Think back to July 2013. FOFA had just come into play, and there was a soft landing planned for commissions to make themselves obsolete over the following couple of decades. Then the Royal Commission came in and accelerated the transition overnight. The time to adopt new practices and adapt to the new world was removed from both advisers and product providers alike. And in that maelstrom – the chips fell to those who were prepared.
The difference in being prepared
Changing strategy is hard – especially if you can point to a century of success. Commissions have been such a reliable strategy to gain and retain adviser attention for such a long period of time, it was almost hard to believe advice could exist without them. But advisers had been pushing for a move away from commissions for quite some time. Groups of advisers all over the world had independently arrived at similar conclusions surrounding commissions – that by decoupling revenue from product providers, the scope of advice was dramatically enhanced.
This message did not go unheard by new entrants to the product provider space. In fact, this message was seen as a competitive advantage. If the newer entrants could not compete with a direct challenge to existing distribution structures, then they could appeal to advisers who shared this philosophy. These newer entrants were so entrenched with this messaging, when the commissions tap was turned off overnight, they were poised to take advantage of the inevitable fallout.
How advisers now look at commissions
While commissions on investments and platforms are currently the only type of products to be affected by the Royal Commission, advisers are now understandably nervous with revenue directly received from product providers. There is an element of ‘only a matter of time’ until further commission reductions occur. Not to say advisers aren’t still building fantastic offerings earning large revenue from commissions, but there’s a growing portion of advisers who see a reduction in systemic risk by moving revenue lines away from avenues which can be turned off without their control.
What you can do in this new environment
Start the process of owning a message in the market. Be known for something beyond the features and benefits of your product. The majority of advisers operate in a very open environment, and the traditional distribution channels are a fraction of what they once were. In essence advisers now have choice in the open market, and each product is examined under the conditions of how it performs compared to competitors. The good news is, advisers still need help to build and maintain great advice offerings. It is here a product provider can add value to an adviser and maintain front of mind presence, achieving your main two goals of building awareness and building leads.
XY assists product providers by adding value to the lives of advisers in ways they actively seek out. We ensure the content we create for advisers accurately reflects their challenges. Not only does this provide clear value for advisers, but your brand is included in the positive evolution of financial advice.
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