IFAs should compete with the big banks

Independent financial advisors (IFAs) have an opportunity to counter the advice offerings of the big banks by proving the value and independence they can add, according to new research from GlobalData.

According to GlobalData wealth management analyst Heike van den Hoevel, recent Australian Securities and Investments Commission (ASIC) suggestions that banks have been pushing their own products should prompt IFAs to point to the breadth of their service proposition when reaching out to new customers.

The GlobalData 2017 IFA Survey, released this month, suggests only a handful of IFAs perceive competition from the big banks as a threat because the IFAs generally attract an older and more affluent client-base.

However, van den Hoevel said this did not mean IFAs could not broaden their target market and reach out to a wider demographic.

The survey showed a significantly larger proportion (54 per cent) of the Australian population had used a bank at some stage when arranging investments compared to only 38 per cent who had used an IFA.

However, the survey analysis pointed out that the main feature Australians were looking for when selecting an advisor was access to a wide range of investment options.

“That is in direct contrast to ASIC’s finding that banks continue to breach the ‘best interest duty’ and are more likely to recommend products manufactured by their parent companies, intentionally limiting customers’ options or withholding more suited alternative investment products,” the survey analysis said.

“Even demographics that are not typically drawn to IFAs will find themselves more likely to opt for independent advice when they learn their trusted banking partner has been pushing products that are not in their best interests,” it said. “The 15 per cent of IFAs that are independent of a product manufacturer should start aiming for a bigger slice of the pie by highlighting their two core strengths: unbiased advice and a wide product range.”