Value of scoped financial advice outweighs price
Some of the industry's largest dealer group leaders have attempted to map an approach to pricing scoped advice, but key cost differences have emerged between the groups.
The issue arose in a panel discussion on scoped advice at the Financial Services Council's (FSC) annual conference last week.
AMP director of financial planning advice and services Steve Helmich told the audience that cost would not be an issue for consumers when they were shown the value of advice.
Helmich gave the example of an AMP Horizon's Academy practice that charged $150 for scoped advice on budgets and cash flow, $440 for a single simple piece of scoped advice, and $660 for a more complex single piece of scoped advice.
Speaking to Money Management, Helmich emphasised that the cost of scoped advice would be set as per the terms of engagement with the client.
A recent Investment Trends report suggested that consumers wouldn't pay more than $270 for scoped advice provided by a super fund.
Scoped advice should only be costed through discussions with consumers to determine what was a fair and reasonable fee for each particular piece of advice, according to MLC general manager Greg Miller.
If scoped advice was broken down into a single advice strategy each time, it would help drive down the cost of that advice, he said.
He added, the cost of the advice should rise or fall according to how complicated the advice was.
In the FSC discussion, Miller said scoped advice should be seen as an introduction to holistic financial advice.
However, ANZ Wealth general manager of advice and distribution Paul Barrett said research showed a customer wouldn't pay more than $300 for scoped advice, and dealer groups should find ways to make scoped advice available under that amount.
"Most of the research that we have done indicates that $300 is the paying threshold. So therefore, we have to be under that. One of the people on the panel said that most planners would charge more than that, and people would pay – I disagree with that. I think there is a fundamental problem – the advice value dilemma, where people will only pay $300."
Mercer member services and advice leader Jo-Anne Bloch also questioned the costs of scoped advice suggested during the session.
There was a real reluctance among super fund members managed by Mercer to pay extra for advice related questions, particularly within super, Bloch said.
If the member asked an advice question unrelated to super, they would be happy to pay, but they were very reluctant to pay for advice related to their super when they were already paying for their actual super, she said.
"Our experience through our call centre and our seminar, where we do deliver scaled advice, indicates it's really hard to charge extra," she said.
It was also administratively inefficient to add the bureaucracy to charge for it, Bloch added.
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