 'linked' to them, till the client is “ready” to pay for a fuller service.