Not all advisers are created equal, nor are their clients. One size does not fit all and I believe it is incredibly arrogant to suggest that it does.
If a consumer walks into the office of an adviser working for Big Company A, I think we can be fairly certain that their expectations are that said adviser will engage with them to figure out their objectives and formulate a financial plan to meet those objectives. I doubt the consumer expects that the adviser will recommend Company B’s products to them.
The consumer is comfortable with the strength of Big Company A’s brand. Sure, there could be products from other institutions that are better. But they just want to feel that they are being taken care of by a big institution that they know and trust.
That said, I do think that generally speaking consumers are better off getting advice from an adviser who is not aligned to a product manufacturer. Like those working for a big brand, non-aligned advisers will also get to know their clients’ needs and objectives. However, they will have a much broader range of products to select from in order to make appropriate recommendations to help clients achieve their stated goals.
So what is the problem? We have two models that are very clear about their alliances. If consumers go with an adviser who is aligned to an institution, they get the comfort of the brand, but may not get the best product. If they go with an adviser who is not aligned to an institution, they are dealing with a lesser-known brand, but get the benefit of greater product choice.
It is for advisers to make their case to prospective clients. Consumers can then choose between the two models and neither should be forced upon them. It’s horses for courses.
There are some other advice models but at this stage in the evolution of the advice market, I’m not overly comfortable with either. The first is the aligned adviser who works under a brand that is not recognised as being institutionally owned. Their clients may believe that they are getting independent advice, but there is actually an incentive for the adviser to use a certain company’s products. The second is the non-institutionally owned AFSL with close ties to an institution that restricts their approved product list to favour that institution.
While I am certain that the vast majority of these advisers are ethically solid and take very good care of their clients, I think it is time for them to choose a camp. Do they want to be professionals or do they want to be aligned salespeople?
I believe that both can add massive value for their clients, but now is the time for greater clarity.
