Australia Day marks the official end of summer holidays for me and so, now it’s almost February, it’s time to focus on the main issues affecting financial advisers in 2011.
The opt-in/opt-out debate is still top of the list for most financial advisers. Industry is quite divided on the issue.
The theory behind the opt-in service is that if clients feel that they want and are receiving value from a service provided they will opt-in to pay. Too often we have found people are apathetic towards their superannuation and other financial products. They do not realise the fees and charges and for too long have paid for services they have not had or known they were entitled to.
However, for advisers earning a good part of their income that way, this is a huge financial blow.
Many advisers believe that not only are their livelihoods affected by the new legislation but also their clients’ best interests.
Research recently undertaken by CoreData on behalf of the AFA has backed advisers in this argument, stating that during the financial crisis investors largely acted in two ways – exiting the market and storing their assets in cash and those who saw the market freefall as an opportunity to buy discounted assets.
The CoreData research on the high net worth investor segment clearly showed that those who remained in the market, and even used the crisis as a chance to buy new assets benefited significantly from the recovery while those who exited are in no ways better off than 12 months ago.
Extrapolated from this is that many advisers’ clients would have likely chosen not to opt-in, had the rule existed during the financial crisis, and as a result would have been worse off for their decision.
This is clearly another area of opportunity for advisers acting in their own best interests to make sure they are able to articulate the value of advice and their own offering to clients and potential clients.
If a client is sold on the need of an adviser’s service they are more likely to choose to stick with them in good times and bad. However, if a client does not feel they are receiving value for the service that they are receiving they will not choose to opt-in. It’s similar to an adviser’s own behaviour should they feel they were not receiving value for something they were paying for. They would choose not to opt-in.
What is your value proposition? Is it a good one? Are people going to choose you and what you offer? Spending the time developing that proposition now is going to see you reap the benefits later.
