Financial Advice of the Future

I attended Afiniation this week, a finance technology showcase event with 31 presenters. Of these presenters, at least half presented new technology platforms and tools for the wealth management and financial advice industry. It got me thinking about what financial advice will look like 10 years from now and how our clients will be receiving it.

When you look at the financial advice landscape now, from a consumer’s perspective, there are four types of advice and service they currently seek:

  • Tax advice
  • Accounting advice
  • Financial planning advice
  • Finance / mortgages / debt advice

Today many clients receive each of these services from different providers, or in some instances two or three from the same provider. However, when you consider the ongoing changes within the advice industry, it’s very clear that further convergence of the advice model is inevitable.

So what is advice model convergence and why is it inevitable?

Advice model convergence is quite literally the amalgamation of all of the above advice services to the one service provider or practice. Some might say that sounds like the one-stop-shop model that was unsuccessfully argued 10 years ago, however let’s look at today’s drivers for this convergence:

Regulation – As we are all aware accountants are currently undergoing a transition to be licensed in order to continue to provide advice on self-managed super funds. Financial Advisers are also now coming under the regulation and requirements of the Tax Practitioners Board, and the finance broking community similarly went through significant regulatory change back in 2009 with the introduction of the NCCP. All of this increased regulation is converging the standards for advice delivery across these three advice disciplines.

Margin Pressure – As a result of FOFA, there is clear evidence within the financial planning industry that generating revenue in the future will be harder than it was in the past. Accounting practices have, for a number of years, been looking for solutions to implement recurring type fees as opposed to hourly rates to improve business value and profitability. Many of these accounting practices have already adopted financial planning businesses to assist with this objective.

Competition – There is increasing competition in each of the four advice delivery segments as a result of new entrants (e.g. industry super funds, technology enabled marketing and/or offshoring). Additionally technology is enabling providers to service clients without the need to be physically present. It’s interesting to also note the major banks only entered the financial planning market space about 15 years ago and, prior to that, the opportunity to attract new clients was greater. Industry funds also did not have a solution for when clients were no longer an employee.

Technology – It’s clear for those who are willing to adopt technology faster that they will be able to provide better services at a lower cost to a greater number of clients. It’s also clear that technology will in fact enable the delivery of all four advice services more efficiently and seamlessly from the one advice practice.

Consumers – Lastly, and most importantly, the most likely driver for advice model convergence is the consumer, our client. Despite all of the above our clients are still likely to be time poor and none of the above improves their world when it comes to time management. In an environment where time is your most precious asset, and your clients value it highly, it is very likely that they will happily take, if not seek out, all their financial advice from the one advice provider.

The alternative – visiting two or three different professionals to get financial advice – will be very unappealing and require coordination due to advice overlap.
In our view is the evidence is overwhelming. Advice model convergence is underway and your ability to adapt, use technology and outsource, while remaining the front office for clients, will not only impact your business results but also ensure sustainability well into the future.

Chris Wrightson. Founder and CEO at Centurion Market Makers, the industry experts in the sale, acquisition and management of financial planning firms. If you’re planning on selling your firm in 2017, we’d love you to call us for a confidential discussion, or continue browsing our website for more tips, tools and info on the steps to take when buying or selling your financial planning firm.

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