Advisers ‘pawns’ of financial industry
Financial advisers might have been used by the financial industry to distribute its products and investments in the past in a culture of commission but this will no longer work in an industry of increasingly transparent fees.
Such was the opinion of consultant firm Global Adviser Alpha's principal, David Haintz, who said financial advisers had been used as pawns in the financial industry's game to distribute its investments and products, most of which were expensive and unnecessary.
"Continually influenced by product providers and the ‘financial pornography' (the financial trade press and media) — who make fortunes advertising the industry products — advisers unwittingly get sucked into building a service proposition ‘below the line' that focuses primarily on the products and investments they sell," Haintz wrote in a blog.
"Any ongoing service (if any) revolves around switching, changing, or otherwise moving client's money around in order to justify their fees or earn more commission."
But as fees became more transparent, clients would question advisers' services, fees, performance and value, and would demand a service proposition above par, and advisers would have to provide services that meet client needs rather than industry wants, Haintz said.
"If you fail to deliver great client outcomes, sooner or later clients won't pay your fees. And it's started," he said.
From there, it was only a matter of time before clients opted for do-it-yourself option or moved on to robo-advice.
Advisers must always demonstrate to clients how their value proposition would enhance their financial wellbeing.
"Do this well and clients will trust you more, pay you more, and refer you more. They'll also let you oversee all their assets — because they trust you," Haintz said.
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