Is FOFA an opportunity to refocus on financial advice?
Stephen Bartholomew proposes financial advisers take the Future of Financial Advice reforms into their own hands
It seems to me that we’re all over the Future of Financial Advice (FOFA) reforms before they have even started.
As I talk with financial advisers they consistently say they’ve had enough and really just want to get on with it.
That is, they want to get on with giving advice.
A lot of the problem, of course, is that the starting line and the finishing line keep changing. The latest news that implementation will initially only be on a voluntary basis just blurs things a little more again – even though it will be welcomed by many.
Is that date of July 2013 really going to be the mandatory start date? It’s a little bit like superannuation legislation isn’t it?
A bit of tinkering here, some grandfathering there, and a bit of political spin put on top for good measure. Various parties are hopefully satisfied, but mostly clients will continue to be confused.
Hopefully this confusion doesn’t apply to financial advisers, but clearly, regular changes in any area do lead to a certain level of apprehension for all concerned.
So, I say let’s say goodbye to FOFA. Let’s take hold of FOFA and claim it for ourselves.
Let’s make it stand for something meaningful to all financial advisers in the trenches by breathing new life into it. How about Focus on Financial Advice?
Instead of talking about the future of our profession, let’s focus on what it’s all about.
Last time I checked, it was about giving our clients carefully considered financial advice. It’s not really that complicated is it?
Our advice may be either simple or more complicated, but the advice itself is always based on the single premise that our role as advisers is to get our clients from where they are now to where they want to go.
As I heard recently, it’s really as simple as getting our clients’ financial houses in order and rearranging their rooms from time-to-time as they progress through their various life stages.
What about the Financials of Future Advice? Does it really matter how our client chooses to pay us for the advice given?
Many would argue that it doesn’t, but perception does matter to some extent. It may be that the client accepts and even appreciates having a number of payment options, but it’s unlikely that the media and other professionals will accept any method of payment other than fee-for-service.
Is this really a problem? I don’t think so, and most of the financial advisers I talk to don’t see it as a problem either – largely as they’ve already taken the voluntary step of preparing and implementing fee-for-service models.
Better still, maybe we should be referring to service for a fee? In line with a focus on financial advice, maybe the financials of future advice would be decidedly better if we focused on ‘service for a fee’ rather than ‘fee for the service’.
It’s about not putting the cart before the horse. After all, a hallmark of any successful business is tailoring it to meet clients’ needs.
They don’t want a fee – they want a service, and for that service they’re prepared to pay a fee. The better the service and service offering in general, the higher the fee they’re willing to pay.
It might seem like a small point, but really, clients will see value in financial advisers if we first value them.
They’ll recognise that we’re acting in their best interests, as a matter of principle rather than some legislated requirement, and they’ll usually be willing, and ideally, keen to refer us to their family, friends and colleagues.
In fact, it’s a goal and reality for many advisers already. Rather than needing to ask for a referral, the service and financial advice offered is such that clients ask their adviser to help others in much the same way that they’ve been helped.
At that point, we can be confident that the service and advice given really is worthy of a fee.
What about Friends of Financial Advisers? For too long it seems, advisers have been the ones seeking to build relationships with other professionals, with the thought being that those in other professions are doing us a favour by referring their clients.
Building relationships with other professionals obviously makes a lot of sense, but wouldn’t it be great if our services and business models were so closely aligned to the needs of our clients that their most trusted professional relationship was with us?
For some this is already the case, but in other cases a worthy goal is for other professionals to have good reason to make friends with us and thus gain our referrals.
Many advisers have already taken steps to prepare for this new focus on financial advice for the simple reason that it makes good business sense.
They’ve sought to adapt their businesses in the context of the wider fee-for-service debate, but more importantly, for the purpose of better serving their clients. For these advisers it really has been an evolution rather than a revolution.
Yet for the vast majority of financial advisers, and regardless of the economic environment and at times relentlessly negative press, there is no reason at all to be defensive about what we do, and for that matter, how we get paid.
We can all be proud of the role we play and we can all unite as a body of advisers to voice our vision.
Our role – maybe even our calling – is to focus on giving advice to our clients today and tomorrow, and hopefully for the children of our clients as well. It really is a Focus on Future Advice.
Stephen Bartholomew is practice development manager of Fiducian Financial Services.
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
