Inspire

A survival guide for the coming changes

July 2017

With costs and expectations increasing, advisers need to look for efficiencies in their businesses, writes Fiona Smith.

Financial advisers are entering a period of monumental disruption and the survivors will be those who become more efficient and discover new ways to be of use to clients.

Part of this change is that the cost of doing business is climbing – even though many of the changes associated with new government regulation have yet to kick in.

Elixir Consulting in its latest Adviser Pricing Models Research Report, found that 75 per cent of advisers say costs have increased in the past five years.

The cost of coming changes

This is before they’re hit with the full impact of implementing a new set of professional standards, which is expected to cost the industry almost $3 billion, according to the Financial Services Council.

  • From 2019, all new financial planners will have to hold a degree, pass an exam and spend a year developing their professional skills.
  • Existing advisers must pass an industry exam by 2021 and will have until 2024 to reach a degree-equivalent status.
  • Advisers must also adhere to a code of professional ethics from the middle of 2019.

Elixir founder Sue Viskovic says while some of the higher costs will have to be passed on to clients, advisers also need to hunt for efficiencies.

The challenge for advisers is to offer a compelling service – that customers are happy to pay for – that is also efficient, scalable and profitable.

Use technology

Technology can help offload some of the processes that are time-consuming and not highly valued by customers.

Viskovic says clients are not interested in hearing that their fees have increased because new standards have to be met.

“We find that advisers do particularly well when they stop and step back – identify the bits that are too clunky and that cost them too much in time or rework – and then make decisions about how they are going to fix that process,” she says.

Advisers need to make the best use of their client-relationship management systems and other software tools.

“I have seen all ends of the spectrum, where advisers have it all automated to the click of a button, to people having to spend countless hours doing admin every month. Some even employ a full-time staff member just to handle things when they don’t need to,” she says.

To survive this period of change, advisers should also be open to learning.

“There are some who say they have been giving financial advice for 30 years and they shouldn’t have to get another piece of paper [a degree], and there are others who love to learn new things,” she says.

“The challenge is they are so busy running their business and fulfilling their family and social commitments that they don’t have spare time to study.

“Again, that is another reason to look at better, more efficient ways to deliver services. If that frees them up for another two hours a week, and their client service is not impacted, then that gives them time to study.”

Association of Financial Advisers chief executive officer Philip Kewin says when his members were asked how they would invest $50,000 in their businesses, half of them said they would spend it on technology.

“Half of that was to improve efficiencies, and the other half was to improve customer experience” he says.

“The first thing they need to do is look at where they are spending their time. What a lot of good advisors are doing is using technology and social media to educate, where once it might have been a face-to-face conversation,” he says.

“I am not saying it replaces it, but it does supplement the face-to-face communication because that does take up time.”

Use content

New ways of communicating with customers include the use of social media and websites with infographics and video ‘explainers’. These can mean that basic questions are answered before advisors meet with individuals.

Kewin says services can also be broadened beyond traditional financial advice. This might include life-planning subjects such as the psychology of retirement and the processes retiring customers need to go through.

Viskovic agrees that good financial advisers deal with more than just the technical strategies and pure mechanics of investment returns: “The financial advisors are treating their whole client and not just treating their money.”

Look after yourself

Advisers also need to look after their own wellbeing. Viskovic says uncertainty and change can raise stress levels.

“It is the mindset and confidence levels that are going to be a critical factor. If they feel out of control, if they feel a victim, that will lead to them feeling more stress and it makes it more difficult for them to seek out and employ coping strategies,” she says.

Kewin says advisors who thrive will be innovative: “I think it will be those most adaptable to change. If they are not embracing what the future holds, it is going to be very challenging for them.”