Burgeoning challenges of the advice industry: Padua

Padua Solutions co-founder and co-chief executive Anne-Marie Esler explained to the audience at the Association of Financial Advisers’ (AFA) ‘Thrive’ conference that there are four key challenges facing the financial services industry.

There are four key areas that are affecting the financial services industry that prevent advisers from providing accessible and affordable advice to clients, Esler said.

“The first one is time; it’s taking way too long for us to produce advice documents,” she remarked.

According to Financial Services Council (FSC) survey data, the average statement of advice (SOA) takes around 20 hours to produce. But, broken down further, the average record of advice (ROA) takes approximately two to six hours to complete. A simple SOA takes between 8 and 12 hours to procure and a complex SOA can take between 14 and 30 hours.

Esler explicated, that an average advice practice with 150 clients and an approximate 80% ROA and 20% SOA ratio would spend nearly 26 business weeks on producing advice documents.

“That’s time not being spent in front of clients, building relationships and engaging the client in the advice process. It’s an important consideration for us and the quality of advice review will go away to address that we reduce the time it takes to produce advice documents ,” Esler said.

The second big issue facing the advice industry is cost.

“That is not just the cost to provide advice, but the cost that clients pay to access advice,” she said.

ASIC research illustrates that there is a growing number of Australians (10.3 million) seeking advice and 2.6 million willing to pay for it. However, there are only 16,500 financial advisers in Australia.

“41% of Australians intend to receive advice in the new few years, so we need to find solutions for those people to be able to access that in a way that’s affordable to them,” Esler commented.

Equally, FSC research shows that the current cost to produce advice per client, per year is $5334.

“That’s a significant cost that advisers have to bear, so we need to weigh up the profitability of an advice provider versus compared to what you’re charging clients,” Esler said.

There’s very, very little margin for the advice business, she added.

Quality is another issue dogging the industry; speaking from experience Esler recounted that Padua has received ‘chicken scratch’ ineligible handwritten documents from some advice practices that want a SOA written on its behalf.

“We need more quality and I believe that technology and software solutions are able to assist that. Moving from a technical focus to a quality focus, moving from being compliance orientated, to a strategic orientation where we’re focusing on the possibilities available to clients ,” Esler said.

We have a real opportunity to move to more quality offerings, moving from good advice to great advice, she added.

Penultimately, Esler listed engagement as being the final current hurdle for the advice industry, although she upended that it’s a positive story.

“Although Australians still don’t trust advisers as much as we’d like them to do, we’re moving in the right direction,” Esler said.

The global average of trust in the financial services industry is around 60%, comparatively Australia sits at only 45%. Nevertheless, this is a significant increase from two years ago where Australians trust in financial services was recorded at meagre 25%.

“It means more and more Australians see financial advisers as trusted and professional, which is a great for our industry,” she concluded.

Financial Standard is an official media partner of the AFA Thrive Conference 2022.

Leave a Comment

Your email address will not be published.