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Advisers battle rising obstacles to affordable advice: Survey

An increasing number of advisers are battling obstacles to affordable advice on the back of heightened regulation, a recent research paper by Investment Trends has revealed.

Advisers battle rising obstacles to affordable advice: Survey
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  • Maja Garaca Djurdjevic
  • August 02, 2019
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Despite increasing compliance and regulatory requirements, only 11 per cent of financial planners plan to leave the industry if the full recommendations of the royal commission are implemented, while a slim 7 per cent said they will cease providing advice when FASEA’s education requirements come into effect in 2024, Investment Trends has said in its 2019 Licensee Satisfaction Report

According to a survey of 1,030 financial planners, the issue of serving clients in an affordable manner is a growing concern, with 43 per cent of planners saying they are facing obstacles in providing affordable advice compared with 33 per cent in 2018, while 39 per cent of advisers reported they face problems with reducing the cost of advice. 

“While heightened regulation will add time and cost pressures to their business, the vast majority of financial planners have no plans for leaving,” said Recep Peker, research director at Investment Trends.

“However, planners recognise the need to evolve their business not only to satisfy regulatory standards, but also to meet the demands of shifting consumer preferences and an uncertain investing climate.”

When asked how the royal commission will impact their planning practice, over two in three planners (69 per cent) said they intend to accelerate their adoption of technology to better serve their clients.

“By using technology more effectively, planners believe they can enrich their client engagement capabilities, helping them better demonstrate value to existing clients and to expand their pool of potential clients,” said Mr Peker.

More planners embracing self-licensing

Investment Trends revealed that the trend towards self-licensing is charging ahead, with almost a quarter of financial planners now saying they either operate their own AFSL or belong to a self-licensed boutique (24 per cent, up from just 15 per cent five years ago). In the next 12 months, a further 10 per cent say they intend to take the same route.

“More planners are moving away from the traditional licensee model, believing they can deliver better outcomes for the end-client by taking full control of their operating environment, value proposition and product set,” said Mr Peker.

While self-licensing affords financial planners with greater autonomy, it also comes with greater responsibility that often requires a more hands-on approach. This highlights why the vast majority of self-licensed planners (85 per cent) rely on external support to operate their advice business, particularly for compliance/audits, professional development and research.

“As more planners consider self-licensing, we expect to see growing interest and utilisation of solutions that can satisfy their wide-ranging needs," Mr Peker added. 

Dealer group model 

Looking forward, most financial planners will continue to rely on the dealer group model, with over half (55 per cent) intending to remain with their existing dealer group. A further 10 per cent intend to switch to another dealer group within the next 12 months.

“Dealer groups remain the backbone of the financial planning industry, and many planners believe that the support, guidance and services provided by their dealer group outweigh the self-licensed model,” said Mr Peker.

He, however, added that dealer groups should do more to support their network of financial planners, with research suggesting that those advisers who currently invest more to develop their digital client engagement capabilities are also the industry’s most successful. 

“These successful planners are reaping immediate and tangible benefits of placing their clients at the centre of their business, highlighting the need for greater collaboration between planners and their dealer group to deliver better outcomes for the end-client,” Mr Peker concluded.

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