Kelly Power received her first witness statement from the Royal Commission six days into her new role at Colonial First State.
It was a difficult start for a new job, but it illuminated many of the issues facing both the advice industry and the people it serves. As someone who’s worked in advice and platforms throughout her career, and developed a strong passion for closing Australia’s advice gap, these issues were particularly important. Speaking at the IMAP Adviser Roadshow in Sydney, Power recalled a recent dinner with some advisers where she asked what the average cost of adding an authorized representative would be. The answer was between $20,000 and $50,000.
“I started doing the maths of this,” she said, “like how many clients can that AR possibly service in that case? I became quite nervous and concerned, especially given recent research showing that 30% of people’s lives are completely dictated by their finances.”
Obviously, the with the costs of compliance likely going up post-Royal Commission the problem isn’t going to get any better at its face. However, she found a silver lining.
Power looked to the Retail Distribution Review in the UK and its parallels to the current situation in Australia. At the outset, around 20-50% of advisers left the industry, which concomitantly increased the advice gap there.
“It was a difficult period,” she said, “but more recently, advisers have been coming back into the industry and we’ve seen figures of 25% higher profitability.”
How did this happen? She believes the reforms led to a new mindset in the industry, where “the customer is king” and “all conflicts must go.”
Furthermore, she sees platforms playing a much bigger role in how an advice business operates than previously. “The days of platforms being just transaction and reporting vehicles are done,” she argued, adding: “Advisers are now saying, ‘I want you to be my back office.’”
She said advisers are moving towards less compartmentalization in their businesses and looking for ways to streamline their back-office operations so they can spend the majority of time focusing on clients.
“If platforms don’t help them do that,” she said, “they’ll find a way to do it themselves.”
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