Financial Planners Feel Under Attack

Planners feel under attack

29 April 2009 | by Amal Awad and Lucinda Beaman

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Some financial planners are feeling increasingly despondent, and some are feeling let down by their dealer groups and the industry in general – a situation which is leading planners to reassess their business models.

Wealth Insights managing director Vanessa McMahon said her latest research shows that planner sentiment has fallen to new lows, with 38 per cent of planners having a negative outlook compared to 12 per cent last year. This is on the back of most practices reporting a “serious drop in revenue and profit”, McMahon said.

“Some are running at a loss, and most smaller practices don’t have much fat to cut out of their businesses but have the same expenses, including dealer group costs."

At the same time, some financial planners are expressing disappointment with dealer groups, feeling that they are not receiving additional help, McMahon said.

McMahon said planners are “doing it tough”, facing the pressures of lost income, dealing with clients who have lost money and a sense of being over-regulated. Some planners also feel they have no back-up from the industry and feel under attack, McMahon said.

Financial Planning Association chief Jo-Anne Bloch said adviser sentiment in the US is also very low, while countries such as Japan and Ireland face serious problems.

“If you think things are bad here, [it’s nothing] compared to what's happening around the world,” Bloch said.

“Our research is echoing what Vanessa McMahon is saying: [there is] real anxiety among our membership,” Bloch said.

“There are some real issues and certainly we need to acknowledge that.”

Bloch said financial planners seem to be “fair game” and “under attack” by self-interested, sectional groups.

Bloch said some planners are now looking at different business models and how they might better manage their costs and run their businesses.

However, McMahon did note that well-established practices and those with strong referral services were generally doing well.

Platform fees trim dividends from investors' portfolios

Platform fees trim dividends from investors' portfolios

29 April 2009 | by Benjamin Levy

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Platform fees that are charged by platform providers are taking too much out of advisers’ clients, and clients don’t realise how platform fees can impact on their dividend income over time, according to the director of Capel and Associates, Rick Capel.

While there is proper disclosure in terms of external platform fees, clients don’t understand whether the fees are reasonable or not. Advisers who forgo investing their clients’ money through an external platform and invest their clients’ shares directly with their own internal platform can save clients up to 80 basis points in fees, Capel said.

Capel said that in a normal market environment when an asset class does particularly well, when the profits are realised in rebalancing the portfolio, part of those profits will go towards paying platform fees. That practice was questionable in the current market turmoil.

“In this period where most of the asset classes have gone south, I question the practice of rebalancing a client’s portfolio, which may crystallise losses simply to refloat the cash account in order to pay the adviser or dealer fees.

“This rebalancing exercise creates an unethical bias, which any professional adviser should avoid because their fees have to be paid out of asset sales,” Capel said.

Portfolios should be modelled around cash flows so that clients can tell how much of their investment dividend is going towards the cost of operating the platform, he said.

UK consumers embrace online comparison tools

UK consumers embrace online comparison tools

Thursday, 9 April 2009 10:15am

New research on UK consumers shows they are rapidly embracing online finance price comparisons, with big implications for how firms market their products.

According to the Datamonitor research, online price comparison websites are now the most trusted source of information for consumers regarding wealth management products.

"Consumers have embraced online channels for advice and are increasingly depending on technology to compare products in their search for transparent and competitive policies," noted Datamonitor.

Datamonitor said consumers becoming more self-directed means financial services firms need to enhance the way they interact with their clients.

"Providers should consider the implications of these changes that will increase the likelihood that existing clients will seek and find viable alternatives," they said.

Part of this is to dramatically increase avenues for engagement and segmenting clients or prospects into those representing high long term value in contrast to those offering firms lower value.

"Providers need to put the most retention effort towards existing customers who have the highest lifetime value against the cost of servicing them," said Mya Myat Moe, analyst at Datamonitor and author of the report.

Segmenting strategies however require firms to think differently regarding their marketing strategies, she said.

For example, life insurance and pension companies need to understand changing consumer attitudes towards long-term savings while also realising they are becoming more risk-averse, preferring products which offer safer or guaranteed returns over those which offer the highest