Margin compression remains a concern for the advice industry as poor market conditions continue to impact investor confidence, according to BT Financial Group (BTFG).
With regulatory changes and market pressures placing advice fees under scrutiny, margin compression is likely to continue throughout the industry, particularly for platform providers.
“I think, as a result of all the factors in the market, you’re going to see margin compression across the total value chain,” BTFG general manager of adviser distribution Chris Freeman told InvestorDaily.
“It has started already for us: being product providers in the platform space we’re getting squeezed in terms of our margins, but I think what you are seeing now is dealer group and advice fees coming under scrutiny.”
Since the market has been unable to deliver the easy returns seen prior to the global financial crisis, advisers need to focus on providing value in their offerings to clients, BTFG said.
While advisers have not yet experienced the same margin compression as product providers, practices that don’t deliver on their value proposition will experience a squeeze in advice fee margins over the next year.
“The people that are closest to the customer, the advisers, they’re the last ones to really suffer from margin compression, but we’re seeing early signs of it now where investors are pushing back a bit on the fees they’re being charged,” Mr Freeman said.
“So we’re seeing more and more planners look at their own value proposition and ensure that they’re delivering value to the end customer.”
