The move from Viridian and CFS to provide personal advice in a scaled manner highlights a growing willingness within the industry to fix its own problems in lieu of waiting for the government.
Private markets are worth around $14 trillion globally, ASIC believes. It’s not sure, and that uncertainty hints at the wider problem – private markets, and their effect on public ones, is still largely a mystery.
Transactional advice enables financial planners to meet consumers where they’re at
The concept of transactional advice may have become tainted over the years as over-regulation pushed holistic, comprehensive advice to the fore, but it could be the the best solution for a system crying out for a way to get more forms of advice to the masses according to a new whitepaper from Desktop Broker.
While addressing the adviser shortfall is a key element to the industry’s renewal process, the wealth management arm of Bell Direct believes the principles-based regulatory system proposed in the Quality of Advice Review will not only facilitate the dissemination of advice through institutional providers, but encourage the innovation and development of digital advice models that will facilitate transactional advice.
“The key to disseminating quality personal advice to the masses in the short-to-medium term lies in greater use of technology to automate processes and drive efficiencies, supported by accommodative public policy and reform,” the Advice trends and opportunities: 2023 and beyond paper states.
“It must be easier for advisers to provide limited advice such as educational material. It should also be easier for advisers to provide scoped advice, for example, investment only advice. There must be the ability for personal advice to be transactional.”
Regulatory changes that have gradually eroded conflicts of interest in the industry have been effective, the paper argues, but this has also had the effect of limiting advice to a compliance-heavy, high-cost endeavour.
“In the industry’s bid to rid itself of its product-selling roots and transition to a bona-fide profession, it abandoned the concept of transactional advice,” the paper states. “Historically, there were too many advisers collecting commissions and fees on large, inactive client books but with product commissions all but gone and stronger consumer protections in place, there is no reason why advisers can’t help hundreds, if not thousands, of clients.”
Relationships and transactions are not mutually exclusive, Desktop Broker says. In the same way doctors have relationships with clients but interact in a largely transactional way, advisers should be able to have transactional relationships with clients for simple advice matters. “The system should be able to meet people where they are at.”
Industry future
Adviser would be well-placed if they prepare their businesses to take advantage of regulatory change that would free up transactional advice, Desktop Broker says.
But that’s not all the firm believes successful practices will need to focus on, in the short to mid-term.
The ongoing war for talent will ensure that the ability to attract and retain talent will be paramount for practices seeking to grow. Advisers need to sell a career in advice, the paper states, and get creative and flexible about the benefits they offer.
Firms will also need to place an emphasis on teaming up with the right business partners.
“Every business has finite resources so they need to leverage the capabilities and expertise of trusted service providers to help them evolve and execute their strategy.”
