Advisers are often overcomplicating investments when giving financial advice in order to validate ongoing fees, according to Sunsuper head of advice and retirement, Anne Fuchs.

“I think that the industry… has created a whole lot of complexity to justify ongoing fees and a revenue models that isn’t really needed,” Fuchs said at the Professional Planner Best Practice forum in Sydney yesterday.

Chairing a session called ‘Rethinking the value of advice’, Fuchs’ explained that the value proposition for advisers has historically been in portfolio construction, which will always have an important place in the market. Yet ordinary Australians prefer simplicity, she continued, and understanding from their adviser.

“The way to make money if you’re an advice professional isn’t investing a whole lot of time in the back end of your business doing portfolio construction work,” Fuchs said.

The $66 billion industry fund executive argued that strategy is the advice “alpha” for most Australians, not investment expertise. Complicated investment services only raise the cost of advice and inhibit consumer take-up.

Fuchs was joined on the panel by two advisers – Ken Bloomfield from Financial Clarity and Preston Foster from Apt Wealth Partners – who discussed where the value of advice lies and how it should be charged.

Fuchs acknowledged that questioning remuneration models can put people off-side.

She strongly advocated financial advice, saying spending $3,000 for a statement of advice and $1,500 to stay on track of personal goals “actually makes you wealthier”.

“That’s a story that needs to be told,” she added.

However, the ongoing advice model – and the complexity being used to justify it – may be under threat, she believes.

“After the royal commission I’m convinced there will be a time when we are not going to be able to deduct fees – certainly not ongoing fees out of super,” she said. “All I’m asking is, if someone has to hand over a credit card or do a transfer out of their bank account, do our business models need to change?”

Fuchs said she was surprised Hayne didn’t recommend a ban on ongoing fees, adding that it was a “possibility down the track” if the industry didn’t evolve its models.

Sunsuper was called to appear at the royal commission, but didn’t end up taking the stand. Fuchs says she was aware how interested the commission was in the advice fees being charged out of Sunsuper member accounts.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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