Financial advisers should not rely on the logic used by banks as a way to retain clients as it will not fit every business model, in particular, practices that uphold close client relationships, the head of Australia's peak advice association said.
"I think that would be relevant for transaction-based businesses but it's different where you have an advice business and an on-going, deep relationship with clients," FPA chief executive Mark Rantall told InvestorDaily.
"I don't think it's as easy to overlay a banking model into an advice model; I think it is a different proposition, however we are seeing businesses, who are corporatising and getting larger, diversifying into those other areas."
Rantall's comments come after Instreet managing director George Lucas said advisers could adopt the logic used by banks to help retain clients.
Extending into mortgage broking, legal and estate planning, insurance and accounting would mean if clients were tied into two or three products, they would be less likely to take their business elsewhere, Lucas said.
While the FPA is seeing an increasing trend of advisers diversifying into these other service areas, Rantall said they should be staying very close to and communicating with clients, as opposed to relying on the banking logic to retain them.
"Having a variety of touch points with the client throughout the year, reviewing client affairs on an on-going basis and going through a reengagement process will [ensure] a narrow and deep relationship with them," he said.
The "banking logic" approach would not suit everyone however, certain advice groups were implementing it, Lucas said.
"It's a strategy that some independent financial advisers (IFAs) are employing in this current environment," he said.
"[One reason IFAs are taking it up] is because of the diversification of fees, as fees from an accounting practice aren't linked so much to how markets perform compared to investment management."
In regards to some advisers shifting away from "being all things to all people", Lucas said he was not hearing those intentions from the IFA market.
"In regards to moving to fee-for-service, they are thinking, 'what services do we need to provide our clients to show that we're adding value and therefore justifies our fee?'" he said.
