$1,000 per year: The adviser trialling an admin support retainer

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.”