Product commission bans in several jurisdictions have spurred professionalism but narrowed access to financial advice in a challenge to some traditional business models, a new multi-country industry association report has found.
As previewed by Brokers Ireland deputy chief, Rachel McGovern, in a Financial Advice NZ (FANZ) national roadshow last month, ‘The value of advice’ whitepaper tackles eight key issues facing the sector today such as remuneration.
The report incorporates insights from eight national financial advice planning industry bodies including three countries – the UK, Australia and the Netherlands – where commission bans were imposed in 2013.
“Around the world, commission restrictions have played a pivotal role in reshaping financial advice,” the paper says. “For advisors, these changes have prompted a rethinking of business models, service delivery, and how value is communicated to clients. For consumers, they’ve changed how advice is perceived, paid for, and valued.”
But despite initial resistance to the commission bans, all three markets eventually emerged with more professional, transparent financial planning sectors and clients accustomed to paying for advice.
On the downside, however, adviser numbers fell in the commission-banned countries while simultaneously raising financial advice into an almost luxury service for the already wealthy.
“… some markets struggle with how to deliver advice to mass-market or underserved consumers,” the report says.
“Without commission subsidies, lower income clients may find it harder to access financial planning, highlighting a need for scalable, cost-effective models like digital or hybrid advice.”
The finding dovetails into other global trends noted in the whitepaper where the increasing use of technology – and artificial intelligence (AI) in particular – has lowered the barrier to delivering quality mass-market advice while freeing-up advisers from time-consuming back-office and compliance tasks for more face-to-face client interactions.
At the same time, advisers have to work harder, or smarter, to attract and retain clients in a world saturated with financial information and digital tools.
“… clients are becoming more financially literate, digitally empowered, and value conscious,” the report says.
Consumers are “increasingly willing” to pay directly for clear, simple and relevant guidance from financial advisers, according to the study.
“As financial advice continues to evolve from one-off transactions to long-term relationships, ongoing remuneration models have come under greater scrutiny,” the paper says. “[Financial advisers] must now clearly demonstrate how their ongoing value justifies their fees, not just through investment performance, but through consistent client engagement, proactive communication, and personalised service.”
FANZ was among the eight industry associations feeding into the report that offers 10 ‘high level’ recommendations including a refocus on “delivering outcomes” over product, “embracing technology”, adopting a multi-generational client strategy and lifting professional skill levels.
“Across all markets, the role of the financial advisor is evolving from a product salesperson to a holistic planner, behavioural coach, and trusted family partner,” the paper says.
Brokers Ireland hosted the trans-national industry body symposium this May with the discussions forming the basis of the ‘Value of advice’ report, authored by Eamonn Twomey, founder of the Irish advisory business consulting firm, StepChange.