Financial advice tools criticised as simplistic
Financial advisers must develop a more complex toolset to provide advice, according to senior Milliman consultants who criticised the simplistic advice models being used at one advice dealer group.
Speaking at the Actuaries Institute Financial Services Forum in Melbourne, Milliman senior consultants Wade Matterson and Craig McCulloch presented case studies of advice processes provided at one dealer group and suggested that the advice models being used by financial planners were too simplistic to provide proper advice.
Financial planners have to analyse their own advice model and determine if that model is enough to meet an individual client's objectives, McCulloch said.
Financial planners have to change the advice model to make it more likely to meet those objectives, he said.
Financial advice processes have to be driven by set and defined objectives rather than aspiring to reach a goal, McCulloch said.
Because financial advice was only focused on investment risk, the client's objectives and their risk profiles were separated when they shouldn't be, McCulloch said.
Financial advisers need to think of risk in an alternative way and consider set client objectives and the risks to that objective as one subject, he said.
However, Matterson admitted it was difficult from a compliance perspective to introduce broad concepts focusing on a client's objectives or goals using investment products that would still fit the compliance regime.
Advisers have to think of ways that can combine a new objectives-based approach and still fit within compliance, he said.
"The nature of compliance in the industry is a real barrier as to how we integrate a more flexible, goals-based, highly individualised advice process," Matterson said.
Communicating the concept to clients is also something to consider, he added.
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