I’m often asked about Infocus’ strategy and the things we think about in order to ensure we can compete effectively. A sensitive topic to write about to be sure, however I wanted to provide some insight into our own thought process to help you with some ideas in your own business.
Changing regulation
Nothing is more certain than the regulatory environment around financial advice will continue to change.
The introduction of the FOFA reforms saw major changes in the industry structure, with many participants in the non-aligned sector selling to institutions or disappearing altogether under the increased regulatory burden. From an advice perspective, now the regulatory spotlight has shifted to life insurance advice. These significant changes to the way the industry operates mean that advisers of the future will need to have the right qualifications, capability and culture to provide outstanding service to clients.
Aligned and non-aligned
As you might expect, the major institutions have continued to grow and prosper in changing times. As regulation has tightened, platforms have lowered their costs and become commoditised, with little functional differentiation. There may also be discussion in the ‘majors’ around disintermediation (institutions cutting out the adviser and going direct to clients) to manage institutional risk. These responses will create new market opportunities for niche industry players.
Interestingly, the non-aligned participants in the industry are also growing. The last 12 months has seen substantial merger and acquisition activity in the non-aligned space. Importantly, however, adviser numbers are not a proxy for success. Organisational culture and sound advice practices around adviser competency, technology, risk management and professional standards are fundamental success factors in these mergers / acquisitions.
New entrants
We see the advice part of the value chain being the subject of intense competition into the future from a range of new and existing players.
Industry Super Funds are undoubtedly the ‘sleeping giant’ in the advice world. From an advice perspective, forget the ‘compare the pair’ ads and the positioning around no commissions – the advice industry is moving in this direction anyway with the FOFA reforms and the Trowbridge Report recommendations. Industry Super Funds will be a major participant in the advice component of the industry in future with client bases that rival the size of the big-four banks that may be seeking financial advice over time.
In terms of other new entrants, we have already seen a number emerge in the last 12 months, including aligned industries (accounting, mortgage broking) seeking to expand their advice arms.
New technologies will shape the industry further, particularly where these shift the focus of wealth management to, and hence empower, the consumer. Infocus’ view on the growth of ‘Robo-Advice’ is documented – don’t be surprised if this is a major change in the next 3-5 years. Also don’t be surprised if you see the institutional players expand into direct wealth management solutions as the strategy of disintermediation plays out over time.
What does this mean for me?
There’s a lot to think about here! Importantly, in an ever-changing landscape, make sure you spend time working both ‘on the business’ (strategy) as well as ‘in the business’ (operations).
With your strategy, make sure you take some time out, say each quarter, to review what’s taking place in the market. Evaluate whether you may need to consider some alternative strategies in response to emerging threats and opportunities, or should continue business-as-usual.
With your operations, ensuring you are actively engaging with your clients is the key. Clients won’t be interested in alternative solutions if they are highly engaged with you in helping them meet their needs and share your business’ values.
