Paul Stephan is introducing a support service option he knows isn’t for every adviser. “Running this model would hurt a lot of businesses,” he says.

The Perth adviser is offering what he calls an ”admin-only support” retainer to existing comprehensive advice clients which allows them to call at any time for factual information. For roughly 20 per cent of his usual annual advice fee, Stephan is on-call to answer any queries and provide an annual check-in to make sure their needs are being met.

“Rather than taking advice every year, if the client takes the support package – which costs around $1,000 or less – they can come for factual advice any time they want and every year I’ll check in on them,” he explains.

If clients then need comprehensive advice, he explains, they simply switch back to the original model or pay for ‘episodic’ advice.

The idea for the service, he says, came about when he was studying for FASEA’s mandatory ethics course in 2019. It got the adviser thinking about the optimal model for clients, and how advice and support could be separated.

“We’ve got comprehensive advice clients that retire and then every year they need a rebalance,” he says. “The maintenance is lower so I put them on an admin-only support package and quote them on the advice they need. Why should they pay for full advice every year? That’s not how I want to operate. I want to give control back to the consumer.”

Despite the nomenclature, there’s not much administration involved in Stephan’s admin-only service. Execution-only tasks are not included, but he’ll gladly retrieve super statements and tax reports, provide factual information about things like contributions and Centrelink, and simplify jargon from a product disclosure statement for a client.

He doesn’t offer the service to anyone, fearful DIYers would try to game the service for cheap advice. “That’s not what it’s about,” he says. “I’ve only offered it to clients that have already gone through the advice process.”

It’s an unusual method, and one that’s counter-intuitive to running a profitable advice business in a lot of ways. But for Stephan, continuing to charge full advice fees to clients that don’t get full value out of the service is ethically unsustainable.

“The model I’ve adopted has hurt me financially, but I believe it’s the right way to go,” he says. “To me it feels right.”

Stephan says he’s been rolling the option out to clients since 2019 with a slow and steady take-up. Most choose to stay on their existing annual arrangement, he says, but the ones with minimal ongoing advice requirements value the flexibility and transparency.

The adviser says he’s come to view the traditional advice fee model with scepticism, and eventually wants to move away from ongoing fees entirely in favour of an admin-only service, complemented by episodic financial advice.

“Ultimately I don’t want any clients on a comprehensive package,” he says. “That’s where I want to go.”

The nuts and bolts

Much has been made of the distinction between personal and general advice, with ASIC’s 2019 Mind the Gap report echoing the Murray inquiry’s concern that consumers don’t understand the labels and the infamous ‘Wagyu and Shiraz’ case against Westpac highlighting issues on the provider side.

What Stephan offers is essentially general advice, but he calls it ‘factual information’ to make it clear to clients that there is no advice involved. “I try to be as unambiguous as possible,” he says.

Stephan says he presented his case for the admin-only model to his licensee, who examined the premise and gave it the green light.

According to ASIC’s RG 244, any “objectively ascertainable information” isn’t treated as advice as long it’s explained to a client as factual information and doesn’t “imply any recommendation or opinion” about a financial product.

Here, the second condition is crucial, because as explained in RG 36, factual information can still be construed as advice if, for example, “the features of two financial products are described in such a manner as to suggest that one compares more favourably than the other”.

Stephan says he’s keen for ASIC to look over the service and give it their approval, but there is little scope to arrange such a review. His dilemma echoes a common complaint about the corporate regulator, which generally tells people when they’re doing things wrong rather than when they’re doing them right.

“I believe ASIC has the best intentions for the industry,” he says. “But they’ve never actually come out and said what they want us to do.”

A noble profession

What ASIC has done is acknowledged that there are major problems in getting advice out to consumers, with its consultation paper (CP 322) Promoting access to affordable advice to consumers aimed at understanding the impediments to its delivery.

Whether Stephan’s ‘admin-only’ model works in its current format or not, the formulation of new business models will play a role in fixing the problems ASIC identified.

Stephan himself acknowledges that his model needs work. He suspects he’s charging too little for the service – one client is paying only $600 per year – and isn’t convinced ‘admin-only’ is the right name for the service.

“I haven’t spoken to a marketing person yet,” he says. “I’m not sure if I’ve got the labels right.”

But his intention is clear; to do the right thing by the client and shape a business model that’s ethical and sustainable.

“I love what I do, this is the most noble profession,” he says. “And this is the way I should be charging.”

3 comments on “$1,000 per year: The adviser trialling an admin support retainer”
  1. Avatar
    Christoph Schnelle

    This is a great comment by Craig about the nuances between ‘general advice’ and ‘personal advice’.

    It also shows the madness of these definitions and distinctions.

    Imagine if lawyers would have a similar regime. They give ‘general legal advice’ and they give ‘personal legal advice’. Every time they give personal legal advice they have to write a Statement of Advice that takes hours to prepare as it has so many compliance requirements. Then their compliance person reviews it and may demand revisions. It is clearly unworkable and would push legal fees through the roof.

  2. Avatar
    Craig Meldrum

    I understand how much advisers are hurting at the moment. ASIC’s fee-for-no-service lookback/reparation program has had a tremendous impact on licensees and advisers and ASIC’s view (as outlined in Information Sheet (INFO) 232) that in order to retain ongoing fees, advice needs to be provided each year, meaning advisers have had to switch off fees, disengage with low fee paying clients and reparate those clients (with interest – RG256) where services have not been provided (sometimes for many years) is also hurting because advisers provide so much more to their clients than an annual advice document. So I understand some advisers looking for every option to go back to the retainer/club membership charging style which puts the emphasis on the client to chase the adviser for service but doesn’t put any emphasis on the adviser to provide any services – very similar to the “offer of a review” which ASIC has given its opinion on. ASIC has been very clear that if you are going to charge a client, you need to provide agreed and quantifiable services for that money (which is also basic contract law). The days of long trail books where clients don’t receive anything are over. I believe professional advisers can legitimately utilise separate service agreements to provide services such as Centrelink/DVA support and basic administration, but the adviser needs to be extremely careful not to provide activities deemed as financial services. The article also mentions this as being charged to comprehensive advice clients – there has to be a clear delineation between financial services covered under an advice CSA and non-financial services covered under a separate administration agreement. For instance, the article mentions that clients might need a rebalance that might be covered under an admin agreement – that would involve advice. Going through a PDS is part of the advice process because you are dealing with a regulated financial product, and if the client is invested in that product, or the intent is to recommend it, you are already into personal financial advice. In short, what could start innocently as charging for non-financial services has the potential to cross the line and put the adviser/licensee in a fee-for-no-service situation and in breach of their FDS (and other) obligations. It also has the potential to start at low amounts and creep to higher amounts ($1,000 per year is just not a commercially sustainable income level unless you are doing nothing for the client). I think a more defensible approach for clients who don’t need advice every year is to charge for that specific advice on an ad-hoc basis when the client does need advice. If you are going to charge an ongoing fee that is not going to be seen as avoiding the general obligations (and the FASEA standards), you’d want external legal advice and solid policy and process around it so it doesn’t drift outside the swim lanes. I think the regulatory pendulum is slowly swinging back and the damage that over-regulation has wrought on our industry is definitely being heard in Canberra but likewise, we could do ourselves more harm post ASIC’s fee-for-no-service lookback program by heading off the reservation and the light at the end of the tunnel turns out to be the headlight of a freight train.

  3. Avatar
    Lance Meikle

    Good job Paul. The three docs to UNDERSTAND are RG36 | 175 & 244. I’ve been offering a growing service for three years called ‘Wealth Coach’. I offer a General Advice warning at every touch point and you must provide FSG in the first instance OR you can do as you’re doing and provide factual advice, and such, there is no need for FSG nor General Advice warnings. It’s critical to understand the difference between General Advice and factual information (then the rest is easy). My price point is $990 (incl. gst) which is both profitable and payable by clients HOWEVER, I don’t provide personal advice first (or at all) to this segment.

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