Story Wealth's Anne Graham and Rob Jones from Peloton Partners

Financial adviser are selling themselves way too short according to Rob Jones.

The Peloton partners chief executive believes the inability of advice principals to charge sufficiently for their services is a “massive problem”, and while advisers may be brilliant at providing a service their inability or reluctance to demand appropriate recompense is holding the industry back from functioning in good health.

“After all the advancements we’ve made in this industry, the fact that we’re still living with very old, outdated and ineffective pricing models is a real issue for us,” Jones said on a panel at the Professional Planner Best Practice Forum on Tuesday.

The consultant, who advises to financial services companies, pulled no punches in his assessment of the industry’s track record of matching value to revenue.

“I don’t think I’ve had a situation where I can ask the adviser to pick any client and actually tell me whether they make money on that relationship or not,” he said.

“I don’t think we’ve had a firm this year that has accurately priced more than 15 per cent of their existing clients.”

Clients on a pedestal

The problem starts with positioning, Jones believes. Advisers traditionally cluster around a constricted view of their value which leads to constrained pricing.

“The minute you start constricting your value, subconsciously you’re constricting price.”

This is exacerbated by a reluctance to properly segment clients accordingly, Jones argued, with more sophisticated pricing models being required to really capture the appropriate pricing level for highly variable client types.

Advisers also caught in the trap of thinking their client’s outcomes are above their own, he explained. Neither the client or the adviser should be putting each other’s worth above the other.

“I don’t like hearing when an adviser or business owner says ‘well, we put our clients first’… I think that’s garbage,” Jones said.

“I believe putting the clients’ objectives above your own or putting yourself above your clients is the very issue that we’ve confronted for many, many years. They are equal. There’s equal objectives. And I haven’t found one firm turn around and say ‘I’m really happy with the return I’m getting, I’m making great loads of money’. It’s not the case at all.”

Advisers should be making a fair return based on the right fee being crystallised for individual clients, the consultant said.

At the moment, however, data from a cross-section of the industry shows that while advice firms are enjoying increased demand, profit margins swing wildly between groups because the pricing is off.

“We’ve seen a plus 300 per cent profit margin and a negative 200 per cent. It’s insane. It’s way, way off the track.”

The secret sauce

Also on the panel, Story Wealth Management principal adviser Anne Graham said she was, in a sense, “pleased” to see she wasn’t alone in not maximising profitability.

Graham agreed with the need for advisers to better price their services, but made the point that while the future may look bright for the industry given the supply and demand levels, advisers are dealing with a lot of headwinds and a pricing remodel may not be the priority for some.

Bad press might have also fed into the mindset of advisers, she believes.

“Advisers have just been smashed around the head and it’s really difficult to then appreciate the actual value you bring to a client… because it’s what you do day in, day out. And it’s just second nature to you,” Graham said.

It’s also challenging to put a price on the most integral part of advice, she argued: the relationship.

“The relationship and everything else is where the value is, that’s where the secret sauce lies,” Graham said. “How do you price an intangible?”


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