Certainty Advice managing director Jim Stackpool warns the financial planning industry is set for an imminent “Kodak moment”, where automation and robo-advice will destroy low-value advice firms.
But he says that advisers offering “true advice” that focuses on client value will weather the disruptive storm.
Kodak, once an American industrial icon, was famously disrupted by the advent of digital cameras and social media photography sites like Instagram and filed for bankruptcy.
Stackpool says technology, like it did to Kodak, will replace and destroy low-value offerings from advisers such as investor rollover work, compliance and insurance. And firms that don’t adapt will suddenly struggle.
“It’s inevitably going to occur in the next three to four years,” he says.
But firms and advisers that focus on true advice will continue to thrive.
Stackpool says true advice is focused on the value offered to clients including relationships and reassurance and “not on hourly rates, fixed retainers, percentage of funds under management, or quantum of commissions sold”.
“Too many advisers for too long placed value on the hours worked or the amount of product shifted,” he says. “They only know how to run Kodak shops.”
Advisers adding value will benefit
Stackpool says the uncertainty created by changing legislation and planner scandals is shifting the market place and means that advisers adding real value will benefit.
“Australians are fed up with the existing corrupted infrastructure on which advice is being provided,” he says. “These are the best of times for true advice. It’s a great time to be a great adviser.”
“True adviser jobs won’t be outsourced to some foreign country and they will find value from enough clients to ensure a viable future,” he adds.
Last year Stackpool rebranded his Strategic Consulting and Training business as Certainty Advice Group, which is rolling out new Certainty Advice designation.
So far seven firms with around 12 to 15 advisors have been designated, and Stackpool expects another 20 to 25 advisers to be added this year.
Certainty Advice is focusing on quality, not quantity, he says. “We don’t want a lot of growth. We want steady growth as we build this thing. It’s going along as we’d like it to go along.”
Certainty Advice designated advisers must meet two criteria: they must “serve the client’s greater good” with no conflict, including hourly rates, attachment to products or platforms, or referral fee; they also need to provide “complete financial advice”, a broader approach that involves project management of the client’s life.
“People are looking for a firm not influenced by product and that genuinely takes the whole big-picture approach,” he says. “More and more clients are looking for a sounding board, a copilot.”
Bedding down systems
Certainty Advice is focusing on bedding down systems and processes and ensuring advisers who sign up get good value for the fees they’re paying. Firms pay an annual $4000 fee and each Certainty Adviser within the firm pays an additional $1000 to maintain their certification.
It has launched initiatives including monthly press releases on industry topics, the filming of clients talking about getting advice from Certainty Advice and benchmarking of its designated advisers and their work. “We’re trying to deliver more and more services to those guys,” Stackpool says.
Certainty Advice remains in talks with IP Australia and competition regulator, the Australian Competition and Consumer Commission to get an advice certification mark.
Stackpool says the process has been slow and painful. “Accrediting an advice approach is something new for them to get their heads around.”
With benchmarks and accreditation, Stackpool says Certainty Advice will look to ramp up growth next year, and is shooting to sign up around 100 to 200 advisers in coming years.
He says Certainty Advice designation is not strictly focused on financial planners, but will be an advice designation with a “pot pouri” of advisers, including accountants.
