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Scaled advice means providing piece-by-piece simple advice rather than a complete financial plan. It is advice about one area of a client’s needs, such as insurance, or about a limited range of issues. This contrasts to so-called “holistic advice” which is the traditional advice model offered by many financial advisers.
The Government’s move towards scaled advice will open up the financial advice market beyond financial planners to e.g. superannuation trustees and accountants. It is still a matter of consultation how far superannuation trustee advice will be permitted to go.
The Government indicates that it will amend the existing ‘reasonable basis for advice’ obligation in the Corporations Act to make it clear that this obligation is commensurate and scalable to the client’s needs when providing advice.
This change heralds some new opportunities for financial planners. A few of these include:
- The opportunity to present a fixed fee menu of simple services
- The chance to specialise in particular areas
- The opportunity for regular client contact
- The chance to network around a client’s family doing ‘simple’ or ‘specialist’ tasks
- The opportunity to focus on targeted clients with the ‘particular need’
Whilst the concept of limited advice is not new, the fact that the Government is codifying scaleable advice indicates the market need for more easily accessible and advice that addresses specic needs and is easier to understand.
The challenge for advisers will be to set out the blueprint for the future and to manage the change from the current mode of operation. It will involve some astute business planning; in particular, an overhaul of the product offering, and pricing the new services appropriately.
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