For financial advisers intent on shaping quality practices that will help Australians build better financial futures, the rewards are many and varied. So too are some of the issues and barriers. Likelihood is however, there’s one major issue that most independent advisers grapple with: how to ethically, legally and preferably, profitably, address the needs of the “inactive” clients on their books.
This issue brings to light the essence of the conundrum facing the entire advice industry. On the one hand, we know that nearly every Australian would benefit from receiving professional financial advice – whether it be simple, limited advice or of the more complex variety. On the other, even the conservative statistics tell us that a mere 20% or so actually do so – leaving a spectacular 80% of the population unadvised. At face value this figure would seem to shriek “opportunity”. But those of us in the industry know that, as matters currently stand, this is far from the case.
Note that all-important important qualifier: “as matters currently stand”. By that, we mean if we continue to use traditional means to assess those “inactive” clients and, where appropriate, “activate” them. Why? Because if we use those old-school means the maths is against us: we simply cannot deliver accurate, compliant, quality advice at the scale required to “activate” the clients already on our books, let alone the ones who have never made it onto the page.
According to one finding revealed by Recep Peker, Research Director at Investment Trends, given current regulatory requirements and advice practices, the average financial planner is only able to sign on 21 new clients per year, despite vastly greater demand. While other estimates differ, what they have in common is recognition that one single adviser seeking to effectively service thousands of clients using traditional methods is a simple no-can-do. Think of the hours of face-to-face meetings, manual fact-finds, production of bespoke Statements of Advice, personalised phone check-ins, being available and responsive to queries, research, reviews, admin, monitoring compliance and so on. And that’s not even counting the time and hours required on the business management side to ensure a sustainable, robust and profitable practice.
Add to this the fact that, as with so many data bases in so many industries, the information many advisers have on their inactive clients is likely inaccurate – whether it is double ups, out-of-date contact information, outdated income and financial and personal circumstances – and you have a looming degree of difficulty. It’s a degree of difficulty that enters the stratosphere when you consider that the compliance regime is only likely to tighten further.
So, back to the conundrum and what to do about it.
Once upon a time (like, all the way back in 2013) the accepted wisdom for an independent financial adviser was to sell their book of inactive clients – preferably to one of the larger players with the wherewithal to appropriately address the sheer scale of needs.
Today, the thinking is very different. There’s a very good reason for the massive focus on technology across the entire industry, including industry bodies, regulatory players and even the federal government itself.
That’s because when it comes to using tech to provide better, more consistent, more compliant advice – at unprecedented scale – it’s a case of not if but when.
And for IFAs seeking to activate their books the answer to the question of “when?” is now. High quality fintech that delivers on digital financial advice is no longer the province of the big players. With what’s available now there’s no good reason IFAs not to have the power to start servicing their entire client base.
How can technology benefit advisers?
With robo-advice platforms, clients that have been sitting dormant on your books can now be delivered a very tailored service with minimal input from your side. There are four key benefits to adopting technology:
Saved time and cost
You have the ability to serve all your clients, whether it’s 50 or 5,000, at dramatically reduced time and cost than required to provide even basic service to a small number of them. You can tailor your advice to client needs, spending more time on those who need it while knowing that others are serviced at a fraction of the time otherwise required.
The personal satisfaction you receive as an adviser when you provide quality advice to a client is what makes you a professional with a career, rather than someone just doing a job. The right technology platform lets you not only advise more clients, it gives you confidence that you’re delivering the right advice, at the right time – with all the right documentation and compliance safeguards.
Better quality business means higher profitability
It may sound counter-intuitive, but one of the biggest benefits of using technology is increased engagement from clients. This is because you have the ability to make contact with them, support them and learn more accurate information about their circumstances. This translates to higher FUM from more clients. The flow-on benefit of this is that your business is becomes valuable both today – and if you want to sell it.
More engaged staff
The streamlining of advice through technology reduces the administrative burden on the company, meaning admin staff can move into more rewarding adviser support roles and allowing for reallocation of resources to deliver on core advisory and value-add services
How to start
The process of integrating a system into your current advice platform need not be the giant undertaking that it once was. If you choose the right platform it can be straightforward, requiring a relatively low investment of time on your end.
- Understand your data
Before you can sink your teeth into a technology platform, you need to know where you stand with the data you have and what you’re going to need to get to allow the platform to work at its best.
Do you have up-to-date contact details for all your clients? Do you know what their goals are, both long and short-term? This initial research will set the foundation for the rest of the technology rollout.
- What’s your goal?
What do you actually want to achieve from your technology? Talk with an expert to identify the options available and benefits they offer, then think about how these could apply to your business. Most technology providers will conduct a fact-find with you to assess the best approach for your business; whether it’s a technology platform or not.
- Cleanse your data
Regardless of how great your data records are, before you start plugging it into your platform you need to give it a thorough cleanse to ensure there are no errors or missing information. Again, the technology platform you use will likely provide a data cleansing service to assist
- Get started
That’s it. Once your data is cleansed you’re ready to jump into the platform and start providing automated advice to your entire client base.
- Upskill your staff – train widely and often
Technology is often dramatically underused, with as little as 10-20% of any given solution’s capability understood and used. Make sure it doesn’t happen to you. Investment in wide and frequent training across multiple staff will repay you in spades. While it’s great to have a champion of the software, all staff should be confident in using the system, eliminating key person risk, embedding the corporate knowledge in and levelling the playing field for excellence across your business.
Once armed with the right tech, even small independent advice firms can be positioned to overcoming the barriers to achieving the vital goal we all strive for: empowering more Australians with quality advice that will help secure better financial futures.
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