The majority of advisers will struggle to prove the value of advice on an ongoing basis because they continue to use a process that is too transactional.
"For most planning groups and businesses, it's primarily a transaction and the maintenance of that transaction on an ongoing basis," Strategic Consulting and Training (SCAT) managing director Jim Stackpool told InvestorDaily.
"Most financial planners are transactionalists. If advisers are still saying they're charging a payment [for a service] they did two or three years ago, clients won't buy that."
Advisers must be able to prove why they are earning a fee from clients every year and provide evidence.
Good advisers can say "this is what value means to my client this year", Stackpool said.
"Those advisers that begin the first initial conversation about putting a transaction into place or putting together an asset allocation strategy don't set out why they're working together every year," he said.
"The adviser will be exposed as the emperor with no clothes because there's no value in it.
"The industry has been so focused on getting the 'what' done - getting a fund set up, insurance into place or establishing the cash flow plan - that they haven't asked 'why'."
Advisers are wired as specialists or suppliers, Stackpool said.
"They're not what we call on-going consultants to the client but they have been able to earn a fee for finding a bit of specialty work two or three years ago," he said.
The outcomes that needed to be achieved for the year must be formally set out beside what advisers accomplished to identify new and current complexities rather than goals from three years ago, Stackpool said.
"True advisers re-engage every year and can answer why they are working with their client each time," he said.
In addition, advisers must ensure a "no surprises" approach to the financial life of their clients, although the scope of the services will generally determine the engagement, Stackpool said.
Advisers usually completed a full fact find during the initial stage but did not carry out another one unless the client alerts any significant change, Stackpool said.
In addition, clients are realising they can manage their portfolios and pick their own asset allocations because they've lost faith in the industry, he said.
"Part of the self-managed superannuation movement is a testament that people don't trust the ongoing advice or the value that they're getting from financial planning," he added.
