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A new era of advice

A new era of advice

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By andy ·
July 31 2015

A new era of advice

In my role, I'm fortunate to come into contact with passionate, professional advisers from around the country. And while they're all unique, I have noticed the more successful ones share a common philosophy in terms of their longer term focus.

Their view, in the context of all the 'noise' in the market at the moment is simple - forget Trowbridge, ASIC Report 413 and FSI. In the new era of advice these are just distractions from the main challenges facing small and medium independent financial advice businesses in Australia.

While there is no escaping the significance of change that the life industry is now facing, the reality is that advisers and advice businesses are facing longer term challenges of a truly staggering magnitude.

They face disruption from sources they are ill-prepared to face. These disruptors are more than arising trends. Rather, they are cultural, technological, political and demographic shifts that mean that the traditional model of advice (a professional office, the production of a thick bound Statement of Advice, a Christmas card, a newsletter and a seminar to keep you in touch with your clients) needs an evolution, or even a revolution to stay (or in some cases to even become) relevant.

There's no doubt that advice businesses are currently facing major profitability challenges.

According to research conducted for Zurich by the Beddoes Institute, practice profitability dropped sharply in 2013 and remained low in 2014.

After peaking at 36% in 2012, profit as a percentage of revenue dropped to one quarter (25%) of revenue in 2013 and remained relatively unchanged in 2014 (24%).



What can we put these diminished profitability figures down to? The same research provides interesting illumination to the challenge to profitability and it appears there may be more than simply

regulatory impact fatigue at play.


Low prospect numbers, combined with low client conversion rates, show that it became increasingly difficult to attract and convert new clients in 2013.

This resulted in low organic growth and added to the many challenges facing advice practices in 2013. And it appears that this trend is continuing.

Trend-watching and responding becomes incredibly important if advice businesses are to set themselves up to respond to this evolving landscape.

Success will be determined by meeting clients' and prospects' higher expectations.

When we analyse trends in technology, geopolitics and demography, advice business will have to respond -fast.

Earlier this year, Investment Advisor Magazine postulated that the best response would involve:



  • Providing clients with technology interfaces that connect via any device to their advisers,


investments and insurances;


  • Partnering with their professional associations to ensure client needs are known to regulators


and legislators;


  • Connecting to all generations with relevance not only in the types of services offered but in


the means and manner of connection;


  • Attracting a new breed of advisers into their businesses, tech savvy, educated and


entrepreneurial ( a hard task with a persistently negative media portrayal of the advice industry )


Which trends matter?


Advisers must start to provide clients with mobile access and technology engagement tools that make the consumer's experience more engaging and efficient.

Because quite simply, in this day and age clients don't just expect it, they demand it.

How does your use of online tools stack up? Do you have a truly mobile optimised website? Are you using technology as smartly as you could?

Investment Advisor Magazine's report provides a sobering reality check about the threat of robo-advisors, asking us to "imagine if Apple got into the digital advice business."

Think about it.


Demographic shifts are afoot, but not everyone is paying attention.

Client life stages and the relevance of advice at these different stages demands that advice businesses build offers that are not only meaningful but are tailored to the values of each client.

This trend is all about client and prospect expectations of their advice-givers, which has been built on the foundation provided by online shopping, dating, networking and music. In a world where many advice businesses have not even surveyed their clients in the most rudimentary format, the ability of advice business to build personalised offers based on individual clients' preferences is at best, limited and more likely, non-existent.

Regulatory trends

It is becoming increasingly apparent, in this era of regulatory and consumer scrutiny, that the benefits of advice are not clear to those without an adviser.

Whilst it's been proven that consumers who have been through the advice process experience are not only more satisfied with life than those who have not, but they also record better financial outcomes on every metric.

These benefits seem to be less well acknowledged or understood by regulators, the media and the broader community.

As well as encouraging existing customers to become better advocates, advisers owe it to themselves to engage their professional associations, as well as their local and federal members of parliament. You can't complain about not having a voice if you don't exert yours.

Where to from here?

Successful advice businesses have always known that to thrive they need to attract, engage and retain appreciative clients with consistent, profitable, sustainable value. In this new era of advice, the challenge for advisers will be assessing what sustainable means, how to build processes that are repeatable, and how to deliver value.

These will matter far more than a response to third party reports and recommendations on the industry.

The responsibility is there for advice businesses to accept, to design their future, to create success by design.

Fundamentally, advice businesses need to measure their business metrics, assess their client experience, create process efficiencies, manage staff with consistent protocols and maximise their use of technology interfaces to stay relevant to the consumers who have been educated to expect more from the advice industry.

Andy Marshall is the head of sales strategies and research, Life Risk at Zurich Financial Services.

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