I have heard this said a few times now in different contexts – ‘don’t waste a crisis’. It makes me consider what this phrase really means in our industry.
It seems to me those making this statement are challenging our thinking – do we use these challenging times to hold on to past business models, or do we use them to accelerate decision-making around scaling and modernising our businesses and delivering the value of advice to more consumers?
As a personal beneficiary of great financial advice, I know which path I hope we take.
A challenge for good
We are unquestionably in unprecedented times. The small business structure of the advice industry means the dramatic changes in market and investment conditions can and are having significant impacts. This comes after years of accelerating regulatory change.
We see this pressure manifesting, with some licensees temporarily discounting fees or turning them off and advisers bringing forward plans to leave the industry. These are understandable reactions. But are they wasting an opportunity?
Removing or discounting licensee fees is certainly one lever licensees can use to seemingly support advisers. But this approach devalues and constrains a key partnership. Remaining a sustainable and compliant advice practice through this crisis is essential to allow consumers to benefit from great advice and many licensees are valued business partners in this process. The costs of running a licensee continue to escalate (has anyone renewed PI lately?). Choosing to run licensees at significant loss, heavily subsidised by product margin is the past, not the future, and arguably led to the current wave of regulatory change and rising costs, in the first place.
I have seen two responses from practices and licensees to the past waves of change. The first group contemplated the future direction of reforms and modernised their businesses ahead of the curve, for example removing grandfathered commission and moving all clients to annual opt in back in 2014. They are now sustainable in the current crisis and growing.
The second chose to strictly adhere to the regulation, did not modernise and are now far more challenged. There will always be another crisis – it is clear to all of us in hindsight which of those approaches was the right one.
Challenging market conditions are difficult and emotional. But it is also a great time to reform.
Flight or fight
Advisers accelerating their plans to leave the industry is an understandable reaction – it’s tough out there. But there is also evidence that consumers are looking for advice to help them make sense of their lives and changing circumstances. Advisers in our network have increased their engagement levels with clients and the value of the advice they have given for many years is paying off. Analysis of future supply and demand also shows there will not be enough advisers to deliver value to the growing number of future consumers who want to benefit from that same great advice.
This present environment is unquestionably hard. But our industry has the chance to shine after years of scrutiny, helping many thousands of consumers rebuild and live financially rewarding lives. Those consumers need more advisers, not less. They also need licensees that are sustainable in an environment of rapidly escalating costs, to be their business partner an assist them grow.
Yes, regulation is complex, messy and increasing the cost of advice. But let us challenge ourselves to see the current operating environment as an opportunity to transform. Use the opportunity to show government and consumers that great advice makes a positive difference in the lives of consumers. Now that is a conversation I’d love to be having.