Reasons to be cheerful!
It seems contrary to the prevailing zeitgeist, but I’ll say it anyway – something good is happening.
This may against the tide at a time of global pandemic, uninspiring political leadership and the declining ability of humans to listen empathetically to each other and to compromise. While these are very serious issues, if we are looking for causes for optimism, there are many - and one important example can be found in our own corner of the world in the Australian financial services industry.
In a nutshell, our industry is professionalising - and it feels great. It’s been building for a while, and in my estimation, this is now a grass roots movement that that won’t be stopped. Of course, everyone has their own definition of what professionalism means and so it’s incumbent on me to provide illustration from my own daily experience:
Principals of advice businesses are looking to ‘reset’. For some this is coincident with exiting an institutional advice network and wanting to reframe their identity; for others it’s simply the realisation that there are alternative business models and services available to them that represent a better way.
Advice and relationship culture is prevailing over sales culture. Business owners are focused on what it takes to genuinely add value for clients – now and in the future. It’s not just about point in time advice leading to a transaction. It’s about meeting the true investment advice and service needs of clients as they play out over their lifetime.
Advisers are no longer trying to position themselves has having all the answers on investment. They see that working with full time investment professionals enhances their offer and standing and will lead to better outcomes.
Advice firms are investing in the capacity to reliably and equitably deliver the level of client service required – in all market conditions. Extensive use of managed accounts, new technology and fresh thinking is making these businesses more robust, more scalable and more efficient. Improved governance around investment decisions is also a feature of this evolving landscape.
Revenue streams are more transparent, with a better alignment between what people need, what they pay for and what they get. There is strong evidence of a desire to avoid conflict of interest, and where there is conflict, to be transparent and to ensure that the level of service and value delivered will bear scrutiny.
Readers may also be looking for theories as to the source of these developments. In my view there are many contributing forces and allocating proportion to them would cause perpetual debate. The GFC certainly caused a lot of advice practices to reflect on what they could do better, just as current market disruption is doing now. Some other factors I would nominate include industry regulation, a more assertive industry media, the role of industry associations and growing levels of industry education. Overall, if I had to give one factor more weight, it would simply be experience – a collective coming of age. I trace the origins of the true advice industry back to 1983 and the advent of the rollover vehicle. By that reckoning this industry is coming up for 40 years old – which is long enough for willing introspection to bear fruit.
Did the recent royal commission play a role in this turn of events? Inevitably the answer is “yes”, but I believe these trends were well and truly in place before the royal commission started and that what Australia saw was some of the more unfortunate aspects of where the industry has been and not where it was already going.
I said at the outset I did not believe this movement for positive change will be stopped. That is because it is ultimately driven by a strong alignment between what is good for investors, practice owners and the people working within those practices. This “alignment of the planets” is rare and powerful. Practice owners now have the bit between the teeth and are leading.
These changes represent the most significant trend our industry’s history. If that is not exciting enough for you, then consider this:
The market for financial advice is growing
The number of advisers is shrinking
The reset financial service practice described above equips advisers to service more clients than before and deliver a better experience
What a time to be a financial adviser working in Australia!
Have a great week!
Brett Sanders.