As the industry moves towards a fee-for-service model, financial advisers need to better understand their service costs per client and adopt scaled advice solutions to service lower-end customers, according to Provisio Technologies director Cameron O'Sullivan.
O'Sullivan said retaining C and D clients would continue to be a challenge for advisers unless the cost of advice could be lowered.
"Cost of advice is becoming more important as planners and dealer groups consider new models for remaining profitable in a fee-for-service era," O'Sullivan said.
Investment Trends 2011 Planner Business Model report found that 54 per cent of the 1396 financial planners surveyed said the biggest challenge they faced under the Future of Financial Advice legislation was providing advice affordable to lower-balance clients.
O'Sullivan said most planning practices had likely supported their lower-balance clients with their higher-balance individuals and "would become only marginally profitable" if they suddenly lost those clients.
He added that it was crucial for practices to adopt better solutions to service low- to -mid value clients, most of whom prefer receiving basic advice rather than traditional high-cost and time-consuming statements of advice.
"Advisers who embrace newer scaled advice solutions will be able to generate these basic plans in as little as a few minutes, dramatically lowering the cost of advice," O'Sullivan said.
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