You could be forgiven for thinking that our industry is currently writing the definitive manual on sectarian violence and factional infighting.

Law suits, retracted tweets, questions over in-house administration assets, arguments over which industry body represents whom and on what. And as if all of these internal issues were not enough, then there are the external sprays and exposes from just about every media in the country and a slap from Murray for variable advice quality in Tuesday’s Financial System Inquiry interim report.

The violence reached fever pitch last week when the Association of Independently Owned Financial Professionals issued a strongly worded letter to the FPA, the Industry Super Australia report titled “Commissions by Another Name” sparked outrage among industry stakeholders, the ABA blew up at the ISA and a bunch of planners vented their spleens at the FPA Chairman. And that was merely a few days’ worth of trench warfare.

When the “T” and “C” in T&C spoke to Treasury at the time when FoFA was a mere twinkling in Chris Bowen’s eye, we were instantly greeted with a cry of frustration – “What is it with you lot? We’ve seen more people claim to truly represent the industry than whistles blown at a rugby match!

The fatuous retort, of course, was “what did you expect?” – given the number of bees around the superannuation honey pot. Instead, we mumbled some suitably abashed answer.

And what does the consumer think? Anecdotally, that all factions are tarred with the same brush making it a relatively unappealing profession to entrust your savings to. No-one is denying that wealth management, including advice, needs to improve. Query, though if factional demonising of advice adds much to the debate.

New business from new clients is scarce on the ground, at least in the more traditional advice and product models. An analysis of wealth management companies on the ASX will show that organic growth is hard to come by. And the SMSF market continues to grow apace, including among the “next-gen” of potential wealth management clients. So, in one sense, SMSFs are an acknowledgement of clients questioning the relevance of the current advice offer and going it alone or delegating less of their FUM to professional advisers than they might otherwise.

What’s more, the wealth management industry is ageing, along with its current crop of clients:

  1. In 2013, for the first time, retirees held half of all planner funds under advice, up from 46% just 12 months earlier.
  2. A growing proportion of current FUA and FUM is in, or approaching, the drawdown phase, in a profession that earns the vast majority of its revenue from FUM and FUA based fees.
  3. Falling revenues from ageing books of business in the absence of relatively higher rates of new business from new clients is both a material threat to the industry and a clarion call for the development of new business models that better meet the needs of the “next gen” of savers, operating within a stable, trusted profession.

Interestingly, when advised, the current crop of clients is largely happy.

The April 2014 Lifeplan Financial Advice Satisfaction Index (compiled by the University of Adelaide) evidenced an increase in satisfaction levels among advised clients (to 74.5% up 3% from October 2013 (including in relation to trust and technical abilities, not just performance). And in accordance with earlier surveys, longer duration of advice results in higher satisfaction levels.

But, as mentioned, new clients into existing wealth management models are thin on the ground. Reconcile the two? Perhaps the predominantly “war generation” and “first wave baby-boomers”, exhibiting high delegation tendencies, embraced and largely enjoyed the traditional industry advice model, but now are moving into drawdown mode. Will the second and third waves of baby-boomers, let alone Gen X and Y do the same and embrace a largely uniform and static model? Will the industry respond with models that resonate with these potential clients? Time will tell but a barrage of internal slings and arrows is unlikely to help the cause.

It’s also worth noting that the protagonists in the wealth management profession actually need each other. Banks and non-aligned dealers need advisers of various types. Industry funds need advisers to support a product and to stem the SMSF outflow tide. Advisers need clients and appropriate products. Clients need good advisers (a point reinforced in Murray’s Financial System Inquiry interim report).

Two themes emerge from all this.

  1. Be relevant and query if the traditional advice model will resonate with new prospects, and be prepared to materially re-work the wealth management and professional advice business model. This applies equally to all walks of advisers.
  2. Stop fighting – parents who constantly fight in front of the children are unlikely to win the enduring trust and confidence of their charges.

The evidence squarely shows that trust is a major driver of purchasing behaviour in the wealth management space. New clients will bring new business to the industry if and when they see an industry that is relevant to them and engenders trust.

Careful what you wish for. Industry pugilists who win battles against each other may see the industry lose the war with the disenfranchised consumer.