Clients are coming around to the idea of opening their wallets a little wider to secure the services of a good adviser. But you’ll need to produce a stellar value proposition.
According to Rice Warner Actuaries CEO Michael Rice, customers are willing to shell out more for good strategic advice.
His comments have been fuelled by the finding of a survey of SMSF investors, carried out by Rice Warner Actuaries for Vanguard Australia and the SMSF Professionals Association of Australia (SPAA)
“The survey found there was a strong correlation between the levels of satisfaction with financial advice and what people paid their advisers,” said Rice.
“Less than half (44%) of respondents are satisfied when the advice cost less than $500, perhaps indicating that simple advice is not sufficient in this complex professional area.
“Conversely, people who paid $1,000 to $2,000 are more likely to be satisfied with the advice (76%). And reinforcing this point is the fact that the respondents are strong users of a range of advice services – 87% wanted strategy and investment advice.”
The survey found that it wasn’t uncommon for complex advice fees to break the $2,000 barrier. Results showed that 25% of all ‘strategic advice’ plans cost more than $2,000, while 50% of all plans that included strategic advice and assistance in making investments cost more than $2,000.
When it came to matching up to the clients expectations, 66% of those surveyed were satisfied with their adviser’s performance, with 34% ticking the ‘unsatisfied’ box.
So what are those planners who fail to meet expectations doing wrong? According to Rice, some of the negative comments from respondents included:
The adviser is more interested in the products sold rather than the return for the client.
Advice given is too simple and general in nature, for the cost to be justified.
The adviser doesn’t make contact; the client has to contact them.
Financial advice from the major channels is highly conflicted by what is on their approved product lists and platforms.
The report noted that there are only two main reasons why clients come away from their adviser unhappy:
Advisers are not competent/only able to provide basic advice and have a lesser level of knowledge and skill than the trustee; or
advice is based entirely on product sale (not strategy) so is more linked to commissions and remuneration strategies.
“One of the findings in here actually shows that trustees when they do get poor advice, or sales advice, or the adviser that wouldn’t necessarily be proactive, they often thought that they knew more than the adviser did,” said SPAA CEO Andrea Slattery.
Develop a value proposition
However, advisers that did cut the mustard with their clients were more likely to be rewarded with a greater fee in future.
“There is a clear relationship that, if someone was satisfied with previous advice, they are willing to pay more for the next piece of advice, with 75% of people who are willing to pay more than $1,000 for future advice are the respondents who say their advisor met their expectations,” said Rice.
“There is a clear challenge for advisers in these findings – develop a value proposition for your clients.”
Overall, the survey indicates a huge opportunity for advisers to tap into the growing need for specialist advice, especially in the SMSF field, noted Vanguard principal, market strategy & communications, Robin Bowerman.
“The value of good advice comes through clearly in this report and advisers should take heart that the huge growth in SMSF establishment will in turn drive growth in the need for advice,” he said, with Slattery adding that “committed professionals who genuinely add value for their clients and who go down this path with be rightly financially rewarded”.