It’s a question I have been asking people in our industry for a while now. Obviously, some business models have been relatively uninterrupted, while others have been totally ripped apart. But the question of who is making money has had mixed response.
For advisers, the cost of compliance, education and complying with all the new regulations is proving to be a massive financial burden. Many I talk to are struggling to do it all - service clients, take care of staff, and simply keep changing their model all at the same time. Others tell me they started the process long ago, as they saw the writing on the wall. The cost then has been stretched out over a longer period, but still affected profitability.
Fund managers have acknowledged that funds flow has slowed - across the board in retail. Those with institutional businesses haven’t seen as much of that. And consultants across the industry all acknowledge how much harder it is to get gigs if they are not legal or compliance related.
It seems that making money is tougher than it is used to be - and this is an Australian wide phenomenon, not just in financial services. I read an interesting fact released from the ABS last week that the net number of new sole traders has increased by 66,000. Four years earlier that number was just 10,000. People are figuring out that they better look after themselves and take responsibility - rather than relying on jobs for life and organisations to determine their destiny.
In so many ways, I take heart in these numbers. Taking responsibility for yourself must be seen as a positive in a world where there is no certainty any more. Whether or not those 66,000 sole traders make it on their own is a different question all together. In a complex tax and super system many of them will need good advisers to make it all work. Hopefully the advice industry can help - while remaining tied up in legislative change and expensive business models that will constantly need refining.
The biggest outcome of the difficulty and changing way people are making money is in my view - fear. Fear of an uncertain income, of the interruption to family security and how to make ends meet ongoing. Fear is a powerful motivator, but not always the right one. It drives people to make decisions that they may not normally make and tends to weigh heavily when it comes to making ethical choices in business. If you are afraid your family will be under threat financially unless you make a certain choice, then it makes it a much harder decision to do the right thing.
There is a lot of fear in Australia at the moment. Our status as the lucky country is under threat - and the Royal Commission has only confirmed the suspicions of many that the finance industry is not to be trusted. So, fear inside the industry, and fear outside - it’s going to be a tougher place to make it all work and connect with people to give them access to quality advice and investing. But the price of not overcoming this fear, and assisting people become financially independent is an unbearably high one.
So, continue we must. We are all challenged to be much fleeter of foot, innovative and entrepreneurial. We will be making a raft of tools and programming this year that can help. For after all, a world where we are all thriving is what we all want, and the best thing for Australia as a nation.
Until next time,
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