Financial Advisers are facing increasing compliance costs and as a result are being forced to let go many of their less affluent clients.
In July 2021, Money Management published the article Orphaned clients will be ‘off the charts’. The article explains how increasing compliance costs will make it uneconomic to service many existing clients.
Dealer Groups appear to be telling their advisers to “let go”, clients with a small investment base or who have low to average incomes. These clients are referred to as “Orphaned Clients”.
Here is one of many similar comments relating to the article:
I have been removing clients for almost 2 years now. I would like to help them, I would like to be there for them, but compliance administration, BID, AFCA, ASIC all mean it is simply too hard for both them and me. I know several have made bad financial decisions since they left us …. but I have followed the ASIC model “Hey – that had nothing to do with me, I concentrate on following the law”.
The big question is…
Where do Orphaned Clients go for Advice?
Chances are many of these Orphaned Clients:
- Seek advice from family and friends with no formal financial advice training or investment experience
- Resort to Google to find people or groups who give advice but are not licensed to give advice
- Try to do it themselves, using good robo-advice or financial planning products.
The long-term loss of clients to alternative sources of advice could have ongoing implications. At what point is an orphaned client likely to return to the same financial adviser?
Financial Mappers is a formidable alternative to more expensive software
Financial Planning Software for Financial Advisers
FinTech develops products for Financial Advisers to resolve this problem. However, many Dealer Groups restrict the products available to their advisers.
Financial Mappers is one solution Dealer Groups should consider. Advisers can still use large and expensive platforms such as X-Plan, but allow their financial advisers to bring in new clients without advising or recommending products.
Glenis Phillips SF FIN – Designer of Financial Mappers