To improve innovation the industry needs looser regulatory settings in all areas bar one – the barrier to entry – according to AZ NGA chief Paul Barrett.
Speaking at the Professional Planner Licensee Summit earlier this week, Barrett said for the industry to attract more capital to innovate, barriers to entry must remain high while other regulatory settings are eased.
“Accountants, lawyers and doctors have to climb a mountain to become a practicing member of their firm. On the other side of that mountain they have a good life. In financial planning we have to jump over a speed hump and then we have a hard life.”
Barrett said adding barriers at the early stages of a career in advice will put the vocation in line with other professions.
“Young people that want to have a career right now that have ambition and want to do something special with their lives are not picking financial planning. If you want more people in then put the barriers up. Unusual, but true.”
Adapt and survive
The industry wasn’t broken and had innovated in many areas, Barrett said, with the exception being regulation.
“We just keep beating ourselves up. The conversation [during day one of the conference] blew my mind – if you were a Martian and you came into the room yesterday and listened to the conversation you would walk away thinking the industry is broken. We’ve done some wonderful things, but you wouldn’t know that from walking away yesterday.”
BT Financial Group head of platforms distribution Chris Mather said innovation has traditionally been viewed as a revolution but now the perception is on the ability to adapt.
“Adaptability is going to be the way to innovate. That’s going to be about not what you are doing, but what you stopped doing. So really focusing on target client cohort and adaptability through systems that exist.”
He pointed to managed accounts as an example of an innovation that isn’t a new technology but a solution that can be used to by businesses to adapt in a changing environment.
“80 per cent of advisers say they’ll adopted managed accounts, yet only 30 per cent have adopted it across their business,” he said. “How can we create the capacity to adopt?”
Similarly, Iress commercial director for investment infrastructure Geoff Rogers said the fintech firm sees innovation as the focus on simplification to allow their clients to achieve scale.
“It’s that simple, but it’s hard to do. I’m looking at it in the context of the world I was in 18 months ago where the businesses I was close to [at MLC Advice] were caught with 110 clients per adviser and growing at 10 clients per year. That is an unsustainable model and has to change. To make things simpler and to do that to allow scale to come is important.”
Barrett said a move to dissolve vertically integrated models would be a mistake, and the two-stream approach that would have seen it co-exist alongside holistic, independent advice would have delivered more services to a broader consumer base.
“That was dumb. Vertical integration has some real benefits. One of the things we’ve lost is this affordable, accessible advice on every street corner dispensed through a bank to consumers who wanted to go to a bank they trusted. We’ve lost that.”
Barrett said the mistake made by the banks was not changing their reporting lines earlier so that advice businesses could report directly to the CEO and not the product division.
“The banks would’ve done a pretty decent job and we’d probably have quite a flourishing vertically-integrated sector and we’d have a more professional sector that was going gangbusters as well.”