The Association of Financial Advisers (AFA) is encouraging advisers to think about the adaptability of their practice by addressing changing consumer preferences, the costs to deliver quality financial advice and technology following a three-day AFA Leaders Forum community of practice business summit (the Leaders Forum Business Summit).
The Leaders Forum Business Summit took invited delegates from 15 of the country’s leading advice practices through a six-part facilitated, but adviser-led, think tank that distilled both the macro and micro challenges facing financial advice businesses.
AFA Chief Executive Brad Fox said the Leaders Forum Business Summit highlighted that the temptation for advisers to focus on their advice proposition, delivery of advice and client engagement, runs the risk of ignoring the critical impact that the operating environment has on the overall success of their advice practices.
“We understand from our members that many feel under pressure from the change in trends in the financial advice landscape. Advisers need to develop a deep understanding of these macro trends and use that as the basis to refine the strategy, culture and architecture of their advice practices,” Mr Fox said. “Delegates considered the key trends and market forces through the lenses of political, market, economic, digital and consumer shifts in the advice landscape. These are important challenges facing service industries around the world, but, arguably, none more so than financial advice.”
Mr Fox said there is continued evidence that the traditional role of intermediaries and brokers across numerous markets is being challenged by both new competitors that offer different types of intermediated client experiences or product providers bypassing the intermediary to sell direct to the end consumer.
“Across various markets and industries disruptors have broadened the number of consumers in the market place, but in others they have caused existing businesses to fold by taking their market share,” Mr Fox said. “What is clear in financial advice is that better advisers add value – and that value does not come from providing access to products or information. It comes from providing knowledge and insight and contributing to the financial education and understanding of their clients which leads to greater confidence and improved well-being.”
The AFA Leaders Forum identified that a growing number of new entrants to financial advice will not be charging either commission on life insurance or asset based fees on superannuation and investment advice.
“As disruptors to the traditional advice models they may succeed or fail; either way it means existing advice practices need to consider what is the business formula for success in a changing market place and be prepared to adapt,” he said. “Political, economic, societal, digital and legislative paradigms are shifting – and adapting business strategy is essential.”
The AFA Leaders Forum Business Summit identified numerous opportunities for financial advice practices. One common theme was that bespoke, personal financial advice will be most valuable where the client has deeper, complex needs.
“The complexity can be because of their financial position, but increasingly it may be because of complex relationship and/or life-stage needs. An approach that combines financial modelling with a counselling or coaching style, along with developing the financial understanding of the client, is likely to be most effective, and the most valuable for clients.”
Another shared theme was the desire for fintech solutions that provide full end-to-end practice management and client experience functionality. The need for greater efficiency in the back office together with the desire for greater client engagement and user experience is a high priority for these leading practices. Delegates described nirvana as the high-touch, low-cost, high-tech model.
“All of the practices are bullish about the future for financial advice yet there was strong acknowledgement that the paradigm for financial advice is ripe for reinvention; that the way advice is provided and relationships are managed will change. We can blend the best of the present with the best ideas for the future,” Mr Fox said. “We only have to consider lessons from the retail sales world to learn that old business models have a use-by date and that reinvention is a necessity to stay relevant with current and prospective clients.”
Delegates from the AFA Leaders Forum will be presenting at the AFA National Adviser Conference in Canberra 5-7 October on key learnings and take-outs from the Business Summit. Most importantly, they will share what they are doing in terms of their business strategy, culture and architecture to embrace the opportunities to create the new advice paradigm.
“It takes a start-up mentality where you need to get started well before you have all the pieces to the puzzle, and then stay flexible and adapt and learn as you go. It’s about being nimble and agile – that’s what delegates determined to be the characteristics of the adaptive practice.”
