Advisers spend too much time chasing the rich
Advisers are concentrating on the high end of the market which will be producing the future millionaires, says Brian Ashe, immediate past-president of the Million Dollar Round Table (MDRT).
"There are many advisers who gravitate to the high end of the marketplace, but the problem is there are no relationships with the middle marketplace," he told this week's Association of Financial Advisers conference.
"In the US, 80 per cent of the population earn less than $US75,000 but everybody is after the 20 per cent who earn more."
Ashe says there are advantages in building a long-term relationship with young people, who may not have many financial needs initially. When they want advice eventually, they will turn to the adviser who has built up a relationship.
Competition in the top end of the market has become even more intense recently as the authorities deregulated the financial services marketplace.
"We have been through the biggest change in financial services in the last half-century, but that is providing opportunities," Ashe says.
"Everybody can take business now from everybody, and that is a great opportunity for advisers."
"The consumer is confused with all the choice that has suddenly been presented to them."
Ashe says this has opened up opportunities for advisers, as the one thing the consumer wants now is advice.
"It is like buying a suit. If there is one on the peg, that's simple, but if there are two, the consumer has to make a choice."
A further outcome of this deregulation is that the adviser has to offer more products and services, Ashe says.
"The banks consider existing clients a valuable asset as they can now cross-sell to them," he says.
"One problem in the insurance business is that close to 40 per cent of insurance company policy holders are orphan policy holders."
An orphan policy holder is where the original adviser who sold the policy has probably left the company and nobody is calling on the customer to see if they have any further financial services needs.
"If 40 per cent of customers never see or hear from anybody, then we are not in a relationship business," says Ashe.
"This is another area of opportunity for advisers as the cost involved in acquiring the client is zero and the adviser will be dealing with a well-established client of the insurance company."
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