No substitute for face-to-face

Recent research commissioned by the Association of Financial Advisers (AFA) has highlighted the degree to which the face-to-face relationship between planners and their clients is fundamental to the advice equation. 

The point was made by AFA chief executive Brad Fox in a closing address aimed at last week’s Money Management/AFA thought leadership event in Sydney which traversed the question of financial planning policy before, during and after the election. 

It was notable that, at the same event, the Industry Super Network chief executive, David Whiteley, made a plea for the financial advice sector to give the current Government’s Future of Financial Advice (FOFA) legislation a chance to work rather than supporting immediate amendment by an incoming Coalition Government. 

But if one clear thing emerged from the Money Management/AFA breakfast it was that the FOFA legislation had forced important changes on the financial planning industry, including scaled advice and a further embrace of so-called “industrialised” planning techniques. 

The reference to “industrialised” planning techniques encompassed the increased use of technology to interact with clients – something which one of the breakfast panelists, Infocus Wealth Management’s chief executive Rod Bristow, suggested was pivotal to successfully operating in a post-FOFA legislative and regulatory environment. 

Commonwealth Bank Financial Planning executive general manager, advice, Marianne Perkovic also referenced the changes in approach that her organisation would be pursuing in adapting to the new environment, including the use of technology. 

But it was Fox’s reference to the importance of face-to-face contact with clients which resonated with many of those attending the breakfast, particularly his warning about the trade-offs inherent in the adoption of a technology-based approach. 

“Our own independent research has proven that 82 per cent of clients of a financial adviser rate the interpersonal skills of the adviser as the most valued part of the relationship,” he said.

“The pathway to the future could well see a trade-off between technology-driven time-saving advice models and those that seek to understand and value the personal drivers, the why, of the client, and provide personal tailored solutions.” 

However Fox also noted that the democratisation of consumption has empowered consumers across all manner of purchasing decisions and that this meant “value and not price will be the future driver of success in advice businesses”. 

One of the key elements of discussion at the breakfast was the findings of recent Rice Warner research commissioned by the ISN, which suggested that the Government’s FOFA changes would actually serve to drive down the cost of advice. 

However, Rice Warner principal and head of life insurance, Richard Weatherhead, acknowledged that the research findings had been based on a number of assumptions around the uptake of scaled advice and the growth in the advice sector generally. 

Equally, Weatherhead sought to explain his company’s earlier research that forecast the cost of opt-in at $11 per client, saying it was based on planners/advisers who were already having frequent contact with their clients, rather than those who had either lost contact or had only intermittent interactions. 

However it was Whiteley’s plea for the planning industry to give FOFA a chance and to enter into consultation before pressing for the Coalition’s amendments which made the breakfast particularly notable. 

The ISN chief executive used his address to argue that the FOFA changes had been in place for less than 40 days, that some of the regulations remained to be finalised and, on that basis, the industry would be justified in waiting to see whether the new regime would actually work. 

On the question of opt-in and the annual fee disclosure requirements, he said he believed that if there were any problems, then they should be up for discussion and resolution within the industry. 

However, speaking for the Coalition, the Liberal member for Bradfield, Paul Fletcher, standing in for the Shadow Assistant Treasurer, Senator Mathias Cormann, made clear that the Coalition had not altered its view on FOFA – that the legislation had gone well beyond the bipartisan report which had resulted from the so-called Ripoll Inquiry which followed the collapse of Storm Financial. 

“It (the Ripoll Inquiry report) became lost in translation,” he said.