At the outset, I’d like to emphasise that no advice model is unimpeachable. It’s in everyone’s interests for a variety of business models to operate. But every adviser, regardless of their business model, will ultimately be forced to consider issues of cost, price and value.
It’s the question of value that I think is the real point of contention; the FDS has caused some advisers to consider the remuneration they receive and the services they provide, and they are concerned that the “value” of the services they provide is not evident. I understand that many advisers struggle to articulate the value of the services they provide, but I also appreciate that their clients do significantly benefit from the advice and services they provide.
Admittedly, many advisers consider the FDS to be an inferior engagement tool to their current processes. Some practices already exceed the FDS’ minimum requirements and tailor their services to their clients’ needs. Unfortunately, other advisers principally see the FDS as a threat to their revenue streams (and would no doubt see best interests and the client priority rule in similar terms). As one adviser asked me recently, how are clients likely to react when they see what they paid for “quarterly newsletters and the opportunity for an annual review?”
In my experience, the great majority of good advisers legitimately provide valued services, and these changes provide them with an opportunity to promote their value and the professionalism of their offering. Some advisers may struggle to rationalise and defend their passive income stream model and subsequently disappear from the industry, but I don’t think that this is either an undesirable nor unintended consequence of the reforms.
Whether we like it or not, value – not remuneration source or association – will be the new battleground for financial advice, so we are best dealing with the new reality and turning our minds to better explaining the significant benefits advisers provide to their clients.
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