The past few weeks have seen some of Australia’s biggest advice groups moving quickly to make constructive changes to their businesses, with a view to restoring trust – what does this rapid restructuring say about client expectations?
It may seem odd to focus on the recovery strategies of a select few businesses, but if the leaders of Australia’s largest financial institutions – at least those retaining their wealth arms – believe these changes will have a tangible restorative effect on their reputation, it’s important to consider how that reflects changing consumer needs.
Issues that clients may not have examined as closely before – risk management, compliance, the appropriateness of certain fees – may well now be a more prominent part of the consumer lexicon. Having the right answers to these questions will be more critical than ever.
An acceleration in remediation
First and foremost, these businesses have responded to ASIC’s request for an industry-wide review of advice appropriateness from 1 January 2009, and the delivery of ongoing service arrangements from 1 July 2008.
Following on from this, large institutions are now expediting their remediation programs, acknowledging this will have a tangible effect on profits over the next few years.
What does this mean? Well, especially in the case of larger wealth businesses, potential remediation costs will need to be factored into ongoing profits and losses.
A focus on fees
Fees have also come into the spotlight, particularly in regards to aligned product. As reflected in last week’s piece on the review of ASIC’s RG97 fee regime for investment products and super funds, this hasn’t just been driven by the Royal Commission.
Nonetheless, there’s been a raft of fee cuts across the industry, suggesting that consumers on the whole are going to be even more fee-conscious with their investments than ever before – and more inclined to examine the specific characteristics of a product that justify its fees.
Revamping risk management
Large institutions have also said they’re investing in major enhancements to their risk management controls and compliance systems, which will also drive up annual expenses over the next few years.
The focus on future-proofing risk management is unsurprising given the heavy priority placed on compliance breaches during the Royal Commission. Fortunately for many smaller advice businesses today, there are third-party solutions that can expedite compliance and risk management at a much lower cost than doing it internally.
Bring it all together
While it’s fair to say the Royal Commission led to the advice industry being somewhat unfairly tarred with the same brush, it’s nonetheless instructive to look at how some of the biggest players in Australian wealth management are addressing the problem.
As above, whether it’s fees, risk management or compliance, clients are likely to be watching these topics in greater detail than ever.
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