Orphaned clients will be 'off the charts'

The cost of providing advice will lead to more clients being ‘orphaned’ over the next 12 months as advisers struggle to justify certain clients under new ongoing fee arrangements, according to Lifespan Financial Planning.

Eugene Ardino, Lifespan chief executive, said it had been driven by a multitude of factors which would see advisers orphan a lot of their clients.

“The reason it will come to a conclusion over the next 12 months is having to get clients to re-consent or to consent to their ongoing fee arrangements,” Ardino said.

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“I’m seeing the volume of clients being orphaned is off the charts and the other thing is up until now, we’re not seeing advisers proactively orphan clients where it’s kind of happening as the situation arises.

“We haven’t seen trail and commission clients where there’s no longer anything being paid – we haven’t seen advisers proactively start orphaning those clients – that will be a massive thing that will happen over the next few years.”

Ardino said this would be a greater issue for consumers who were unable to generate enough revenue to justify giving them advice.

“A lot of these clients call up every so often and want help with things and it’s difficult to run an advisory group to have infrastructure in place to deal with them when there’s no income being generated,” Ardino said.

“Some of those clients will have been converted to fees [paying] but many of them haven’t because they’re too small and don’t have the capacity to pay a reasonable fee, so for me that’s the big thing that’s going to play out over the next year or so.

“Generally, it’s a high volume of clients that make up a very small amount of income and what will probably happen is you’ll look at the fee arrangements of everybody else and look at increasing fees.”

An exodus of advisers was expected this week and Ardino said Lifespan was expecting to lose 10 to 15 advisers.

“If you’re thinking about leaving this year and you don’t have a good reason to stick until the end of December if you get off the register before 30 June, you’re going to save yourself probably somewhere between $3,000 to $4,000 in the ASIC levy,” Ardino said.

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“A lot of these clients call up every so often and want help with things and it’s difficult to run an advisory group to have infrastructure in place to deal with them when there’s no income being generated,” Ardino said.

It's not not having the infrastructure it's being unable to comply with BID and the consequential cost of "making reasonable enquiries" into "ALL their relevant circumstances". So this small client (or their son, daughter/attorney) who needs occasional support, nudging or help can now sue you for not taking into account EVERY aspect of their financial lives for some perceived small loss or oversight that you might never have been asked to address.

We didn't have a big book like this compared to many practices but we cut off about 100 such clients. Some were quite distressed especially when I told them their only option for help was centrelink.

If I didn't love my clients as much as I hate the regulators I'd find something else to go and do. The current regulatory framework would've sounded like a Monty Python sketch 20 years ago.

But this is the best thing - as per the Gov, FASEA, and ASIC, right?

Orphaned clients should be sent packing with a sorry letter confirming it's LNP & ASIC that have forced this problem.
And contact numbers, emails, etc for ASIC and your local LNP Federal Member to be directly contacted for future Advice.

I have been removing clients for almost 2 years now. I would like to help them, I would like to be there for them, but compliance administration, BID, AFCA, ASIC all mean it is simply too hard for both them and me. I know several have made bad financial decisions since they left us .... but I have followed the ASIC model "Hey - that had nothing to do with me, I concentrate on following the law".

Advisers of which after 44 years I will next week be no longer one- are like frogs in the saucepan. They didn`t realize they were being cooked to death - because by the time the water got that hot- they couldn`t escape!

This would all be solved if Super Fund Trustees were permitted to implement NON-ongoing fees for a total fixed dollar amount, over a fixed term (say 36 months), according to the Corps Act, Section 962A(3). Why the Govt completed ignored this in developing the Haynes 2 legislation appears to be a major oversight & legislative drafting error. Or has the Parliament been misled by this section being ignored? Crickets....

What about the orphaned adviser? Who holds our hand in this new sink or swim world. Put one foot in front of the other and keep going my friends. The tide will turn.

exactly. this from, "the wellbeing of financial advisers in Australia" produced by the E-lab. thanks to Dr. Adam Fraser and Dr. John Molineux and for AIA for sponsoring the research.

Executive Summary (pg 7, para 2, top-down)

"73% of advisers are experiencing high levels of burnout from work"

"33% of advisers are seeking medical care to manage their health symptoms"

"61% have poor sleep due to stress"

"67% of advisers experience some level of depression"

"when compared to the average Australian, financial advisers have a 64% chance of being in a moderate mental health risk group, 51% higher chance of being in a high mental health risk group, and an 11% chance of being in a very high mental health group.

"as a result, 42% of the advisers we studied considered leaving the profession due to the stress they experience and a further 17% are unsure if they will stay in the profession"

what about us? and our well-being and that of our families. we are also pretty average Australians.

the tide has turned, it was an exit march, that turned into an exodus and now is a stampede.

advisers are unnecessarily worrying about all the "unmet" advice needs. not your problem. focus on your mental health instead, I know most of you and your families are not coping well with all that is going on.

work on your mental health, work on being engaged with your families and children. leave the unmet advice needs to clients they will figure it out on their own. or the government, they know best. let ASIC work with the government to solve the issue. they know best. better than all the rest, better than anyone, anyone I've ever met.

relax. you don't owe your clients or society so much that you or your families become ill yourselves. if any profession demands that of you then it's not worth being in that profession.

you are permitted and allowed to look after your own well-being first and foremost, like every other person in the country does.

you are valuable, you are important, your mental health is important too, think about yourselves first and foremost. otherwise, you won't be of much assistance to anyone else.

Brilliant post.

I received a note from KeyInvest today that all my clients with Funeral Bonds need to sign an Advice Fee Consent Form!!! So that's 55c per month on each client I won't be receiving any more. LOL

Haha I got the same one, I was perplexed that I was even on their mailing list! There must have been on or two in an acquired book. I’ll be writing to KeyInvest asking them to remove me and the AFSL from their registers. They can deal with the executors.

I think I have 2, since one client died last year. I'm certainly not going to worry about a fee acceptance form, but I didn't tell them to remove me as an adviser... Only god knows how I can make that advice affordable in the future though. :P

This was always the plan. Product providers sell clients to advisers, then get them to give them all back now, and then when they need to pay for advice the product provider can A- use general advice to keep them in the product, or b - charge them a large sum to get advice. Win win.

Doing the math.
Assuming minimum 100 clients per adviser and 5000 advisers to exit th industry by end of 2021.
Minium 500,000 orphan clients 2022 and less adviser to assit them because the advisers books are already full.
We continue to live in interesting times.

I read an article yesterday in the AFR, titled "The great resignation wave swamping workplaces around the world'

the story of a British pilot, really resonated with me, pls read the article I think most of you will enjoy it and the question I asked myself overnight as this pilot did to himself was :

" Flying is what I love doing,” he said. “But I think the big thing for everybody right now is, at what cost do I want to follow that dream that I once had when life can be better on the other side?”

life is better outside of financial planning. it's a toxic workplace full of bullying, intimidation, and harassment. all of us deserve a better workplace that is safe and where each day we are valued for making a positive contribution.

if you are on the fence, please read this article it may help you decide to leave. do it for your mental well-being and that of your family. you don't need to suffer in silence.

hello news just in, according to Adviser ratings, 552 advisers left in the last week. normally it averages around 100 per week so about 5,000 pa but it looks like it's going to be a bloodbath to the end of the year with an expectation of around 5,000 drop-offs.

It’s pretty normal for big numbers at the end of financial year. Things will be a bit quiet now until about November, that where the blood bath will commence (though the FASEA extension may prolong things until next year).

Aaaand Mortgage Brokers are next.

All planned and in place.

Then Accountants.

Are barefooted journalists a leading indicator of where industry wide strangulations are headed?

how about lawyers, we need to target them first. worst people on earth.

Bahaha... only too fitting. If it wasn't for them, we probably wouldn't be in this mess. :P

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