Melinda Houghton is trying something different, and while she may be skirting a thin regulatory line it could be the key to bridging the gap between advice and the unadvised.

The ex-adviser is providing consultancy services to people about financial advice; while she isn’t licensed herself anymore, she helps answer questions about advice, gives opinions on advice documents and chaperones clients in meetings with their adviser.

It’s an unusual service provision. “I made it up,” she says. “It’s brand new.”

Houghton acts as an external adviser, leveraging her 15 years in advice to provide people with what she calls “financial relaxation”, making them comfortable with the process and more confident in their advice professional.

The business is called ‘Insider Out’. Houghton doesn’t provide financial advice, but she will answer financial planning queries ($70 for half an hour or $120 for an hour) or provide an opinion on a statement of advice ($290 for around three hours).

While she hasn’t had the opportunity yet – the business is relatively new – for about $500 she’ll even attend an appointment with a client and meet their adviser, then give an opinion on the advice.

“You won’t worry about going to see an adviser with an independent expert on your side,” her website says.

Houghton’s venture is the latest example in a series of investigations Professional Planner has led into pathways being explored by advisers who are leaving advice. Read the latest instalments in this series here and here.

An independent expert    

Houghton sold her financial planning business in December last year and handed the keys over in May. She cites family reasons for walking away but readily admits the business was getting tough to maintain.

“It just all became too much. I was looking after 200 ongoing service clients, as well as the compliance, education, and then the family issues. In the end family came first,“ she explains.

Houghton says she’d been toying with the idea of helping people who were considering advice “but didn’t know if they could trust it or not”. So, she started researching.

“What I saw was that people don’t understand exactly what financial advice is, how it works, what it should cost, what the benefits are, and whether they should be entering the advice process,” she says. “I think we’ve gone down from 20 per cent saturation to about 12 or 15 per cent since the royal commission, so it’s not getting better.”

Houghton boils her fledgling business down to three things; navigation, translation and review. “But people may not need all three,” she adds.

The most popular service so far is the advice review, she reveals. After the adviser explains the document the client often wants a second opinion. At that point, she says, the client has a licensed adviser and an independent expert on side, the combination of which gives clients “core financial relaxation”.

Houghton is an advocate for financial advice. She hopes her service will reduce the barriers between advisers and clients and says she is much more likely to push people towards financial advice than away from it. “There are very few people who are not candidates for advice,” she adds.

She will refer clients to advisers and is building an adviser ‘panel’, but Houghton says that’s not what the business is about. “I don’t have to make a referral – that’s not my service,” she says. “If you don’t have one then I can refer you, but that’s not what I’m promoting.”

A fine regulatory line

The Fold Legal’s Simon Carrodus says Houghton’s business is “not a bad idea”, but he has some concerns from a regulatory standpoint.

“It’s not without risk,” Carrodus says, noting that endorsement could be an issue. “What if an adviser provides inappropriate or conflicted advice and she fails to pick up on it?”

Melinda says she hasn’t checked in with ASIC about the positioning of her services, but she knows she has to be careful. The business does carry professional indemnity insurance, and the website provides legal disclaimers.

“My opinion is all I’m providing,” she says. “I can say I agree with the advice and it’s valid, but I stay away from product.”

The definition of financial product advice in the Corporations Act is, in Carrodus’ words, “rather broad”.

Regardless, Melinda says most advisers she’s spoke to have been on board. “I’m actually surprised,” she says. “I expected a lot of criticism.”

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.
3 comments on “The advice sherpa: A new career pathway emerges”
  1. I just do not believe that Melinda can be in a position to help the client without giving advice herself. Craig made a very valid point on the fact that advice has become so expensive without this service, let alone adding another layer.
    So you are an adviser who advises on whether your adviser is advising appropriately, without advising?
    Not sure that is is going to take off but good luck with it.

  2. Craig Meldrum

    It’s an innovative idea but it raises some questions. For one, if a would-be financial planning client does not inherently trust the provider or the service, it says that regardless of the level of complex regulation imposed on this industry, it will always remain a relationship business, meaning trust needs to be earned for the best outcomes for clients. This is where the banks got it so wrong. It also adds another level of cost in the advice process which is already becoming prohibitive for the people that need advice the most. Another point raised in the article is the regulatory tight-rope. This post-Royal Commission and post-FASEA world is experiencing an increase in advisers wanting to become unlicensed “money coaches” which will no doubt come to the attention of the regulator. The breadth of services that a money coach can offer without stepping over the line are restricted to cash flow management, budgeting and potentially debt management. For what a money coach can charge and depending on scalability, does it possibly force these practitioners into the world of financial counselling to be broad enough to build a business? Many good financial planners are being wooed into the world of post-RC client reparation with the banks and consulting firms offering 6-figures for short-term roles. Good licensees want good financial planners and compliance teams always need good people who understand what good advice is. It is only going to get harder for those advisers clinging onto the nineties and naughties once we get to 1 January 2020 and financial advisers step up as professional fiduciaries.

  3. Christoph Schnelle

    It sounds like a very good idea. Melinda could quickly become an authority on advisers and clients know that Melinda is not selling them financial advice, i.e. isn’t a competitor and, unlike other professionals, Melinda has substantial experience as an adviser. Advisers may also benefit from the feedback.

Leave a comment