In a netwealth webinar this week, Mr Burridge reflected on his recent trip to Silicon Valley, saying the Australian financial services sector is a “huge, fat, lazy beast that hasn’t been attacked properly”.
One of his findings from the trip was that independent financial advice will be “the way of the future”, he said.
“We were very happy to hear that this is the dominant advice channel now in the US and it was put to us that if you are not independent, you can’t compete. The independents are becoming massive and are now actually developing as small institutions.
“The institutional model is dead. It is considered un-American to be institutionally aligned.”
Mr Burridge believes what helped the IFA sector in the US thrive was disruption to adviser remuneration.
“The independents over there can’t receive commissions – the aligned advisers can. This is part of the success of independents over in the US and the independent movement has been facilitated by that,” he said.
“We were disappointed and frustrated with how they are able to, via technology, become much more profitable. They are making twice as much as Australian advisers on average … they collaborate brilliantly, data is everything to them, and how they market from that data is crucial.”
Mr Burridge added that he expects this trend to take off in Australia as well, with many institutions here already moving out of the advice sector.
“What we’ve seen over the last 20 years in Australia is that good independents are created but then bought up by institutions. I think that cycle has ended here and we’re going to see the rise of the large independents in the country, which is going to be great for our businesses,” he said.
Australian advisers “need to start winning the service game, not the product game … how are we going to change our business models, knowing full well that we are going to be attacked?”, Mr Burridge said.
I look forward to this paradigm change with relish, this is one of the reasons why we moved our model away from an AMPFP institutional model, a behemoth that cannot see that its days are numbered, to our own AFSL.
Advisors that concentrate purely on the FUM model and depend on the % fee of this, must see that this is the next area for ASIC to attack.
The future of our profession, like it or not, is in fee for service, let’s not get into the argument of LIF, lets just concentrate on providing the best possible level we can as this, at the moment, is a blue ocean and if advisors cannot see that then they are clearly burying their heads in the sand.
Great article and confirms what many of us have thought for sometime.
The most crucial part of that article is the final paragraph.
[i]”Australian advisers “need to start winning the service game, not the product game … how are we going to change our business models, knowing full well that we are going to be attacked?”, Mr Burridge said.”[/i]
For many this will be an insurmountable transition, not everyone will make it across and, in stead, choose to stay in insto world as a salaried planner. This will present huge opportunities for those businesses that are geared up and ready.
Bring it on.
Instos don’t seem to have got the message and seem to be on a “business as usual” footing. Maybe it will be a death by a thousand cuts. Endless attacks on conflicted advice, fees and obsolete technology.