Advisers challenged by fee-for-service
Mike Goodall
It has been almost one year since ANZ FinancialPlanning (ANZFP) adopted fee-for-service, but despite the majority of its new clients choosing this payment method over commissions, the biggest challenge has been the advisers themselves.
According to Mike Goodall, the dealer group’s general manager, clients possess a strong appetite for fees, but it is the adviser who struggles when it comes to naming the price.
“When you move from what has been the model for about 150 years, which is a commission-based model where the price is embedded in the cost of the product, you mentally challenge the planner as to their value,” he explained.
“What they are now saying is, ‘I’m worth this’, and they have never had to have that conversation before.”
The majority of ANZFP advisers now have the ability to offer their clients a choice between fee-for-service and commissions, with 80 per cent of customers opting for fees.
Goodall added that as a result of this option, the revenue attributed to fees has risen by 132 per cent and that in the last 12 months the dealer group had grown by 48 planners.
But despite not one planner leaving as a direct result of the alternative remuneration roll out, many advisers lacked confidence in the necessary training and found it difficult to define what they were worth.
To overcome this obstacle, ANZFP introduced a pricing model that accommodated different tiers of service, but Goodall feels this is something the industry should do collectively.
“In getting the value of advice story across to the consuming public, as an adviser you have to be absolutely confident about what your value of advice is,” he said.
“It would be nice to see a joint working party of an association and the regulator giving some definition to that, but I don’t think that is going to happen very soon because people are taking opposing positions and it would be hard to get a working party together when that atmosphere exists.”
Goodall added though that he believed an industry-wide change was just around the corner, predicting that within three years the majority of financial planners would have adopted fee-for-service over commissions.
As for ANZFP, the number of clients paying fees as a percentage of its total business is only about 20 per cent, but Goodall believes this will eventually shift to 100 per cent.
Recommended for you
A former Victorian financial adviser has been sentenced after stealing $4.4 million from clients, family and friends to feed his “raging gambling addiction”.
Advice licensee Centrepoint Alliance has acquired the financial advice book of superannuation fund Brighter Super and will become the preferred partner to provide advice to its members.
The association has expressed its support for the Opposition’s commitment to making financial advice a “national priority”, alongside its bold target of reaching 30,000 advisers.
Australian investors are increasingly turning to financial advisers as their top source of information, with more than a third using them for investment guidance.
