From left: Rachael Bursell, Andrew DeBono, Jacinta Martin, Ryan Skeen, Rebecca Pritchard and Sam Jewell.
New advisers alarmed by banking royal commission
The finalists of last year’s AFA ANZ Rising Star Award are new to advice, with less than four years of industry experience. They are a good measure of what the next generation of advisers think and feel about their profession post the royal commission.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was just that, a long hard look at the industry’s failures.
It made the immediate past a tough time to be an adviser, tougher still for these less established and experienced advisers. They have been hit hard by what the commission uncovered and the public’s anathema.
“I feel disillusioned by what the banks have done,” says Altitude Financial Management financial adviser Jacinta Martin, referring to the cases that came to light during the royal commission. “We saw a lot of clients who didn’t have an understanding of what their advisers were doing.”
Rising Tide Financial Services adviser Sam Jewell agrees: “It has been a frustrating time. I feel like everyone is [being] punished for a small proportion of people doing the wrong thing.”
The winner of the Rising Star Award for 2018, Wealth Enhancers financial coach Rebecca Pritchard, believes no one was spared, and focusing on the aggrieved customers that took the stand, says “this should never have happened”.
Being relatively new to advice, this group is particularly vulnerable. At a time they’re trying to build up their client base, the negative perception and sentiment intensified from the commission’s findings towards financial advisers, leaves them on the back foot.
How potential clients perceive financial advisers is important when it comes to attracting and converting them, for these relative newcomers.
While these five advisers maintain the enthusiasm, energy and desire to innovate (which is why they were Rising Star finalists), they feel the reputational damage the sector has suffered.
“There’s a little bit more caution and a little bit more scepticism,” says Jewell. “I’ve had a couple of clients where I thought the conversation was going well and then you get to the pointy end and they haven’t moved forward.”
Finance Your Future adviser Rachael Bursell believes it is the pre-retirees who have been most impacted by the royal commission, historically being the target market of most advisers.
In comparison, her Gen X and Y clients don’t care about it. She puts this down to the younger generations’ different life experience and exposure to shocking revelations across all industries and professions. “They’ve lived with Trump and Bill Clinton. Everyone lies about everything.”
A belief for this group is the clear importance of high levels of compliance and transparency.
“We are being even more open about fee disclosure,” says Pritchard. “We have always been compliant, but we are making sure there is no ambiguity.”
Another finalist, adviser Andrew Debono, has changed his licensee and launched his own business, Peak Wealth Management.
Moving from charging percentage-based fees to fixed fees was a key driver in his decision to go out on his own.
“The fee for no service aspect of the royal commission was particularly damaging and charging fixed fees helps to change this mentality,” explains Debono. “It’s been well received,” he adds.
Debono views the current environment as a huge opportunity. The expected impact of the new education, training and ethical standards on adviser numbers, changes to adviser remuneration and increased regulation, has him excited about the future of advice.
He admits many of these obstacles that affect other advisers do not affect him, but says he “likes to take a contrarian approach, to do things when other people don’t want to or aren’t doing them. I think there is a good little opportunity here”.
And he is not alone. Fellow finalist, Jewell is considering diversifying income streams into estate planning or conveyancing to replace the lost income stream of grandfathered commissions from insurance.
The cost of advice is a key issue for the group as they believe that, once implemented, the recommendations of the royal commission will make advice expensive.
Bursell is struggling post the royal commission to get her fee structure to a point where she doesn’t have to turn away clients.
She recently had a couple with $5000 to invest and her statement of advice usually costs $2500. To accommodate them she cut her fee to $660 and scoped out the advice.
“People need to access advice in a cost-effective manner,” she says, explaining that it increases public confidence, which is good, “as long as it is not at a cost”.
The royal commission has highlighted to Bursell and Martin that the future of advice is heavily reliant on innovation and low-cost online advice platforms.
Martin is creating a financial-literacy program to empower consumers to educate themselves up to a point, and then seek out financial advice when they are equipped with that level of information.
“Financial literacy is so important so when you come up against complex issues you are not going to get duped,” clarifies Martin.
According to Pritchard, the royal commission has ultimately reassured advisers they are doing good things. “It reaffirms that we are delivering what we need to for the community. It bolsters your enthusiasm for where we are going.”
“Advice should be all about relationships and strategy. I am very comfortable in what I do and helping people on a daily basis,” says Debono.
They are also very aware of opportunity in front of them: “Less advisers means more clients. It has filled me with a lot of positivity,” says Jewell.
Martin believes that ultimately, the royal commission has strengthened the advice industry, “I am excited. The failures are now opportunities to reinvent advice.”
It is this optimism that helped these Rising Stars shine last year and which still sets them apart as they tackle the brave new world of financial advice.
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