I received an email last week from a fearful adviser citing the hours of work his firm had to undertake for an insurance product sale embedded in the client’s superannuation. The proposed legislation would outlaw him from charging commissions for this work in the future, and he believed he wouldn’t be able to be properly paid under a non-commission arrangement. Since he’s new to the non-commission landscape, I can easily understand his trepidation and concerns.
It’s obvious that most advisers are fearful about change.
And yet, regulation is not the sole purpose of the proposed FOFA legislation.
FOFA is also about ideas, innovation, and commitment to improve the value proposition delivered to Australians seeking financial advice.
Obviously the biggest problem with trying to measure a value proposition is that value by itself is hard to measure, and for some, only particular outcomes like cost savings or special gains may serve as proxies. Another problem with trying to quantifiably measure value is that “objective” measures fail to account for the reality that the value in an ongoing advisory relationship between adviser and client is usually subjective.
The term “value” is so widely used that it has become synonymous with notions of financial savings and gains. Aligning value with a relationship that may not provide specific cost savings or financial gains is a challenge. But that’s not reason enough to avoid experimenting with value propositions that will underpin prosperous advice relationships for many years to come.
Firms that have experimented with their value propositions for years would recognise my correspondent’s situation as a common “we’ve hit some unexpected issues” scenario. The necessary client discussion is difficult but also a natural part of any advice relationship. Positioning the fee in the context of why the task’s outcome is important to the client (rather than how much work is required to perform the task) is the first necessary step when delivering any fee.
When financial advice is positioned in the context of how it better enables the client to live a better financial life, the uncontrollable issues of commissions, opt-in, market competition and global uncertainty are much more easily handled.
In these uncertain times, clients won’t engage with you because of what you do, but rather, because of why you are doing it. Express what you do in terms of why it helps clients achieve greater financial certainty in their lives, and you’re getting ready for the next unforeseen but inevitable challenges of our industry maturing into the advice profession.
These are the best of times to be building quality advice firms.