Scaled financial advice will continue its march into the fee for service regime, but some planners have come up with an alternative strategy for survival…
Financial advisers must wise up to the fact that their business model has to change post FoFA, and those that do will go in one of two directions, claims management advisor and business analyst at MGF Consulting Group Max Franchitto.
One route is to focus on scaled advice, and adopt the business model that accountants use, for example.
“The client says, ‘I’ve got this much tax work to do in a year, what’s your flat fee?’. And a lot of accountants say, ‘I’ll charge you a flat fee of x, and I’ll do the following for you – two company returns, a personal return and a couple of family trusts – and it will cost you x per annum’,” he told Wealth Professional. “The financial planner’s got to move into that space.”
“The problem that we have is that accounting we must have, because the tax office says you must do your taxes.”
“The question is, ‘do I need an adviser to buy life insurance?’. Maybe yes, maybe no – depending on how complex my life is,” he added.
“And do I really need to see an adviser more than once a year to talk about my investments? Especially with the way wrap accounts work nowadays. They’re not high-touch instruments.”
When asked whether he believes that advisers will therefore need to focus on offering scaled advice and increasing their volume of clients, Franchitto stated that the financial advice market will be split in two.
“There’ll be a group that will go for a smaller amount of high net worth clients,” he said. “And you can already find those sorts of people around Australia, particularly in the eastern states. They might only be managing 50 or 60 clients, but each client’s got three or four million put away – or more. So they’re high net worth clients who they can bill and justify their invoices to – because they’re managing large amounts of money.
“So that’s one end of the spectrum. Then at the other end of the spectrum is going to be the guys that are going to say, ‘we’ll have lots of little clients and charge lots of little fees, and hope that we can collect them’.”
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