That is the view of Wayne Wilson, managing director of wealth at software provider and COIN parent company Rubik Financial. Mr Wilson pointed to static platform fund flows and volatile market returns over the past five years as a contributing factor in pressuring adviser business models.
As we continue to see margin squeeze in industry, the primary place where advisers will want to see labour savings is the administration of their client base, the former Asgard head told InvestorDaily.
“Scaled and scoped advice will push down that path as well because advisers that choose to provide that service will have to administer on their client platforms probably five or six times the number of clients they’d have ordinarily had to for the same revenue,” he said.
“To keep their profitability, they’ve got to find ways of doing that in a batch and automated sense and in a far more sophisticated manner than they have historically.”
One outcome of this will be a divergence between advisers servicing a small number of more engaged high net worth clients with comprehensive solutions and those focusing on scaled and scoped advice.
The high net worth advisers will work in the space where clients have investable portfolios above around $500,000 where they can add more value, more complex advice and multiple structures, while advisers focusing on scaled and scoped advice will operate more in the $100,000 to $500,000 space, he said.
Beyond these two there will be advice that is mass provided by institutional product manufacturers and industry super funds. They will look to provide a direct form of advice in order to service people who (either by choice or because they can’t afford it) don’t go to a financial planner, Mr Wilson said.
“That’s a huge market – only a little over 20 per cent of people who should seek advice do so from financial planners. And the need for advice will only continue to grow in the pre- to post-retirement transfer of the baby boomers’ [wealth], and in the growth of superannuation assets in the hands of Gen Y and Gen X.”
There remains a supply and demand misalignment, and Mr Wilson said many people who approach large-scale providers for scaled advice may start there before moving into a more holistic advice environment based on their needs.
