Scaled advice: Clients won’t pay

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Client attitudes are constantly changing, and despite speculation that the majority are looking for more control in their super, industry funds are benefiting the most from switching members.

According to CoreData’s Member Retention Report, of those looking to switch going forward, about 42.2% are likely to move to an industry fund. This is followed by less than one quarter that will move to an SMSF.

However, Australians are calling for greater access to advice from whatever fund they are involved in. While a large portion of members aren’t aware that their fund offers advice, 44.5% of those looking to switch said advice was a key factor.

It is mostly demand for scaled and single-issue advice, particularly tax minimization. More than three quarters of members would prefer access via online advice tools but the majority of respondents said that they would not be willing to pay for the services.

Salvador Saiz, Head of Advice, Wealth & Super at CoreData says that in a bid to retain members, “…funds are considering or have already begun to offer other services, such as mortgage broking services and even partnering with SMSF specialist providers.”

So who’s stealing the members? At a fund level, those funds mostly likely to benefit from switching members are AustralianSuper, AMP, MLC, HESTA and Colonial First State, respectively.

“If we consider the leakage to SMSFSs that all funds are grappling with, retail funds have lost the largest proportion of members to this segment”, says Saiz. In particular, advisers should be wary of those that are defined by CoreData as “controllers and outsourcer SMSF trustees”, who Saiz says are more likely to have come from retail funds than from other sectors.

  • Andrew on 21/08/2013 3:26:32 PM

    Reading this 42% are likely to move to an Industry fund, want advice and dont want to pay for it so good luck to the Industry funds running that business model.

    25% want to go to an SMSF and make their own decisions which is fine. No doubt at times they will also want advice and will be happy to pay for it as required.

    That still leaves 33% who presumably have no idea or interest or will be looking to advisers for advice and will be happy to pay an appropriate fee. They wont want the bias of the Industry funds or the Banks and that 33% (3.3m people ??) when they start looking are likely to have larger balances than smaller and should be enough for me to find 200 suitable clients.

    The sooner that the journalists work out an adviser business model is to have 200 or less clients with a productive and interactive relationship over 10 years plus the sooner they will stop writing transactional based articles in what should be an advice related article.

    The angle for the journalists to pursue over the next 2-3 years is how will the Industry funds deal with a growing base of clients that want advice and dont want to pay for it ? Industry funds will need to provide higher value services with a margin based on no service so how will they do that without increasing the fees. If they dont provide the advice they will lose the funds. Perhaps that is why the compare the pair adverts will stop.

    I am optimistic that the next Labor treasurer will come from the ISN as if someone can fix that business model and run profitably before going broke then they will clearly have the business acumen that the ALP front bench today clearly doesn't have.

  • Fedup on 21/08/2013 9:45:11 AM

    Lets see how we go with a new government that is not morally bankrupt, contemptuous and deceitful. Scaled advice is fine if we don’t have to ware the inevitable claims that will come. If every one worked under the same rules that would be fine, but we don’t. Union/Labor funds and the banks can give intra fund advice with no recourse. If the client comes to a planner they have unlimited recourse. Only a Labor/Union government can line their pockets like that and claim to be the good guys.

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