That financial planning advice adds value is not challenged by those who engage the ongoing services of an experienced, qualified financial planner. This truth has been verified in research published from time to time (and we have previously posted about their findings).
“Free advice: it costs you nothing; and is worth the price” or so the old adage goes!
In our position as financial planners we are very much aware of what the government, through Minister Bill Shorten, has been attempting to get in place by way of further regulation of the financial services industry (an aftermath of the Storm Financial situation no doubt). The regulatory regime we are having framed for us has been given the name – the Future of Financial Advice (FoFA).
Some of the elements of FoFA that readers will be aware of (and are likely to become a whole lot more aware of in the coming months) include:-
- Fee for advice/ fee for service;
- Discontinuation of ‘volume bonuses’ (and commissions?); and
- Opt In for ongoing service.
One view of the provisions of the new regime is that in the client/ adviser relationship there will be a more direct payment by clients for the services delivered by their financial advisers – the practice adopted by many firms of advisers (including our own) of subsidising the cost of delivering advice and services with any commissions or other financial benefits received from the Dealer Group or product providers will no longer be available.
As a consequence of this change it will become important for us as advisers to be able to articulate value and justify its cost to our clients. We will need to demonstrate that we provide Advice of Value. To set some parameters as to what might be considered advice of value we thought the following criteria would be worth considering:
Advice should R.A.T.E. according to –
- Relevance – Is the information relevant in the current context: considering personal situations, market trends/ developments and asset risk factors?
- Accuracy – Is the information correct and in the best interest of the client in the circumstances understood to prevail?
- Timeliness – How relevant is the information for implementation within the timeframe of concern/ interest to the client?
- Engagement – Is the information capable of affecting the progress towards achieving a strategic outcome (according to documented and agreed planning)?
…and at the end of all of that, the client should have that peace of mind about their investment strategy and structure that allows them to sleep at night with minimal financial worry.
Our service criteria are clearly set out on our website1 and we expect it will comply with the FoFA requirements: our service standard already ensures that the best interest of each of our clients is foremost in all considerations.
We look forward to the continuing expansion of the clients benefiting from our services – and welcome your referral of family, friends and associates.