Planners need “radical transparency”: Investment Trends

Financial planners are losing clients faster than they’re gaining them and increasing transparency of fees and interrelationships with entities is key to remaining relevant as the industry evolves, the CEO of Investment Trends, Michael Blomfield, has told Money Management and Super Review’s Future of Wealth Management conference.

Blomfield said client retention has emerged as a major long-term issue for the financial planning industry, with advisers gaining 20 clients and losing 30 to 35 in a 12-month period, and it began post-Future of Financial Advice (FoFA) regulation.

While the number of clients receiving advice is shrinking, the number of Australians seeking advice is increasing, with around three million Australians intending to turn to a financial planner for help but failing to for a lack of transparency on the planners’ side.

It’s also particularly difficult for planners to retain clients in the accumulation and pre-retirement stage, with a very low penetration rate to clients aged 30 to 44 who are starting to amass wealth, but a “massive advice-peak” in those aged 55 and above.

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“We run a tax and super system that is so complex, that it drives a massive need before retirement to get help, but the help needed to arrive 15 to 20 years earlier,” said Blomfield.

The lack of advice in accumulation and pre-retirement is driving a widespread interest in being invested though, with millennials, who historically made up 28 per cent of the online-broking market, now making up 44 per cent of the online-broking space.

“There’s also a big piece of 50-ish year-olds and SMSF holders moving into online broking models because they can’t access the services they want to,” added the CEO.

Blomfield said this came back to FoFA changes, with the face-to-face holistic advice model contrary to what Australians actually prefer.

“Post FoFA, about 50 per cent less Australians are getting advice, and the average wealth of clients is 50 per cent higher,” he said.

The clear message that emerged from Investment Trends’ statistics was that clients wanted transparency, with 42 per cent of clients expecting to view their investments managed by advisers.

Thirty-seven per cent wanted tools to track how they were progressing towards their goals and 32 per cent wanted to track their budget and cashflow position.

Blomfield suggested the pathways to advisers needed to change, reflecting the seventy-seven per cent of Australians that prefer the piece-by-piece advice model.

In terms of advisers, Blomfield said their top challenges were concerns with negative press and regulatory uncertainty following the Royal Commission, as well as increased compliance challenges, business efficiencies, new client acquisition and a higher cost of advice.

Blomfield expected new technology like open banking would transform the industry, and commended platforms like Calendly and Rev for already simplifying the advice process.