Scaled advice will be popular with tech-savvy clients and will provide new business opportunities for planners.

Introducing scaled or transactional advice alongside holistic advice will provide new business opportunities for planners and is likely to be popular with clients; in many ways scaled advice is a more natural model because clients often seek advice around a specific area.

Today many client meetings begin with a 35 page fact-find, which can be frustrating to the client who has come in seeking advice with a particular transaction, such as a contributions strategy. Scaled advice enables the advisor to give the client quick, low-cost turnaround on the advice sought, and it does not preclude providing holistic advice should other areas become relevant during that conversation.

Scaled advice augments, rather than replaces, the holistic advice model. But to take advantage of the opportunities around scaled advice, planners will need to recognise that holistic advice is not always the best solution. Embracing scaled advice will give planners the flexibility to address specific areas quickly, and give the client a quick turnaround on what they want.

It could be that scaled advice provides the opportunity for a planner to show their expertise and experience, leading to holistic advice; or it could be they have already provided the holistic advice and can scale a future piece of advice for the area the client is now seeking assistance, such as an investment change.

An effective business model for scaled advice will employ systems that lower the cost of advice per client to keep it profitable. For a holistic financial plan, you may be happy to spend hours on a Statement of Advice (SoA). But scaled transactions require much faster processing for advisors to keep fees reasonable yet profitable.

The best way to lower those costs is to use technology to speed up the processing of scaled advice, just as the superannuation funds have done with their expansion into this area. Planners should note that most super funds are using the same defined scope framework that retail advisors use. The funds are not using intra-fund legislation much at all. But the technological changes which have been driven by the superannuation funds can now be harnessed by IFAs, providing a huge opportunity for efficiency gains.

Such technology has often been perceived as a competitive threat, but it’s really little more than a new way of servicing a group of clients. The technology can also give planners more control over their business model. Research by Investment Trends, released in September 2011, found that planners are still spending well over six hours on SOAs, forcing many to gravitate towards higher value clients.

Planners shouldn’t be in a situation where only higher value clients are profitable, but with SOAs taking six plus hours to produce they don’t have much choice due to the blowout in the cost of advice per client. Yet the technology is available to ensure maximum profitability for all clients, including C and D clients. Breakthroughs such as cloud computing means scale becomes less of a factor, and by lowering the cost of providing advice you then have the ability to broaden a service offering for the A/B clients with the option of making C/D clients viable.

Technology that supports self-service advice online and generates SoAs could also enhance profitability under fee-for-service. Advisors may find a way of doing it themselves — or they might find that their platform or dealer group could offer such services. Taking the opportunity to implement scaled advice will involve some change in how an advisor interacts with a client, and again technology will be able to support these interactions efficiently.

A key thought-shift in advisory technology allows the adviser to create all the information needed in the SOA while in conversation with a client. The technology allows advisers to model scenarios quickly and gather information at the same time. This results in a more engaging experience for the client, and means the adviser is effectively ready to generate the SOA as the session wraps up; no six-plus hour slog required.

Another key strategy is putting the work into the SOA templates at the start to cater for a range of different scenarios. The SOA generation can then add/remove sections as relevant and massively reduce the need to manually edit the SOA afterwards. The same tools could manage opt-in and other requirements easily and cost-effectively.

Superannuation funds currently lead the way on what can be achieved with scaled advice. They are using technology to process quality SoAs in just a few minutes, under defined scope, allowing them to service many thousands of members who have simple advice needs. In fact many super funds are already delivering successful scaled advice services in conjunction with holistic planning.

But their models are moving towards a much stronger integration of different advice channels; face-to-face, online and web advice, and integrating all of this into the platform/super fund so that both advisers and members have an evolving “living retirement plan” online that incorporates all advice they have received, regardless of the channel that provided it.

Planners have a big opportunity to make scaled advice, fee for service and opt-in work for them, provided they are savvy in how they engage with clients and create new revenue streams. Employing technology to capitalise on these opportunities will only become more important as changes to the industry intensify.