Why the financial advice industry has to change

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Fortnum Financial Advisers executive director Ray Miles argues that the online consumer revolution means that financial advisers will have to change their business models completely.

The financial advice industry is in trouble, and what we’re currently seeing happening is reminiscent of an industry in its death throes. Institutions control about 85% of the market in Australia, and they are looking to consolidate on this.

It feels like we’re back in the 80s with the amount of money being thrown at advisers to join dealer groups. There are too many overpriced platforms, there is too much fat in products and there are too many conflicts of interest. Something has to change.

There is now some feeling around the marketplace that the model of financial advice as we know is over. For example, in The Consumer Revolution, produced by United Capital Financial Partners, it is recognised that there is a significant consumer shift occurring that will forever change financial services.

My feeling is that the industry as we know it is about to get torn apart because we have very outdated models of advice.

Twenty years ago, if you wanted to go on an overseas trip you would go to a travel agent – now you go to the internet. If you wanted to buy music, you would get a CD from a mega music store. Apple destroyed that model with iTunes. If you wanted to rent a video, you would go to your video store. Netflix changed that. If you want to read a book now you go online – all the bookstores are going broke.

We’re in the middle of a consumer revolution and people are finding cheaper, easier and more convenient ways to do things online.

The financial services industry has not delivered any efficiency in 20 years – and this industry will not remain untouched by the consumer revolution.

Financial advisers will have to change their business models completely, and consumers will be able to get advice online at a reasonable price in the future. Change is inevitable, and it is only a short matter of time before the financial advice industry finds this out.

Reproduced courtesy of No More Practice, the education and reality TV franchise created for the business and financial sector. For more information on the series and the inaugural live event, visit http://www.nomorepractice.com.au/.

How are you adapting to the online age? Have your say by commenting below.

  • Ian Bailey on 7/08/2012 2:58:22 PM

    Well I also think the industry is in for change.How ever I don't see this as internet revolution but more about consumer realisation. Many consumers are realising that their advisers don't really have anything to offer other than selling products produced by the 85%. Advisers with real businesses and their own intellectual property will survive and most likely do well. These are the best of times, I love change it brings opportunities.

  • Martin Webb on 7/08/2012 11:46:32 AM

    This is a bit short sighted really. Having access to a hammer does not make you a carpenter! It folows that having access to cheaper products via the internet can not replace advice. I think you might be confusing advice with product sales.
    The market will allow advisers whoe sell advice that benefits consumers. Granted it may take a little while to educate consumers of the benefits of advice but timing does not mean it will not happen.

  • Jed on 7/08/2012 11:13:14 AM

    To think that advice practices, advice models and consumer wants are the same is short sighted. There is and always will be a requirement for a range of low touch and high touch options for clients. Some advisers will move into that low touch online arena and do well. For others, they will maintain their high touch, face to face business model and continue to do very well. With the low level of consumer take up of advice, there is plenty of opportunities to expand into the online space, and I hope it acts to get more people involved. Business models do not need to change, but we do need to encourage and build services in the online arena. And whilst we probably won't go there, we will be focusing on using technology to improve our advice delivery and client contact.

  • Alan Klein on 7/08/2012 11:03:22 AM

    Ray I think you have hit the nail on the head. I think the advice industry meaning current advisers need to band together to develop a strategy to offer an online solution. Everyone is developing their own online presence but I think as independent advisers we don't have the resources that the big end of town has.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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