The days of one-man band advice practices is over
The days of the one man financial adviser band is likely a thing of the past and the profession will end up with a number of different business models, according to an adviser.
VISIS Private Wealth partner, Chris Smith, said there was not enough time in a week for one adviser to service a profitable client base while also focusing on red tape and administration without sacrificing some quality of advice.
Smith said there needed to be at least one full time staff member for one adviser that was dedicated to compliance requirements.
The staff member was needed given advisers need to write file notes, run compliance requirements, write advice documents, write financial planning advice, complete financial modelling, product comparisons, and administration.
“It is a time consuming activity. We use an external compliance consulting group as well because we just need extra expertise. Even though we believe we do it right and ethically make great decisions for our clients, you still need someone experienced with the compliance law to make sure you are compliant,” Smith said.
“We pay a compliance consulting firm that come in and work with us one day a week plus do all of our compliance administration make sure that our processes are efficient and effective.
“They pick up all the fee disclosure statements and opt ins, spot checks on the quality of the document to make sure they're compliant, and they give us advice on how to improve our documents and make sure that they are complying with the laws. So that's a fair bit of work.”
Smith noted there were still many ‘one man band’ operators that had their own financial services licences.
“A lot of them were one man practices licenced under different aggregators, or licenced dealers, and they might have got compliance support from those licensees. But all of the risk is resting with the licensee so those costs are going up as the licensee doesn't want to take the risk of having rogue advisers out there working unsupervised,” he said.
“So, I think that that's another trend against them. I think these one man operations won't be able to survive.”
Smith said eventually there would not be any massive advisory firms that had their own product and once the big houses were gone there would be smaller boutique practices of partners with underlying advisers and a team of support staff.
Though, he noted that if the corporate regulator ultimately required individual advisers being licenced then the landscape would change again and people could work for themselves or deposit themselves into an office with some shared expenses.
“But for that to happen, they really have to find a way to overcome the red tape issue or put a little bit of responsibility back on the consumers or change the rules about what advice is, what product advice is, and what you have to put compliance around,” Smith said.
“And then you would have to look at strategy advice and structure advice that would carve out product and advisers could then be able to provide advice on a cheaper basis.”
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