A growing number of financial planners are embracing a business model where they advise on all aspects of a client's finances, rather than on specific areas such as taxation benefits or investment options.
Under this model, dubbed the personal CFO (chief financial officer), planners enter into a close relationship with clients and provide assistance on issues ranging from asset management to succession planning.
This could create pricing problems because the industry has traditionally relied on advisers receiving remuneration based on the delivery of products, according to Strategic Consulting and Training consultant Martin Mulcare.
It requires a new mindset to avoid the tendency to link the fee to the funds under management, he said during a presentation at the Institute of Actuaries of Australia yesterday.
Mulcare was careful to point out he was not referring to the discussion of commission versus fee-based advice.
Instead, he referred to those services traditionally provided by planners that are not directly compensated, including the education of clients in different financial strategies and devising plans.
Advisers will also have to spend more time on building relationships with clients to establish a bond of trust between them. "From the client's point of view, this [model] provides [them] with one throat to choke," Mulcare said.
