Once-off advice will not bridge advice gap
Despite some industry experts believing that once-off advice would increase given the rising cost of advice, industry experts do not believe it will bridge the unmet advice gap.
Speaking to Money Management, Centrepoint Alliance advice group executive, Paul Cullen, said the reality was that there were less advisers around and once-off advice was still costly to advisers to provide.
“The number of people are looking for advice is only going to increase and there's a demographic sort of tidal wave washing over with many people hitting those retirement ages,” he said.
“If you look at the natural providers of some of that advice, they're no longer there such as banks. While superannuation funds do intrafund advice it is not comprehensive.
“So, there’s more people around and less people to do it. I think there’s more of a fundamental reason for that advice gap.”
Cullen said while a scoped adviser could do a piece of advice in 90 minutes and see more clients, the adviser would still have a pricing issue. Not only this, advisers would still have to abide by regulation, legislation, and the systems and processes that went into providing advice.
“You're not paying ongoing service fees but if it's fairly substantial piece of advice it is still going to be quite costly,” he said.
“It's going to involve a lot of hours and all those sorts of inefficiencies and red tape that go with advice. It will continue contribute to the cost of providing advice.”
Lifespan Partnership chief executive, Eugene Ardino, said the most expensive part of providing advice was the first piece of advice regardless of whether it was once-off or ongoing advice.
“The thing about best interest duty and safe harbour and other requirements is while they can cater for scaled advice you still have to meet requirements which are quite comprehensive within that limited scope advice framework. It’s still a very big job” he said.
“The reason advisers will do a piece of advice for $3,500 when it should be $7,000 to $10,000 is because, in my view, if the client becomes an ongoing fee-paying client they’ll be a client for the next 20 to 30 years.
“So, the mindset is ‘I’m prepared to do the onboarding at a discount or at a loss so long as I can recoup some of that cost because I’m going to have that client for a long time’.”
Ardino said if a client wanted one piece of advice without a guarantee of being an ongoing client, advisers were likely to charge a higher fee as there was no commercial reason to do that at a discount.
“The way you could have more ad-hoc advice is for there to be relief around some of the compliance requirements,” he said.
“Whether the client becomes an ongoing client or not, the amount of work involved in presenting the best advice to the client is the same. All that is different is the adviser looking at a one-off project rather than something that leads to more work so I’m not sure if we’d see more in that space.
“There would need to be relief in limited or scope advice.”
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