Scaled advice is in many ways what both advisers and their clients have been calling out for since the introduction of the Financial Services Reform Act.
For years I have listened to fellow advisers complain about the time taken to deliver a Statement of Advice (generally estimated at around 6-10 hours), and they would freely admit that very little of this time adds value to the client; and the resulting SoA was usually long, hard to understand, and often largely ignored by both adviser and client.
Scaled advice is the mechanism to address these problems. But because it is bringing new entrants into the market many advisers are compelled to resist it.
Scaled advice does not replace comprehensive advice, and nor is it panacea to be used in all occasions. But coming from a high net worth, SMSF-based practice, I believe there are four areas where advisers could benefit from incorporating a scaled advice process.
Ongoing reviews:
Many advisers would benefit from an ongoing review process that centers on retirement income at retirement. It makes your focus on something other than investment performance, separating you from performance in the eyes of the client, and allows you to focus clients on long-term outcomes rather than short-term super fluctuations. A scaled advice document around retirement income and the steps to bridge any funding shortfalls has been hugely successful in our practice, dramatically increasing our clients’ interest levels and engagement.
Additional strategies:
Initial advice may be complex and cover many areas, but in an ongoing relationship scaled advice can add to or enhance certain facets of the overall strategy, whether it’s reviewing insurance, investment options or adding a transition to retirement or contributions strategy. Using a quality scaled advice system makes it fast and easy to add strategies with the bonus that the scaled tools are visually friendly enough to be used in front of the client during a meeting.
C and D clients:
In the new world, where you will be expected to offer some level of service to all clients, traditional advice models are simply not viable or appropriate given the client’s needs or the remuneration they will be willing to pay. Advisers will need to explore phone-based and online advice models for these clients, either employing them directly, or leveraging off a capability from their dealer group or platform provider. These can provide real value to a client at a fraction of the cost, and still allow the adviser to be on-hand should a trigger arise that requires more complex advice.
Corporate Super:
As corporate super advisers move from a relationship with the employer to one that must be with the underlying members, they will face many of the same challenges as with traditional C and D clients. Given the average level of remuneration per member is likely under $100, only a phone-based or online model has any hope of servicing these clients profitably.
Advisers have the luxury of knowing the advice landscape, and the needs of clients, in a much deeper and more meaningful way than other aspects of the advice industry. This understanding also uniquely places them in the right position to be able to decide where to use traditional advice processes, with all the pros and cons of that model; and where to use the simpler advice model, understanding the limitations of it, but matching it to the needs of the client.
Cameron O’Sullivan is a director of Provisio Technologies and a financial advisor with Ward Financial Group.
