Two thousand years ago when the money lenders in Israel had finished celebrating the start of a new Millennium and were considering their business plans, few of them would have realised the major change to distribution that would soon affect their profession.
Two thousand years ago when the money lenders in Israel had finished celebrating the start of a new Millennium and were considering their business plans, few of them would have realised the major change to distribution that would soon affect their profession.
The impact of Jesus of Nazareth sweeping the money lenders from the gates of the temple was probably just as traumatic to money lenders at the time (and just as unexpected) as the recent advent of the Internet on financial planners. I hasten to add that the Internet should not be regarded as sacred or as having any religious connection.
Fifteen years ago the still fledgling Australian financial planning industry had no idea of the shake-up and rethinking needed if financial planners were to survive and progress in a post Internet world.
The key words that describe the financial services operating environment as we face a brave new technology supported future include “very complex”, “fast changing”, “value added advice” and “trust”.
There is a lot more competition from all sorts of areas for financial planners than there was 15 years ago, and a lot more financial information available for investors that can be easily accessed by them directly on the Internet. That is not to say that the role of financial planners must diminish. Good advice will be a valuable commodity and keenly sought.
So there is no need for financial planners to be dinosaurs and vanish. Quite the contrary. The Internet is just the latest influence in their evolution and one that can be advantageous to them.
The Internet impact on personal finance will continue to grow dramatically. Individual investors can easily access information about a huge range of products, services and approaches in a way that 20 years ago financial advisers themselves did not have available.
Individual investors can not only learn about different investment products but also can buy shares, invest in funds, arrange finance and undertake a wide range of other transactions, directly on-line.
While this may sound very bad for financial advisers, in fact it creates an amazing opportunity for those who adapt to the Internet environment. Why? There are a number of reasons, both related to the Internet and also because of the investment environment generally in Australia.
For instance, the immense wealth of information and opportunity delivered by the Internet to individual investors also delivers confusion.
It is very difficult for most Australians to come to grips with the best approach for themselves, or even to be able to understand the features of individual products.
Even investors with a fairly sophisticated understanding of investments find it difficult to work out what many of the new investment products will deliver and how to use them. They need advice, and trusted financial advisers are the people to turn to.
Another element that will continue to make advice a sought after commodity is investors’ fear. An increasing number of Australians are becoming involved in investment. As they accumulate wealth, they will seek advice to both protect what they already have and also teach them how to earn more from their capital.
Nothing quite focuses the mind as recognising you have real value in your savings and that it needs looking after. Once investment returns increase the base each year as much as added savings, investors’ concern will also increase. So, as more investors start to invest by themselves, the market for financial advisers who add value is also increasing.
This is where the value add comes in. Investors will seek advice to both find a way through the confusion and to protect their wealth. And it will be the financial advisers with a trustworthy reputation who they will turn to.
The Internet is a good ally for advice-givers as it also opens up marketing opportunities and a number of easy to use and cost effective communication paths with clients and prospects. Web pages show knowledge and the role of services. Group and individual emails give ways of showing that the adviser can be trusted to add value, and is able to give good advice. Chat rooms make it easy to establish two-way communication with potential clients. The market for good advisers is no longer confined to their home town.
There are of course other reasons advisers will continue to prosper in the years to come.
A benefit that the financial services industry now has in Australia is the very complex compliance and tax environment in Australia.
The complicated investment environment in Australia created by the government is better than any subsidy that could be given to financial advisers as it means just about every investor needs help in developing investment strategies and to protect the value of their assets.
So while the money lenders 2000 years ago were not aware that their way of doing business was about to change, financial advisers can plan for much of the change that is now taking place and be confident that their services will meet increased demand for some years to come.
Gerard Doherty is general manager of retail business at Perpetual Investments.
