Last week we talked about the financial advice climate heading into 2013, Kohler’s call to ‘Save Our Super’ and the challenges and opportunities this will present to all of us.
Whether an opportunity or a challenge, one thing is clear – a self-managed super fund is almost a dinner party conversation starter. Who’d have thought the $439 billion in SMSF assets across 480,000 funds would be considered cool? That never happened with whole-of-life or endowment policies!
Seeing everyone must have one, is this just a trend bubble ready to burst sometime soon? Or is the real learning and opportunity here to be found in understanding the profound mistrust of financial planning and advice and misconceptions about the role such advice can play in the lives of most Australians?
Looking back on five years of extraordinary times, more and more Australians will see nothing but disappointing results. It’s easy to understand their desire to take greater control and appoint themselves as investors.
But to let them self-medicate, self-analyse, self-discipline and control their own emotional decision making in this marketplace – is that our future? Few of us are Warren Buffett. Students of behavioural finance know that most of us are not properly wired to make consistent, sound, impartial financial decisions.
Doctors wouldn’t let their patients self-medicate. Armies wouldn’t let civilians walk into danger zones. Lifesavers wouldn’t let swimmers go carefree outside the flags.
Can we just blithely sit back and await the next trainwreck of people punching above their weight in markets that are beyond anyone’s control? Is this a disaster waiting to happen in 2013 – or later – with not just the pocket money of Australians, but with their proverbial ‘sheep stations’ (i.e. life savings)?
Australians’ need for financial advice hasn’t gone anywhere, but the old financial planning business model of earning commissions based on the provision of financial products masquerading as financial advice is declining (as indeed it should!)
The proposition underpinning the future advice profession – “financial certainty for life” – resembles that of the medical profession: providing value through upfront and ongoing services, and maintaining arms-length links to financial products.
Financial advisers who are prepared with 2013-and-beyond propositions are going to thrive and build the brands that the financial product providers will work harder than ever before to supply to (in a non-conflicted, open market approach).
Meanwhile, groups that threw a quick coat of compliance paint on old value propositions tinted slightly with a mix of corporate brand marketing are heading for a compliance and commoditisation cliff.
It may not happen in 2013, but instead when more institutional marketing departments figure out their new ‘opt-out’ adverts and ‘special honeymoon’ deals for Australians switching offers when they receive their new 2014 terms of engagement. My builder mates tell me the latest round of building industry collapses are based upon some firms willing to operate on margins as tight as 1%. The days of making good margins on superannuation and other financial products are numbered.
As during the consolidation of the computer hardware industry of the 1980’s, we’ll witness more consolidation for the sake of better margins and ‘efficiencies of scale’, along the lines of those at WHK/SFG, Count/CBA, AMP/AXA, Bankwest/CBA, DKN/IOOF, and Plan B/IOOF.
I am amazed at how many groups are blaming unclear or delayed legislation regarding FoFA and Best Interest regulation. Are these the same people who’ll say they weren’t ready for climate change?
Advisory firms with good value propositions beyond “we’ll do it for less” or “we’ve got the best product” or “if you need anything I’m always here” only need to be patient and watch the inevitable commoditisation war take more casualties.
There’s little doubt that your proposition of first choice in 2013, and probably for the rest of your working life, will be helping your clients deal with financial uncertainty.
The GFC has taught people that “guaranteed returns” usually refers to what the originators of the funds will get, not the buyers into the fund.
More advisers are realising that helping their clients manage their financial behaviours will have a far greater effect on their ultimate financial achievements than will placing them in today’s “best returning proposition”.
And our advice clients in 2013 and beyond will also realise that no matter how good, how reputable and how reliable the product provider might be, it’s managing their ongoing behaviours ‘behind the wheel’ that will most affect their ability to reach their desired and achievable financial destinations with the least amount of wear and tear.
It’s the best of times to be building great financial advice firms.
2013 – bring it on!
Image courtesy of adamr / FreeDigitalPhotos.net
About Jim Stackpool
For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a like-minded team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.