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The wealth advisor’s role is becoming tougher than ever due to increasing regulation, changing consumer expectations, volatile investment markets and the emerging robo-advice threat.

Here we discuss the ten biggest problems faced by advisors today and explain how partnering with a trusted investment specialist can provide valuable relief.

Advisors are increasingly outsourcing investment management so they can work more effectively, free up their time for strategic activities, reduce costs and gain better outcomes for their customers.

1 Lack of focus on business strategy and customer needs

Investment research and portfolio management is a hugely time consuming exercise, frequently with unsatisfactory outcomes. Advisors need to spend more time developing growth strategies, fostering customer relationships and prospecting for new ones.

Delegating investment and administration work to specialists can provide the added capacity to empower advisors to maximise the potential of their businesses.

Convergence across accounting, financial planning and other advisory services is being driven by regulatory change including the need for self-managed super advice to be licensed, margin pressure due to increased competitive pressures and technology allowing advisory services to be delivered more efficiently. Critically, consumers themselves increasingly see the value in having a single adviser for all their financial advice so they can save time.

Convergence is encouraging adaptive advisors to establish themselves as the central customer relationship-owner, utilising specialist skills from outsourced service providers to meet the unique needs of each of their clients.

2 Emerging robo-advice threat

The invasion of many and varied robo-advice businesses in recent years offering cheap, simple, automated investment services is threatening elements of traditional advice. This threat, however, does provide an opportunity for advice firms in that individuals who may have managed their own affairs are introduced to the idea of investment advice.

This evolution is an opportunity for advice firms in some respects, especially as it introduces individuals in the community to some form of advice when they probably otherwise would have continued on their own. However, it does bring into focus the quality and personalisation of services being offered by traditional advisory firms.

Collaborating with a trusted investment specialist can empower advisors to boost the sophistication of their investment services and boost profits by being more scalable and efficient.

3 Standing out from the crowd

Advisors are having a difficult time attracting new customers. The need to focus on the areas where they create the most value is paramount. Developing a clearly-defined unique selling proposition is essential to gain superiority over rivals and make their offer more compelling. It also helps advisors decide which areas of their business require greater investment and which they should cut back on and delegate.

Investment outsourcing allows advisors to reduce their workload, boost the reliability and governance of their investment process and increase the focus on their unique value-add.

4 Advisors’ own transition to retirement

Advisors planning to retire in the next ten years need to develop a succession plan to make their business more saleable or transferable to a younger partner.

Outsourcing investment management is an effective way for business principals to step out of critical elements of day-to-day business management and build processes that can continue without them. Businesses tend to be more successful, and be worth more to potential buyers, if they:

  • have a clear customer-value proposition,
  • have thorough and high-repeat investment approaches,
  • outsource all non-core activities like asset allocation and security selection research and compliance,
  • spend more time with clients and on growing the business.

5 Managing human resources

Staffing and managing internal processes is an area of considerable concern. Financial services firms are struggling to find and retain suitably qualified personnel. Management of investment committees can be cumbersome and many cannot meet frequently enough to enable transactions to take the advantages that boost turns in volatile markets.

Outsourcing investment management reduces the daily investment management burden. It allows investment committees to focus on strategic activities. It also provides staff development opportunities through interactions with seasoned investment professionals.

Outsourcing also reduces the administration burden. Administering portfolios is time consuming and prone to expensive error, particularly when portfolios comprise direct securities. Advisors that outsource part or all of their investment functions typically cut the risk and expense of implementation, administration and reporting.


6 Getting the allocation right

Guiding investors to the best asset allocation is one of the most valuable components of an advisor’s service. Too many investors are too conservatively invested for fear of repeating the kind of wealth destruction seen during the global financial crises. Other investors are too heavily invested in Australian shares and other risky assets and therefore are prone to not being able to fund their lifestyle choices if markets fall just before retirement.

Advisors are better armed to discuss asset class risk and return characteristics and guide customers to better asset allocation decisions if they can utilise research supplied by their investment partner.

7 Unforgiving markets

Investing is a challenging business at the best of times. A number of factors appear to be conspiring to make it tougher than ever, raising the value of partnering with a trusted investment professional with a robust approach. Extraordinarily low interest rates and full equity prices make asset prices more susceptible to changing growth and inflation expectations. Higher volatility is the result. Low interest rates have pushed too many investors into higher-risk equities in pursuit of income. Advisor education to keep investors on the right path is critical.

Maximising returns

Buying and holding assets passively for extended periods of time is unlikely to maximise investor outcomes. Tilting portfolios toward the most attractively-valued assets boosts potential returns while minimising the chance of capital loss. Empirical evidence and our own experience demonstrates that a focus on high-quality companies in equity portfolios is more likely to generate superior returns than other approaches.

Collaborating with a trusted investment professional enhances advisors’ capacity to generate pleasing returns for customers while minimising the chance of capital loss.

9 Information overload

Investors are now overwhelmed with information via a wide variety 24-hour news websites, blogs, social network and other media channels. Advisors have far more competition in providing market insight. Instead, advisors can inform themselves and their customers with the analysis provided by their investment partner. This will help cut through the noise and facilitate better long-term decisions.

Effective client communication helps advisors attract and develop customer relationships. Market downturns can spur significant stress amongst inexperienced investors. Advisors that partner with investment specialists can more confidently provide the objective and disciplined guidance necessary to help their clients maintain a long-term perspective and avoid rash and costly decisions.

10 Investor demand for direct shares

Potential advice customers have a strong interest in investing in direct shares and other securities due to their additional control, flexibility, transparency and potential tax benefits over managed fund unit trusts.

The Self-Managed Superannuation Fund (SMSF) sector continues to grow strongly. Over 30,000 SMSFs were established in the year to June 2015 according data compiled by the Australian Taxation Office. Around 32% of SMSF assets were held in direct shares.

The considerable additional resources that are required to successfully manage direct security portfolios put this service out of reach of many advisor groups unless they collaborate with a trusted investment specialist.

There are fundamental differences between professionally managed portfolios and non-advised individual portfolios in relation to diversification and quality of security selection. For example, individual portfolios are typically overexposed to Australian equities, underweight international assets and have very little exposure to government bonds. Investors with inappropriate asset allocations are less likely to achieve their financial goals.



Copyright © 2016 AssureInvest Pty Ltd ABN 55 636 036 188 (AssureInvest). All rights reserved. No part of this publication may be reproduced or distributed in any form without prior consent in writing from AssureInvest.


AssureInvest has taken all care in preparing this presentation and the data, information and research commentary within it (together referred to as the ‘publication’) but to the extent that the publication is based on information received from other parties no liability is accepted by AssureInvest for errors contained in the publication or omissions from the publication. AssureInvest gives neither guarantee nor warranty nor makes any representation as to the correctness or completeness of the publication. AssureInvest bases its data, information and research commentary on information disclosed to it by other parties. Past performance is no guarantee of future performance.

General Advice Warning

The information contained within this publication is of a general nature only. No information contained in the publication constitutes the provision of securities advice. AssureInvest warns that: (a) in preparing the publication, AssureInvest did not take into account the particular goals and objectives, anticipated resources, current situation or attitudes of any particular person; and (b) before making any investment decisions on the basis of that publication, any investor or prospective investor needs to consider, with or without the assistance of a securities adviser, whether the information contained within the publication is appropriate in light of the particular goals and objectives, anticipated resources, current situation or attitudes of the investor or prospective investor. If the information contained in this document relates to the possible purchase of a financial product, the client should consider the relevant product disclosure statement (PDS) before making any decision.

AssureInvest Pty Ltd
ABN 55 636 036 188 AFSL number 478978.

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