Consumer awareness, not reviews, drive industry change

More than half of the financial planning practices surveyed by Centurion Market Makers have already transitioned to an explicit fee-for-service or asset-based fee model.

Director Wayne Marsh said while recent government inquiries into financial planning have created healthy debate within the industry, it is increased consumer awareness rather than the recent reviews that is driving practices to change their business models.

The survey of 140 financial advisers found that more than 50 per cent had already shifted to explicit fees for advice and asset fees for service.

However, Marsh said there were still a large number of those advisers (25 per cent) taking a wait-and-see approach who were in danger of diminishing the value of their businesses.

“We have been a little brutal in our feedback to those financial planners with no plans to change,” he said. “We tell them either change your revenue model or erode the value of your practice.”

Marsh was critical of the Government’s approach, suspecting that its focus on financial planner reform was “politically sellable”. He said there were some inequities in the proposed reforms, for example the Future of Financial Advice reforms that would require a yearly review during which clients would have to ‘opt in’ for advice.

“I would have thought that if integrity and trust were the underlying principles, then the practice of yearly approvals ought to extend across the value chain — custodians, trustees, administration platform providers and funds managers,” he said.

“It would be interesting to see what response we would get from consumers if fund managers, platform administrators or trustees were asked to get investing clients to sign up every year for their asset-based fees.”