Advice entrepreneurs in action: compliance and reimagining advice processes

Innovation in compliance

Since the 2014 FOFA reforms, advisers have seen an exponential increase in legislation, regulation and compliance requirements – and associated costs.

The rising cost of compliance is arguably the biggest single sustainability challenge facing the advice profession, with every increase making advice more expensive to provide and putting it further out of the reach of everyday Australians.

But it’s not just the cost of compliance that’s problematic for the clients and potential clients of advisers. The processes, documentation and language of compliance are, for most clients, impenetrable. And although their purpose is to protect consumers, they often only succeed in building a barrier to the client’s engagement with, and understanding of, advice. This, in turn, makes them less willing to pay for advice.

Case study: Reimagining advice process

An alternative path to innovation in compliance is to focus more on the client, rather than the SOA. A recent industry panel discussion concluded that SOAs have become “big, alienating and defensive documents that are more likely to increase the anxiety of consumers who are accessing advice for the first time”.¹

According to Tim Henry of Aspire Planning, (Aspire Financial & Retirement Planning Pty Ltd ABN 63 123 748 603), a process whereby the SOA is put forward as the embodiment of the advice proposition is problematic on two levels:

• SOAs are generally hard to understand.
• They don’t reflect how clients see advice.

Henry believes clients see advice as the ‘co-creation of strategies designed to solve particular problems’ rather than simply recommending and implementing solutions.

Engaging the client through a co-creation journey

For this reason, he has redesigned his own processes around a document he calls the Strategy and Options paper. This paper documents the ‘co-creation journey’ with the client, during which the client has been actively involved in choosing from the options presented to them.

While Henry still produces an SOA – as dictated by regulatory requirements – he doesn’t make this the central focus. Instead, he directs most of the client’s attention onto the Strategy and Options paper, which he presents 2–3 weeks prior to a ‘Recommend and Implement’ meeting. The SOA is thus relegated to the status of necessary compliance documentation, rather than being the centrepiece of his advice.

Henry sees two benefits in his approach:

• The client is better able to understand the advice and they feel they’ve played a more active role in its direction, which means their consent is genuinely more informed.
• Clients want to pay for action, not the production of a 100-page document. Defining the advice proposition in terms of providing a framework for ideas and concepts prior to recommendations and steps for implementation represents a more tangible outcome in the eyes of the client, which translates into a greater willingness to pay fees.

“The new process has significantly improved the quality of our annual client meetings, and hence our compliance,” Henry said. “The main reason for this is that the structured modules ensure we consistently discuss relevant areas of the client’s circumstances.

Meeting client needs through modular advice

Aspire Planning also offers advice on a modular basis. This approach has the additional compliance benefit of making it easier to map individual modules to the sole-purpose test.

“The process of ascertaining what fee amount is deductible from the client’s superannuation is thus much easier and more transparent”, says Henry. The results of this approach speak for themselves. Aspire has doubled its number of new clients in the last year, most of whom have been referrals from existing clients.

Another benefit of the modular approach has been a significant increase in existing clients requesting additional advice. “Most existing clients held super and insurance with us; however, we are getting a big uptake on estate planning and investment options,” Henry said. “Our estate planning revenue is up 250%, and next year we will have more revenue in estate planning than insurance.”

“We have also written significantly more investment advice with existing clients using their personal money – like investment bonds for kids and grandkids, or commencing an investment for themselves. These were things that we were previously missing out on, which we’re attaching to our existing service.”

Find out more

Innovation isn’t new but the way advice entrepreneurs look at common challenges provides fresh perspectives on how they do business. By shifting their focus to the client and approaching key facets of advice in innovative ways, they are making their business more efficient while driving better client outcomes.

To read more, download our paper, ‘How advice entrepreneurs are delivering cost-effective advice to more Australians’ or check out our podcast series with XY Adviser.

¹ Goh, ‘SOAs are alienating clients’, Money Management, 31 March 2021.

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