Is the single biggest challenge faced by the financial advice profession really the price of advice?
A glimpse at the financial media in recent times certainly reinforces that impression with headlines like these:
“100,000 quit advice as fees jump another 8 percent[1]” and “Escalating fees put advice out of reach for most Australians[2]”
leaving little doubt that increasing advice fees are driving people away from the sector.
And there’s no shortage of research to back such a contention up, with various studies – including ASIC’s Report 627[3] and Momentum Intelligence’s 2019 Client Experience Survey[4] – showing the cost of advice is possibly the biggest barrier to engaging a financial adviser, and the biggest reason to cease using one.
It’s little wonder then that we see an associated narrative focused on increasing efficiencies and reducing red tape to drive down the cost to serve. As if that is the key.
It’s little wonder also that much of the discussion around the value of advice, and how advisers can better articulate that value (to help ‘sell their fees’), is equally quantitative in nature, focusing on how advice can improve investment performance by a few percent each year, or shave thousands from a tax bill, or reduce debt.
Even discussion about the eagerly anticipated government review into the Quality of Advice (QAR) has – in most quarters – been distilled down to one about the cost and accessibility, rather than the quality, of financial advice.
The question then becomes, do we think that simply making advice cheaper – even a lot cheaper – will open the floodgates and see millions of previously inaccessible clients bang down the doors of adviser offices all over Australia?
Perhaps not.
And even if lower advice fees did encourage more people to at least consider seeking advice, would this in itself be enough to motivate them to pull the trigger and book an appointment with an adviser?
Even more importantly, is price the basis on which you want prospects to choose you over another adviser, and the basis on which you would want your existing clients to stay?
Or is it possible that we have missed the point all together, and the way people judge advice, and its value – and therefore their willingness to pay – is the way they judge other services?
Which is, of course, by the way they experience it and the way it makes them feel.
Put another way, should our efforts to make the value of advice so unquestionable and unassailable be focused not on the cost of advice, but on the experience of advice?
Expressing the value of advice in functional and quantitative terms is problematic
The concepts of price and value are intrinsically interconnected, with our decisions around purchasing a product or service at a given price involving – consciously or unconsciously – some level of calculation of price versus value. Some calculations can be simple and quick because they relate to low cost or low involvement categories (such as food or cleaning products), whilst others are more complex, because they relate to higher value or higher involvement categories such as fashion, cars or travel.
Various studies have, over the years, demonstrated the functional and/or quantitative value that financial advice can offer individuals, such as improved investment performance, lower tax bills, improved cash flow and lowering debt.
An equally functional approach has been seen in the approach of many firms to client care, with the focus being on service standards, such as the speed of answering phone calls and opening accounts, or the frequency of review meetings and newsletters.
To continue reading and receive CPD points, view the original article on AdviserVoice’s website.
[1] https://www.afr.com/companies/financial-services/100-000-quit-financial-advice-as-fees-jump-another-8pc-20220418-p5ae5t
[2] https://www.adviservoice.com.au/2022/10/escalating-fees-puts-advice-out-of-reach-for-most-australians/
[3] https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-627-financial-advice-what-consumers-really-think/
[4] https://www.ifa.com.au/news/27145-client-experience-survey-the-findings-revealed
