The four major problems facing advisers
- Time taken to produce advice
- Cost of producing advice
- Quality of advice; and
- Trusted or engaged advice.
By solving these problems, the industry will find the oxygen it has so desperately been gasping for since strangulation by regulation became too much to endure.
Time taken to produce advice
Depending on what market research you trust, the time taken to produce ROAs ranges from 2-6 hours, simple SOAs range from 4-10 hours and complex SOAs range from 14-30 hours. We would argue that once the fact find is completed, if you are taking longer than 15 minutes for an ROA, 30 minutes for a simple SOA and 1 hour for a complex SOA, you’re probably using the wrong solution.
According to Wealth Data, there are 17,044 financial advisers (as of 12th May 2022). Approximately 2.6m Australians pay for advice. This equates to roughly 150 clients per adviser on average. On average within an advice practice, we have found that approximately 80% of advice documents are ROAs and 20% are SOAs. Assuming a 50/50 mix of simple and complex SOAs (15/15) and the average times taken to produce advice above, this equates to 855 hours or 114 days to produce advice for the average client base (see “Traditional advice generation methods” in the table below).
Compare this to the “Next-generation advice software”. The same 150 documents are generated in 116.25 hours or 15.5 days. The difference is so great - 738.75 hours and 98.50 days - it beggars belief! The question is: why aren’t all dealer groups using next-generation advice software? As with any innovation there’s a lifecycle - early adopters, early to late majority, then laggards.
Late adopters beware! Soon advisers will be basing their decision
on which dealer group to join (or leave) based on their access to
software that produces high-quality advice in a timely manner.
Cost of producing advice
Since it’s inception in 2014 we’ve been striving to reduce the cost of high-quality advice. We built a Services business to help advisers produce quality advice, and Software to create efficiency at each stage of the advice process. By “drinking our own champagne” our advice experts inform our Software, and our Software creates efficiency for our advice experts. It’s a virtuous cycle.
There is no doubt the cost of producing advice has skyrocketed through increased regulatory pressure. The FSC White Paper on Financial Advice released in October 2021 suggests the average cost of producing financial advice per client is currently $5,334. However, this suggests that the cost of advice is overstated, or financial advisers are probably using the wrong software again.
Our advisers access ROAs for $125 and simple SOAs for $250 through our DIY capability. Complex SOAs average $575 through our services. This is 5% to 10% of the average cost suggested by the FSC. We have integrated with market-leading technology like Iress Xplan, which has deep CRM, portfolio management and remuneration capability. Leveraging this combination reduces the cost of advice considerably.
Accessibility and affordability
The major problems of time and cost of producing advice are extremely important to solve. It’s the key reason why the Quality of Advice Review is in full swing. Whilst 10% of Australians pay for advice, around 41% want it. The 31% difference is due to affordability. By reducing the cost of advice and the time taken to generate advice, we make advice affordable for anyone who wants to access it. Sounds simple – change never is – but we need to change to make up the difference we’ve lost.
The full article published by The Financial Adviser, an official magazine of the AFA, can be viewed here: https://issuu.com/afamagazine/...