As advisers continue the pursuit of professionalisation, one of the major questions they’ll have to grapple with is how they can improve their client offering and profitability against the backdrop of increasing compliance demands.

This is a Professional Planner Infocus report, in partnership with iShares by BlackRock. To see a pdf of the full version from the September magazine, click here. 

The client of tomorrow expects efficiency. They want quickly executed advice, as well as freely flowing information and empowerment from their adviser, according to research by Macquarie Wealth Management. But at the same time, advisers are drowning in paperwork, emails and compliance expectations, most notably from Records of Advice (ROAs) that can take up to three months to complete a tactical change.

With regulation and compliance here to stay, advisers will increasingly have to make a choice between whether they use their human capital to meet technical demands or to nourish client relationships, said Sherise Mercer, head of Macquarie Virtual Adviser Network.

“Your keys to success walk out of the business every night,” she said. “A lot of the talk out in the market at the moment is about what we call the bionic adviser – a human adviser that is powered by technology.”

Finding staff with soft skills – including empathy and the ability to build rapport – is a key tenet of professionalism and one that is being prioritised, she said.

The question that’s repeatedly being asked, according to Mercer, is “how can the back office be streamlined, either through technology or outsourcing, so that the adviser at the front end can focus on the client and making sure their needs are met?”

Jon Howie, head of iShares Australia at BlackRock, agreed competitive pressures and cost sensitivity will mean the practices that thrive in the future will be the ones with a clear recognition of what their clients want and how they can serve them. For Howie, that begins with streamlining the investment process.

“When you’re running portfolios yourself as a planner you take on an enormous amount of responsibility,” he said. “It’s not necessarily the case that the clients value that responsibility.

“What we’ve seen over the past couple of years is advisers really looking for efficiency and scale.”

Speaking at a recent BlackRock symposium, Howie said efficiency and value to clients are inherently interwoven in the current regulatory environment.

“Ultimately this is a shift to the way you do business and ultimately to your value proposition to clients, whether you realise it or not,” he said.

A practice revolution

In light of technological innovation and changing client demands, Howie said there is an increasing interest from advisers in model portfolios they can offer clients without the paperwork burden of an ROA. But it’s only been a fairly recent theme.

One of the first to recognise the conflict between client service and time-poor advisers was Brett Taggart, chief executive of Australian Financial Advisory Solutions.

“If you go back four or five years, we were asset managers. We thought we could build portfolios, make decisions on asset allocation…We thought we were great,” Taggart said.

He found himself in a position where he was making bulk changes to client portfolios and issuing hundreds of ROAs a week.

“If you do one change, that’s 300 documents you have to send out,” he said. “You’ve got to send 300 customised documents, you’ve got to make the change, then you’ve got teams of people doing the compliance. I can’t afford to add scores of people for a compliance function.

“I could send money all around the world with a click of a button, but I still had to send clients a paper document which they had to sign and send back. It didn’t make sense.”

Taggart said he had to make the tactical choice Mercer referred to earlier: do you invest in becoming an asset management specialist or do you invest in building client relationships?

He described the decision as a “no-brainer”.

“In my business, I don’t want the labour cost of something that adds no value.”

From there, he started investigating options to reduce the human compliance, while preserving performance.

“We had to find a way to plug into that asset management capability and we recognised we needed to use ETFs rather than managed funds given the speed of transactions and the cost,” he said.

It wasn’t a difficult conversation to have with clients, he explained.

One client in his 70s, who initially resisted Taggart’s recommendation to go down the ETF path, recently admitted he would have been $300,000 better off if he had followed the advice.

“He would have saved himself so much heartache and so much stress,” Taggart said.

In terms of how it’s revolutionised Taggart’s practice, the proof is in the numbers: over a six month period, his firm has been relieved of sending more than 700 ROAs and won back hundreds of hours for its clients.

“It’s been a very big journey of discovery,” he says.

Just the start

According to Howie, Taggart’s story is no longer unique, with advisers increasingly questioning how they can use technology effectively.

Advisers tell him up until recently, technology has not been delivering what they expected it to in terms of saving them time or improving the client experience.

The ETF model portfolio is the first iteration of a more holistic approach BlackRock is taking to harnessing technology to improve client outcomes, Howie said.

“What we’ve seen over the past 12 months is a lot of advice practices are learning this is a way to significantly reduce their costs, while retaining what clients value most,” he said. “It’s really around leveraging technology to build scale. This is one of the first forays into that. You’re going to see technology become much more capable.”

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