Why the financial advice industry has to change
The financial advice industry is in trouble, and what we’re currently seeing happening is reminiscent of an industry in its death throes. Institutions control about 85 per cent of the market in Australia, and they are looking to consolidate on this.
It feels like we’re back in the 80s with the amount of money being thrown at advisers to join dealer groups. There are too many overpriced platforms, there is too much fat in products and there are too many conflicts of interest. Something has to change.
There is now some feeling around the marketplace that the model of financial advice as we know is over. For example, in The Consumer Revolution, produced by United Capital Financial Partners, it is recognised that there is a significant consumer shift occurring that will forever change financial services. My feeling is that the industry as we know it is about to get torn apart because we have very outdated models of advice.
Twenty years ago, if you wanted to go on an overseas trip you would go to a travel agent – now you go to the internet. If you wanted to buy music, you would get a CD from a mega music store. Apple destroyed that model with iTunes. If you wanted to rent a video, you would go to your video store. Netflix changed that. If you want to read a book now you go online – all the bookstores are going broke. We’re in the middle of a consumer revolution and people are finding cheaper, easier and more convenient ways to do things online.
The financial services industry has not delivered any efficiency in 20 years – and this industry will not remain untouched by the consumer revolution. Financial advisers will have to change their business models completely, and consumers will be able to get advice online at a reasonable price in the future. Change is inevitable, and it is only a short matter of time before the financial advice industry finds this out.
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