Ditching the suits, building the trust
A new style of financial advice has emerged from the banking and financial services royal commission, and those leading the charge are rejoicing in the newfound transparency.
Gone are the days of financial advisers selling products to clients in exchange for commissions, and gone are many of the institutions and advisers that relied on this strategy, ousted by new compliance rules and higher education requirements.
In a recent report, Deloitte signposted the way forward, declaring advice will become more personalised, convenient, cost-effective and transparent thanks to new innovations – even in the mass market.
‘‘The cost of wealth advice and management services will shrink as lean new entrants spur competition,’’ Deloitte said in its Future of Financial Services report. ‘‘Customers will gain greater visibility into their investments and make adjustments more readily.”
The problems Australians face in accessing advice years on from the royal commission, however, are still legion; due to the power of the current product providers, most Australians still enter advice discussions in an uneven marketplace, heavily weighted towards delivering value to the product providers.
But in their place is a new generation of boutique, non-aligned firms that have embraced the new game.
“Everyone deserves trustworthy advice, free from undeclared commissions and the smoke and mirrors that have traditionally tainted the industry,” said Troy MacMillan, chief executive of The Wealth Designers, the reigning Association of Financial Advisers’ Practice of the Year.
Mr MacMillan, who says he’s always been uncomfortable with these aspects of financial services, pioneered a new service model based on valuable, non-aligned advice long before the findings of the royal commission were handed down.
“Personally, I’m thrilled that we can finally rebuild trust in the sector,” he said. “I absolutely welcomed the recommendations, the code of ethics and the compliance changes. It dawned a new day that will benefit all Australians.”
Mr MacMillan said the changes had helped bring about a newfound transparency and integrity, and had revolutionised an industry that had long been viewed as stiff, serious and suited up. He hoped all Australians seeking financial advice would now understand what it should actually look like.
‘‘There needs to be a clear separation of what is a product recommendation, like something obtained at a pharmacy, and what is advice, like that obtained from a medical practitioner,’’ Mr MacMillan said. ‘‘The many inquiries to date have failed to address this imbalance.”
The Wealth Designers have implemented things such as one flat fee and an in-house investment team so advisers can focus solely on their relationships with clients – which, critically, provides individualised advice from a person rather than a robo-adviser.
‘‘It’s our belief that the digitisation of advice will not level the future marketplace in favour of consumers,” Mr MacMillan said. “Value will still be biased towards the provider of products before the receiver of advice.
‘‘Firms that embrace technology to free up their team to nurture and deepen relationships will build a competitive advantage around service consistency and quality, in a sustainable, profitable way.’’
What this means in practice is using technology to streamline business efficiencies and offer extras on top, so young families can afford advice while affluent families have more options for managing a diverse portfolio.
One example is bringing all of a person’s wealth into one digital location.
‘‘We spent the last two years introducing an inhouse wealth app that creates a holistic view of a person’s wealth in one place – from bank accounts to property values and share portfolios,’’ Mr MacMillan said.
‘‘Before this, people often had no idea of what their total wealth looked like and found it difficult to collate all the information they needed to get that overarching view,’’ he added. ‘‘The more you can see everything in one place, the better you can achieve your goals.’’
With the technology side sorted out, Mr MacMillan said, the company is gearing up to make even bigger changes.
“We want to continue to bring more personability and approachability to what we do,” he said. “We are focused on helping our clients to live well, not with huge bank balances, and we foster deep connections with our clients and let their goals dictate the journey of their wealth creation.
‘‘For example, a great life doesn’t necessarily mean sacrificing today so you can retire with as much money as possible. Real financial advice may involve giving people reassurance and permission to spend money now on the things that matter most to them, while still keeping an eye on a perfect future.’’
From an internal culture perspective, Mr MacMillan knows that ensuring staff are happy and well supported will benefit their clients.
“In our new re-brand, it was important to us that we didn’t present ourselves as ‘suits’. We wanted our clients to see us as real people with real stories. On our new website, we share our own motivations for what we do and our own individual definitions of living well to inspire others to think about what their goals are.”