Practice of the Month – Financial Spectrum

12-Apr-2017

By Daniel Paperny

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The clampdown on poor planning practices and remuneration structures over the past few years has seen the advice industry increasingly pivot towards a fee-for-service model as a key step towards lifting the collective integrity of financial planning as a profession.

But simply embracing a fee-for-service model is not enough, as practices must endeavour to justify this model to clients by actively reframing the conversation around financial planning as being about adding value and delivering real individual outcomes.

It was this deep, fundamental disconnect between financial planning and value that drove Financial Spectrum director Brenton Tong to start his practice in 2002.

“At the time, I noticed that wealthier clients, in terms of their overall FUM (funds under management), were subsidising the smaller clients … I found myself spending more time helping people make decisions about their future,” Tong says.

“Before I started my firm, I had all these people who needed both time and attention to make good financial decisions and based on the way the industry worked … these were the people who, with just a little time, energy and effort, would potentially make major financial decisions near the proverbial fork in the road.

“Yet their portfolios, and the way the industry was structured, wasn’t paying for that level of service [and] at the same time, there are all these other people who have got everything sorted, they basically needed someone to ‘babysit’ them when it came to managing their money for them.”

Tong, who has been in the advice industry for more than 18 years, feels the fee-for-service model helps address this demand for tailored advice.

But he admits that the adoption of a fee-for-service model back in 2002 was initially met with resistance, particularly as the model was not so common at that time.

While the practice’s value proposition amounts to having to justify fees on a frequent basis, Tong says it is a conversation that advisers need to have more often.

“That’s a good thing, simply because if a client is going to question what value they’re getting from this process, then they’re not going to sign up to anything that’s not going to deliver value for them,” he says.

“Our focus [at Financial Spectrum] is not FUM, it’s actually helping you to make good financial decisions about the future.

“That includes investing but it’s also around budgeting, what type of education you want for your kids, what you’re doing for your house … we’re going to help clients with all of their financial problems.”

Looking at the advice sector from a longevity point of view, Tong believes the industry is in a growing state of crisis given the “the 80 per cent of working Australians who don’t believe in our industry”.

He says while past industry participants may have failed to demonstrate how they can make a difference in the lives of clients, he remains optimistic for the future of advice.

“Advisers need to be thinking about how they can be making someone’s life better, how they can make their financial problems go away and help fix things, how can they put their clients into a better, stronger and safer position for the future,” he says.

“Clients today might say they met a financial planner who rolled over their super, but they still have credit card debt, they still don’t know how to save, and they still won’t be able to afford private school fees which are all important to them.

“We’re not relevant as an industry because our focus is on the wrong place - that all boils down to the infrastructure and the DNA of the industry, [but it] is slowly changing.”

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