Advisers, accountants: Who has the X factor?

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As planning firms implement a fee-for-service model to meet FoFA regulations, they must not only navigate associated costs but also find a way of justifying the costs they’re presenting to clients.

Management advisor Max Franchitto said the biggest challenge for most firms will be in this justification. If the client can’t see the value, they’re going to struggle to pay a large fee, he said.

“My tip is to make sure that the client can see that whatever they’re buying can’t be easily substituted,” he said. “It’s basic economics. The price of butter is limited in that it has an easy substitute in margarine.”

It could be debated as to who is the butter and who is the margarine, but financial planners will have to effectively prove to clients what makes them worth the money. Franchitto said the challenge will come particularly with SMSF’s: “accountants are going to be very competitive in that area.”

“Accountants are highly focused on compliance and they do give business advice. Managing money is not their core activity,” said Franchitto. “A financial planner is more a money manager and a wealth manager – so making that money grow and stopping it from going backwards…The financial planner has got to say ‘I’m not here to give you compliance and that sort of advice, my work is much more about your wealth and managing your money’, so that’s the point of differentiation.”

Franchitto said it all comes down to presentation. Most planners have the value there, but it is the presentation that is the problem. They need to put together a service proposal that the client’s not going to quiver about.

At this stage, Franchitto sees about a 50/50 split of advisers that have this presentation skill mastered and those that need to work on their proposition, but he said he hasn’t seen any lost causes yet.

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  • Matthew Lock on 14/02/2013 9:56:43 AM

    The industry has never had a level playing field for Advice. Cross subsidies abound via Institutions/Industry Funds with platform revenue and investment management fees, and Accountants selling SMSF audit and accounting services. The issue of a level playing field between compromised service suppliers and independent planners is raised mainly by those who consider themselves to be competing with the tied adviser working inside these organisations. This is the wrong target. Investors know that by going to a bank planner it’s highly likely that bank products will be used. For some that’s fine. For those seeking wholly objective advice the service is different. Independent advisers must differentiate themselves from the average tied adviser AND justify their more visible fee simply by virtue of the fact that they are independent. Competing on price in a professional services industry has always been a mugs game. Always will be! Independent advisers must compete as “value adders” not low cost/price providers. Truly independent advisers can naturally take the higher competitive/moral ground simply by selling their independence. That is unless of course their Dealer also offers in-house products that they are encouraged to use. In the eyes of consumers this is as compromised as Institutional/Industry fund advice and runs the risk of sullying the integrity of true independent advisers.

  • Andrew Ward - SelfWealth on 13/02/2013 10:51:14 AM

    Kathleen, this article is spot on. Every accountant knows they should be adding value by differentiating themselves from their competition, especially if they still want to charge the fees they feel they are entitled to.
    Max Franchitto also hits the nail on the head when this argument applies to SMSFs. Accountants will indeed be very competitive in this area. How can they stand apart from the crowd? What services or value adds do they provide with their SMSF service? What indeed is their X factor?

    Historically, without being licensed , accountants have not been allowed to give advice or recommendations around investments. SMSF trustees are increasingly asking their accountants "I'm sitting on all this cash in my SMSF, is it time to move into equities, what should I do?" The accountants have been hamstrung answering this question until now. AW

  • Peter Johnston - AIOFP on 13/02/2013 10:18:25 AM

    We DO NOT have a level playing field with Insto/Industry Funds cross subsidising advice with platform revenue and Accountants selling SMSF audit fee business to clients. They too are cross subsidising advice. Independents cannot compete by being the only group operating a pure fee for service business model. Hourly rate charging is a flawed conflicted way to charge clients. Half of FOFA is OK, the rest is a politically driven witch hunt designed to maximise political donations.

  • Another Mad Planner on 14/02/2013 11:01:16 AM

    Andrew Ward - Accountants have not been hamstrung until now. They have always had the option to refer to a Financial Planner for those conversations surrounding what to do with cash. Gees, the smart accountants would be already having the best of both worlds if they work very closely with a FP.

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

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