Clearview MD Simon Swanson works the room at the group's annual roadshow

Wealth management fee structures will continue shifting away from percentage-based funds-under-management models to fees-for-service arrangements, according to the managing director of listed financial services provider Clearview’s, Simon Swanson.

During a candid presentation at the group’s annual roadshow in Sydney this morning – where he eschewed the dais and microphone in favour of pacing amongst the crowd – Swanson called fee-for-service models “the new normal”.

Swanson cited figures from researcher Investment Trends and said that while the proportion of fee-for-service models is “obviously getting a lot bigger”, asset-based fees are “shrinking” and hourly basis rates “have actually gone nowhere for the last 10 or 12 years”. The data showed that fee-for-service arrangements have steadily increased from 14 per cent in 2010 to 28 per cent in 2015 and 37 per cent in 2019. Investment Trends predict 53 per cent of advice will be fee-for-service by 2022.

“You can see fee-for-service on a fixed basis is where it seems to be all going,” he said.

The comments come a week after the government released draft legislation proposing annual opt-ins for service renewals and ‘lack of independence’ disclosure for advisers, with both Bills putting further pressure on advisers to adopt conflict-free remuneration.

Clearview provides insurance, financial planning and investment management services and was the 16th largest licensee owner in the country in Professional Planner‘s 2019 licencee list, with just over 200 advisers spread across its Clearview Financial Advice and Matrix Planning Solutions brands

While they face what Swanson called a “wall of regulation coming down the line”, Swanson reckons there will be a flood of opportunities for advisers as the workforce shrinks from a peak of 30,000 to “20,000, maybe a little bit less”.

“Your phone, ladies and gentlemen, is about to take off,” he said. “As of today, 41 per cent of people want to get financial advice and 25 per cent want it in the next year, which is fantastic. There are only about 11 million adults in Australia so that gives you about five million people to talk to. So good luck, knock yourselves out.”

Swanson drew on figures from the corporate regulator to show the issues that Australians seeking financial advice are looking for, which was topped by Investments, followed by retirement income planning and ‘growing your superannuation’.

Other pressing areas included budgeting and cash flow management, aged care planning, risk protection and self-managed superannuation funds.

The market for advice will widen, he said, but the costs burden will increase as the 2021 banning on grandfathered commissions squeezes revenue. Advisers will lose 20 per cent of their income after the ban, Swanson predicted – Coredata put the figure at 12.5 per cent – but the real cost increase will be seen in licensing.

“The dealer groups actually get totally shafted through this process, because they have also been living off these rebates and that’s been the difference between profit and loss,” he explained. “So the dealer groups are now increasing their fees.”

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. Contact at [email protected]
3 comments on “Fee for service ‘the new normal’: Clearview”
  1. Avatar Geoff Whiddon

    What will be interesting is if we see the product manufacturers and platforms also forced to a fee for service model. The administration of one’s investment funds does not get harder the more that is invested. As an adviser, I believe the laws need to be adjusted to be able to more simply provide advice electronically or the ability to service clients with less capacity to afford the service will mean those requiring advice (we used to call them the mass-affluent) will be priced out.

  2. Avatar Steve Blizard

    Allowing Royal Commission Lawyers to shape retirement policy, with little idea of how low to middle income people function in relation to advice provision, is fraught with danger. The Treasury’s latest draft legislation related to the RC has just been launched – designed to make advice hyper-expensive for low income earners. This legislation is one of Coalitions most epic policy fails in decades. Not to forget the 16 suicides of advisers over the past 12 months. If there are no amendments to this appalling legislation, in 18 months time there will be some big names disappear at the next round of Liberal Party Senate Preselections. Watch this space.

  3. Avatar Jeremy Wright

    Dealer groups getting shafted and having to increase fees to their advisers, leads me to the point that Life risk advisers have been warning would happen.
    As it stands now, it is no longer viable to write Life Insurance and this is prior to any upcoming hike in Dealer fees.
    Put simply, if revenue drops, expenses increase, compliance becomes unworkable and the risk of doing Business is greater than the opportunity, then you do not need a degree to see where it will end.

    At what point will the message finally sink in?
    Why is it that in this country, we have been hijacked by stupidity, insane red tape and an inability to see and quickly act on BAD POLICY, before it causes irrevocable damage.

    ASIC needs to be reined in and reined in NOW, before they totally destroy thousands of hard working and honest Businesses and Millions of Australians who are already much worse off under this regime of bureaucratic madness.

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