The best way for financial planners to justify their value is to move away from short-term performance results and focus squarely on retirement income, according to a financial services specialist.
If Australia’s superannuation and financial advice industry could take one productive lesson from 2010, it’s that 12-month performance figures fail to communicate an effective retirement strategy, Provisio Technologies director Cameron O’Sullivan said.
“2010 has seen the foundation laid for more intense competition. With the super funds now providing advice, and with opt-in requirements for financial planners, advisers are going to have to justify their value,” he said.
“The best way to justify value is to move away from short-term performance and focus squarely on retirement income.”
O’Sullivan said that obsessive reporting of 12-month performance results narrows client and member focus to the detriment of the advisers themselves.
“The focus on 12-month performance may encourage clients to leave after a single bad year,” he said.
However, he said a focus on retirement income provides clients with tangible goals and engages them in longer-term planning.
“If a client can see what their expected retirement income is going to look like if they continue on a certain path, then it either provides confidence in the approach or an incentive to make positive changes. By contrast, a 12-month period has little or no impact on their long-term strategy,” O’Sullivan said.
“Ongoing service will be the differentiator between advisers and the new industry fund models. And by focusing this on the client’s real objective, income in retirement, advisers will have an offering that clients will want to revisit every year.”
O’Sullivan said technology now allows for accurate retirement income projections on all superannuation member and adviser-client statements.
“Software can integrate the retirement projections with other advice topics, creating a living retirement plan that will show advisers and clients exactly where they stand at all times,” he said.
