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Written by: Jim Stackpole
I reckon financial advice industry is entering a new phase of professionalism and opportunity, only everyone doesn’t seem that excited about it.
As with any change there are many advice licensees and practices that refuse to embrace anything new and evolve.
No matter what happens there will be advisers that’ll ultimately find themselves trapped in untenable positions beyond their control due to the convergence of factors like technology, regulation and increasing consumer knowledge which is already causing radical disruption.
With the inevitably tightening of advice fees and margins across the industry, consumers won’t buy much of the ‘spin’ from advisers self-proclaiming their ethics and professionalism, expecting consumers to pay higher pricing based upon only their word for it.
Today’s advice consumers is more savvy and cynical.
They don’t believe that BlackBerry technology is vastly superior to mobile competitors like Apple and Samsung and they won’t believe an adviser has the necessary skills and qualifications just because they say so.
There are some practical steps advisers can take to secure their ongoing success and prosperity in the face of digital disruption and consumer mistrust, however, the right approach will differ from adviser-to-adviser depending on what advice generation they belong to.
Fourth generation advisers?
Since the inception of the financial planning industry, three distinct types of adviser and advice business have emerged but now I reckon a fourth advice generation is rising up.
Fourth generation firms put their clients first in all their dealings. Literally.
They aren’t building businesses with the intention to sell to anyone who happens to be the highest bidder at a later date. Particularly if that bidder is ‘aligned’ to specific product or platform offering.
Nor are they chasing payments, or other benefits, from product or platform providers.
These advisers are paid by their clients based purely upon the quality of their service and advice they provide year-after-year.
Fourth generation advisers derive their sense of worth and value by delivering a comprehensive service that removes financial complexity from their clients’ lives, increases financial certainty and ultimately leads to improved client outcomes.
While they come from disparate backgrounds including risk, investments, accounting, lending and the law, they all provide strategic advice and act as the project manager of their clients’ financial lives. Unlike previous generations, they’re not necessarily targeting retirees or high net worth clients. They’re broadly interested in helping everyday Australians recognise the value of professional advice and their need of it.
Their mindsets and principles about why they will grow and be rewarded are vastly different to the first, second and third generation of adviser.
What are the four advice generations?
The first generation of financial planners are a group of like-minded product experts. They’re akin to pharmacists working for major retail chains – technically savvy with strong soft skills.
First generation financial planners commonly heralded from companies like MLC, National Mutual, AMP, Prudential, Australian Eagle and Capita, or the latest incarnation of those institutions. They have great people skills and strong product knowledge which is essential for consumers want a ‘retail’ advice experience.
Like the first generation, the second advice generation is transaction or ‘event’ focused but they’ve gone a little further due to the rise of master trust and wrap platforms. They evolved into platform providers, designing a variety of applications that allowed them to clip the ticket along the way.
This approach has been extremely lucrative for the fortunate few who have been able to carve out a niche.
The third advice generation are newer entrants or refugees from either the first or second model. Many of the third generation have amalgamated together because they recognise that by banding together there’s a higher chance of a ‘liquidity’ event such as a trade sale to a any listed (or unlisted) diversified financial company looking to expand via acquisition. As a result this generation can be easily perceived to focus on prioritising stakeholders returns over their clients.
The fourth advice generation’s single, main priority is the client. There’ll be a lot of collaboration within this group as they work towards improving the public perception of financial advice to encourage more Australians to seek advice.
This generation seeks to remove the clutter and conflict inherent in most financial advice. They are laying the cornerstone to support a new, pure advice profession which serves the greater public good with authentic value for money advice.
What do you reckon?