FOFA, the real F-word. I’m not going to sugar coat it. This legislation contains several onerous obligations for advisers that do not seem to be designed to protect consumers. Based on the current business models of most advisers, there will be a lot of additional compliance work to do. It will be expensive and uncomfortable. Okay, I sugar coated it a little.
The good news is, although we may not quite love FOFA, at least we now know for sure that we’ve got it… I think.
Like all change, this is an opportunity. Although we have plenty of personable, technically gifted and immensely talented advisers in this industry, this is still an industry. The writing is on the wall. If you want to be part of a profession, you’re going to need to charge fees. Furthermore, those fees will need to be for the provision of a current service, not something that happened five years ago.
Personally, I believe that most advisers can manage conflicts of interest and have done so quite well for many years. FSR went a long way to ensuring this with its disclosure requirements. But none of that matters. The perception is what matters. If consumers will forever be wondering just how well you’re managing that conflict, then you’ll lose, anyway.
Therefore, the opportunity here is to enhance the consumers’ opinions of advisers by changing the way you charge your clients. If you’re not seeing the person at least once a year, they’re probably not exactly an A-client. Don’t send me hate mail, I know exceptions will apply to that rule. So you’re seeing the client every year. You’re reinforcing the value of your service every year. You’re giving them an invoice every year. In that scenario, there is no need for a Fee Disclosure Statement nor an Opt-In letter.
You don’t need me to tell you that the service you provide is valuable. Financial advice changes lives for the better every day. So you now need to concentrate on two things. Just two!
- Take every opportunity to remind your clients of the value you are delivering them
- Make sure that you deliver that value as efficiently as possible.
Point one is how you attract and retain the clients. Point two is how you ensure that you’ll make a profit. It may not come as much of a surprise to you that at AdviserLogic, we’re of the opinion that software is the basis of that efficiency. We live and breathe the premise that the answer to every efficiency question is technology.
Whether it is the production of documents, the management of tasks, communications or research, it is technology that will give you economies of scale. It is software that will let you earn that hard earned profit from the service you provide your clients.
If it is going to take you some time to make this change to fees or you’re happy with what you’re doing, that’s fine – that’s your business decision. We’ll still help you manage your value propositions, fee data, FDSs and Opt-In letters. The choice is yours. You have freedom. Freedom, the new F-word!
Daniel has been involved in the financial services industry since 1999. His main passions are helping financial advisers improve their businesses through increased efficiency and improved sales opportunities.
