The Future of Financial Advice (FoFA) reforms will have a significant impact upon financial advisers and the way they do business. While FoFA presents a number of challenges, it is important not to get caught up in all the negativity surrounding FoFA.
There are opportunities in the legislation for practices, and it’s important to strike a balance in looking at FoFA and understanding where these opportunities are.
For example, advisers will need to carefully look at their business and revenue models to make sure they comply with FoFA, but take a step back and think about long-term sustainability of your business and value creation – for both your practice and for your clients.
Competition is also on the increase in the advice space, and this presents practices with an extra challenge. There is direct competition, competition from industry funds as well as competition from the banks and other major institutions. We are seeing certain companies looking to make inroads into the advice market by going in and offering incentives for people to move, and I think that sets a dangerous precedent – but that is a sign of the times and as confronting as it is to the industry I don’t see that changing.
So what do you have to do to overcome this? Have a good hard look at where the industry is going. Talk to other people in the profession and get a sense for where the opportunities are. Look for alternative revenue opportunities that might not fit with traditional business models. Whether it’s the way you charge your fees to clients or extensions of advice to areas such as real estate or streamlining your business through technology, look at areas that will help you grow your revenue and your client base at the same time. If you happen to employ advisers, think about retention as well and what you need to do to make them stay with you and not be tempted to go elsewhere.
As much as you need to make sure you are on top of FoFA and compliance obligations, think about your business model to ensure you’re making the most of other opportunities and capture these through a profitable and sustainable revenue model.
