Business planning Australia – a challenge is looming for financial advisers!
Business planning Australia
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A lot of self employed financial planners are going to have their world turned upside down next year when ongoing commissions will cease as a way of paying for financial advice.
Many financial advisers will have to change the way that they charge for their services. But that is only the start of it. The knock-on effects of this change are much more far reaching in terms of business survival. In financial services business planning Australia will lead the way.
There are many advisers whose entire monthly income is made up of investment and insurance commissions relating to business written in the past. They will be shaken up the most. A lack of business planning and management skills will see a lot of advisers leave the industry.
Although it is irrelevant now, some clients love the commission based income system and others hate it. The problem with this model of pricing financial advice is that it doesn’t relate to the present. It relates to past business written.
From the adviser’s point of view, that’s not such a bad thing because it is always a desirable business goal to establish recurring income streams. In other words, it allows income earning while you sleep.
From the client’s point of view however, one of the disadvantages is that there is no incentive to provide service today. The adviser only has to do enough so that the client doesn’t change his or her servicing adviser. So in many cases, a minimum service is provided and the adviser gets paid, no matter what.
With the upcoming change, every adviser will have to provide maximum service (not minimum service) to compete. It is often said that the price of financial advice will skyrocket as a result of this change, but I don’t think so. It is more likely that competition will keep fees at a reasonable level.
The changes required to each and every financial adviser’s business will go much further than a mere switch to charging fees. It will involve a complete restructure of their businesses. To many, it will feel like starting all over again.
Those who commence business planning now will be well placed when the change comes into effect on 1 July 2012.