Vanguard Global Adviser Survey reveals optimism in spite of common obstacles

Vanguard | 25 October 2016


Despite grappling with global challenges like moving to a transparent fee-for-service model and greater regulation, financial advisers across the globe told a recent Vanguard study they were largely optimistic about the future of their businesses.

Vanguard's 2016 Global Adviser Trends Survey drew on insights from financial advisers in Australia, Canada, Hong Kong, the UK and US, finding that although advisers in these regions shared many of the same concerns and challenges, there was also a common sense of optimism when it came to growing client assets.

A key finding from the survey was that advisers in all regions were finding their professional environment more difficult, citing regulation and subsequent compliance as a key challenge in operating their businesses.

Australian advisers reported feeling the most challenged in this way, compared to advisers in other regions. In the Australian cohort, only one in six advisers said their professional environment had improved, with the remainder saying the profession had become more difficult. The Future of Financial Advice (FOFA) reforms were cited as a particular pain point, with 61 per cent of advisers saying it had a negative influence on their businesses.

Keeping up with regulatory changes was the issue of highest concern for Australian advisers, and featured in the top three issues named by advisers in the other regions. Australian advisers also said acquiring new clients and greater fiduciary responsibilities were among their greatest challenges.

Advisers in other parts of the globe cited similar frustration with recent regulatory changes, including the Retail Distribution Review in the UK, Canada's Client Relationship Model and new fiduciary standards in the US. Like FOFA, these changes all signify a move away from commission-based revenue to transparent fee-for-service advice models focused on holistic financial advice, rather than investment selection.

Vanguard Australia National Sales Manager – Adviser, Matt Willis, said the research not only reflected conversations with advisers about challenges their business face, it also highlighted emerging opportunities as the advice environment evolved.

"When we talk to advisers, there is an acute difference between those who have successfully transitioned to a business model based on broad financial planning services, and those who primarily base their value on selecting investments for their clients," Mr Willis said.

"The report clearly shows that where advisers had moved to fee-for-service model, they saw their clients better understand what value proposition they presented. In this context, it's positive to see increased transparency helping advisers showcase the full breadth and depth of their value to clients.

"As Vanguard is a strong believer in the value of advice, it's also positive to see that more advisers across the globe are confident about increasing their advised assets."

According to the survey, 83 per cent of Australian advisers said they expected the amount of advised assets to increase, while 68 per cent expected their number of clients to increase. By comparison, 77 per cent of Hong Kong advisers expected to grow their number of clients, while 92 per cent of both UK and US advisers expected to grow their amount of advised assets.

In aggregate, Australian advisers said 31 per cent of their book of business would comprise of new clients in the coming year, compared to 21 per cent in Canada, 26 per cent in the US and the UK and 37 per cent in Hong Kong.

"There's no question that attracting new clients in an already competitive environment is a tough task, not just in Australia, but globally. We hear from advisers that there are concerns about having to spend more time serving their existing client base as they age, as well as the perceived threat of emerging advice models and technology," Mr Willis said.

"Although technology is boosting competition in the advice sector, we see it as also being a great benefit for existing advisers. Where technology can streamline client administration and asset allocation, advisers are able to spend more time attracting new clients and providing the 'human face' that will continue to be an essential part of high-quality financial advice."

To see a full copy of the Vanguard's 2016 Global Adviser Trends report, please click here.