MM: What are your general market thoughts this year?
Matt Brown: There is indeed an acceleration of change in the landscape. I guess there are some who are surprised at the pace of that change, but to be honest, I am not personally surprised by it.
If you look back at the impacts of the Royal Commission – and we know it for ourselves – it forces an internal look at your business once you’ve digested the recommendations to understand the meaning behind them and pre-empt the regulatory reform that comes off the back of it. You need to assess what you need to do in order to comply with the new regulation while supporting your advisers to implement the changes and keep everyone safe.
That actually drives up cost and the complexity, perhaps a little counterintuitively to the intent of the Royal Commission. So there are a few players in the market who would be looking at increasing costs and complexity relative to the inherent risk of their businesses, particularly the bigger players who have decided in various ways to move on.
When you are assessing the value and the purpose of the business against its costs and complexity moving forward, as well as, for some, quite costly remedial actions then it’s not surprising that they made the decisions that they have.
Something you can see, once you move beyond regulatory reform, are the real opportunities that exist. There is irrefutable evidence and data that shows that the demand for advice is large and growing, and yet supply is diminishing. And when coupled with significant disruption, then it seems to me that the opportunity is worth the pain of change. Something to consider if you want to participate is the emergence of business models in the market that haven’t been around before.
MM: How do you think the business model across the industry will evolve and which ones will struggle?
MB: Business models that have relied on being formed as a means of distribution for other products and services will struggle in the new environment. In this new economic reality it is unlikely to last.
That said, I think some larger organisations in the marketplace will absolutely flourish – I think the trend you can see in the marketplace which is gaining momentum is self-licencing and perhaps conglomeration altogether. I think a fair portion of those will succeed but also a portion of those will be at risk of failure.
MM: What are your views on the self-licencing?
MB: I think we need to take care (as a collective industry) with self-licensed becoming the dominant model. I think that there is absolutely a place for it and it’s a valid model for those advisers who are well-resourced, focused and capable of running a licence.
There are a few things to consider though: one is that the advisers need to understand the skills required to run a license, which are very different from advising clients. It’s one thing to run a business and being in a business, seeing clients and another matter all together in running your own licence. The time and ability to step back and think, innovate by challenging established norms sort of diminishes.
I don’t think it’s wrong, it’s just an observation that there is something to notice for the industry in how we collectively react to that. We need to encourage innovation, not restrict nor diminish it.
MM: What are, according to you, the potential red flags across the industry moving forward?
MB: I think we can’t underestimate, regardless of a business model, a fatigue that has led to some significant mental health challenges for advisers within the marketplace. It is real and something that must be addressed, and something obviously that we at Australian Unity as a wellbeing organisation – are critically aware of.
One of my personal frustrations post-Royal Commission – [is that] all important reform actually does not get to the root cause of some of the challenges that the industry is facing. By that I mean it’s not simplifying industry, it’s not making it more sustainable. It’s adding costs and complexity. So if we could address the fundamental issue which is why many clients won’t pay what it costs an adviser to advise them and advisers by the same token typically haven’t been in the past prepared to pay a licensee what it costs to licence them and we’ve got a real problem.
The opportunity was wasted through the recommendations of the Commission to address that fundamental economic imbalance – and that’s certainly one that we at Australian Unity are trying to address.
MM: What are the strengths of your business?
MB: What I think we are really clear about, and what I think other participants in the market need to be much clearer about, is purpose. We are clear on our purpose – we are a wellbeing organisation. Our advice business exists to look after the financial wellbeing of our clients. We get that right balance between being institutionally-owned and supported and being product agnostic in terms of getting the right product solutions are for clients. So that’s sort of the unique mix which seems to be resonating for some advisers and clients in the market.
So, we are not like some other players in the marketplace, we are not a platform provider, we are not a superannuation company, we are not an insurance company, we are a wellbeing organisation and believe in looking after the wealth of our clients.
We’ve now got 20 years of data that we call our wellbeing index, which was developed in conjunction with Deakin University, which shows irrefutably how important wealth is, as one of the seven pillars in someone’s overall actual sense of wellbeing.
Our ownership structure is also unique in that we are a mutual and that brings with it a certain business model that I guess is something that advisers who have the same philosophy and purpose are interested in.
