Home / Opinion / Why breaking your advice business could be the best thing for it

The solutions to practice inefficiency might be completely foreign, but the challenges of service delivery have a habit of changing, so the methods employed to meet those challenges need to evolve in tandem.

The near halving in the numbers of registered financial advisers has resulted in a spike in the number of ‘orphaned’ clients and those seeking a new adviser. Like most advice firms, we have experienced a significant uptick in the number of prospective clients in recent years, and there are few signs that this is likely to slow down any time soon.

For most industries, the initial reaction to an increase in demand would be to increase the price, particularly given how inelastic the supply of financial advice is today. For many practices, this means ‘firing’ long-term clients that are on the bottom end of books in terms of fees payable.

This is challenging for many financial advisers who entered the industry with the aim of helping as many people as they could.

One of most common issues in financial advice practices is the ‘overservicing’ of clients, with most being well aware that as little as 20 per cent of their clients represent their largest source of profit, with the remainder being ‘loss leaders’ for lack of a better term. This naturally leads to the question: does my service level need to change?

At the most basic level, sourced from discussions with numerous prospective clients, the majority of ongoing financial advice fees are based solely on assets under management and come with as little as an annual review, or two scheduled phone calls per year. But is this enough time to deal with ever-evolving market conditions? And is it enough to satiate the demand that increasingly engaged clients have for more ‘high touch’ personal advice? Probably not.

In our practice we are highly active with clients, albeit not in investment markets. We are in constant communication, offering daily and monthly updates, unique content and, at a base level, quarterly review and catch-ups with each client.

While we have been able to invest in technology in order to bring the time and cost involved for us to deliver these services down, the onboarding process seems to be taking longer than ever.

It seems to be that the first few engagements with a new client tend to determine their expectations for the relationships and that it is as important to set the rules of play at the beginning, as opposed to once they are onboard.

One question we constantly face internally is how much information we need to gather and provide in order to deliver quality, value-adding financial advice.

Stung by the outcomes and changes triggered by the Hayne Royal Commission, advisers now ask a lot of clients in terms of full financial disclosure around tax returns, financial statements and historical data. Sometimes it feels as if we are providing clients with all the reasons they should not execute our advice, rather than outlining a simple strategy that we know will put them in a better position once executed.

I’ve seen as many as 50 emails backwards and forward to both engage and then onboard a client, which is clearly a symptom of the massive compliance focus that has crept into our industry in recent years. The concern for those seeking to run scalable and profitable businesses is that clients expect this level of service and responsiveness to continue once ongoing relationship commences.

The solutions we have found to many of these issues have hitherto been foreign to us, and they’ve necessitated a management consulting view to be taken on our own business. Having always focused on the client experience, we have rethought every aspect of our process and business in recent years.

From a management perspective, we have undertaken a process of ‘breaking’ our business model to truly understand the cost of providing advice, while also ensuring that all the services we are delivering aren’t just being used by our clients, but are actually providing value. In a growing business it is difficult to stay on top of the issues and slight directional changes that occur on a day-to-day basis, so the centre of our approach is clearly defined and meetings address wins, losses and client feedback.

Among the most important steps for us was to reconsider and define what we were providing as a minimum level of service and what the cost of delivering this to our clients would be. We looked at our service offering and sought to bring in perspectives from other industries to ensure we had something that was both able to be tailored to unique client needs, but also scalable and deliverable for our team. Secondly, we took on a renewed focus on service delivery and the tracking of performance against our new benchmarks, while ensuring clients were seeing the full benefit.

This is the part that needs to become core to our business, as this is the only place where true efficiency can be found.