AXA goes holistic

AXA’s chequebook will show it was the one that bought out the highly prized Ipac financial planning group in 2002.

But as time goes on, the history books might show it was Ipac that had the biggest impact on AXA.

With the purchase of Ipac, the French-owned financial services conglomerate took the first steps toward turning a traditional product distribution approach to financial services into an advice driven model.

The Ipac holistic advice model is now being rolled out at AXA’s two aligned dealer groups, Charter Financial Planning and AXA Financial Planning, although not every adviser associated with the company will use it.

AXA chief executive officer Australia Andy Penn is adamant in his belief that quality financial advice will become the cornerstone of the financial services industry in the future — and AXA intends to be a key player in this area.

“Quality financial advice is something I believe in passionately,” he says.

“I do think it is the single most important dynamic in our industry and will be so over the next 10 to 15 years.”

Penn says delivering highly personalised advice in financial matters will increasingly become a key component of dealing with its customer base.

“Our industry will continue to have a whole range of multiples by which products and services of companies, like us, are distributed to customers,” he says.

“Our acquisition of an Ipac was very important because through Ipac we have a much closer involvement in the actual advice process, whereas Charter and AXA Financial Planning don’t tend to be as close to the advice process.”

Penn says AXA provides support services to these two dealer groups, and they sell its products, but the advisers run their own advice processes.

Things will be different under the Ipac model.

“At Ipac we are inherently involved in designing, supporting, developing and implementing the advice process,” he says.

“I think there is an important element of that for us.

“It actually helps us to better understand how we can improve our products and services to support good-quality financial advice to other dealers with whom we have a relationship.”

Penn says this is something new for AXA and a break with the past of being just a product provider and seller.

But there is another side to providing advice and that is trying to make money out of the service, especially if product selling is not the primary goal.

Penn says financial planning will face pressure on margins.

“I think the whole [financial services] industry will be under some degree of margin pressure and pricing pressure during the next 10 to 15 years,” he says.

“Any aspects of the industry where we can improve efficiency, help meet that cost pressure or provide better quality service to customers ultimately for less money, will have to be done.”

Penn says buying Ipac was not just about changing the advice model, it was about improving the efficiency and availability of the service delivered by AXA advisers.

However, the Ipac model has always been aimed at higher-net-worth individuals. How will that sit with AXA’s plan to deliver advice to all?

Penn says AXA still wants to increase the population base of people receiving financial advice, although he accepts the Ipac model is fee-based and not for the bottom end of the market.

“My personal aspiration is to actually increase the population of people to which we can make financial advice available to,” he says.

“I do believe better quality financial advice and also financial literacy are very important. If you think about it, both are at the ends of the same spectrum.”

He says the test will be to make this advice and education available for all.

“My challenge is to improve the efficiency of advice, be competitive from a pricing point of view and overall find other ways in which we can actually make advice more readily available.”

Penn says the average Australian is better placed today than at any other time in the past to match their long-term lifestyle ambitions with their financial resources.

But the key to delivering advice will be to help these people make the right financial choices around savings and investment over the long-term, he says.

“We have to encourage them to address the issues and their financial management.”

“That says to me that we need our industry, whether it be at regulatory, [product] manufacturing or advice level, to start to refocus our investment and our innovation and development in supporting the best quality financial advice.

“I think if we want to make advice more accessible to more Australians, then that’s what we need to do.”

But bringing advice to everybody may not be possible, with regulation and compliance pushing up the cost of delivering financial planning.

Penn says he is not opposed to legislation, but believes we should be looking at the bigger picture.

Another problem is that the industry has traditionally been driven by the need to sell products. And the planning tools, such as platforms, are also product rather than advice-driven.

“If you look at the big platforms at the end of the 90s, such as Navigator, Summit or Asgard, they had very rich functionality around products,” he says. “Lots of different products and lots of different policies all driving costs up.

“Behind all of this was infrastructure that was complex and expensive to run.”

Penn believes the design functionality of future platforms should be driven by the advice process, not by product manufacturers.

“One of the important features for us is understanding how the advice process works, understanding how advisers interface with customers and understanding how advisers manage their practices, so we can actually try to better align our product services to provide that support for quality advice,” he says.

Penn says when AXA’s product development teams now approach him he asks only one question: ‘How will it fit in advice?’

“They want to tell me how it will have marginally better improved performance or it has got this sort of tracking error or that tracking error,” he says.

“I mean, that is all very interesting, but tell me how it supports an advice process and then you will get my attention.”

Penn believes if the cost of advice support services can be brought down by simplifying systems, then Australia has a better chance of delivering affordable advice for all socio-economic groups. But he accepts it won’t happen overnight.

“There is no point in us sitting back moaning about regulations and that we have to fill in this form or that form,” he says.

“I think we have got to work with various parts of the [financial services] industry and make sure the advice process is more readily accessible to more Australians.”

And it is not only Australians the local operation has its eye on.

Penn says discussions have taken place with his French colleagues about exporting the Ipac model beyond Australia and Asia.

“I think while our model has a lot of relevance overseas…it is very hard for our colleagues to actually see how they can implement it in places like continental Europe,” he says.

“However, in the US and UK, I think it has a lot more relevance.”