Advice isn’t a product.

iStock_supermarketDo Woolworths sell advice?

Do Coles sell advice?

Do banks sell advice?

None of these groups sell advice. They all sell products.

Unfortunately when it comes to financial advice, Australia’s consumers don’t know the difference between financial advice and financial products.

Advice doesn’t provide the same tangiblity of a physical product from the supermarket or even the same intangibility as a loan specifically to buy your new home.

In terms of tangibility, advice is more the invisible hand supporting or pushing you to financial objectives not yet reached or over obstacles not yet overcome. Or advice can be the ‘helping hand’ holding yours providing the confidence for your next venture, adventure, challenge or simply your next step. Advice can stand on its own without products support not losing any of its value, in fact, often being enhanced without the need for product.

The quality of advice is harder to compare than the quality of products.

Whilst attempts to compare advice based upon price are easy, these are usually so full of assumptions that an impartial assessment are near on impossible. Like beauty and art, the quality of advice is usually a subjective judgement for the receiver of advice. Similar to health, engineering, and law, it’s the adviser, rather than the specific advice that provides the DNA upon which all an assessment of quality is formed. It’s easier to buy a great product from a dud salesman, than buy great advice from a dud adviser. Advice doesn’t work like that.

Comparing the value of advice and value of products is like comparing religions. There is no logical start or end to that consideration. Fundamentally the only real comparison is that they are different – very different, and should not be confused as the same.

I believe the people who treat advice as a product are taking a shallow view because it’s usually in their self-interest.

Future of Financial Advice (FoFA) takes this path.

General ‘advice’ or personal ‘advice’ definitions have been crafted by those who consider Australia’s financial advice world as a flat, product-strewn landscape. So too the reporting of Commonwealth Bank’s financial planning fraud which was based upon the assumption that those acting dishonestly were ‘advisers’. They were never advisers, but product-remunerated sales people

Come next crash, next scandal, next government, next scary world-event, or next expected or unexpected financial event in life, consumers will come looking for different, better financial solutions to an age-old problem – the search for greater financial certainty.

The delivery of greater certainty isn’t based upon delivery of more products, it never has been. It’s about the delivery of better advice.

Whilst the delivery of better health advice often relies upon the delivery of better drugs, the differences between health advice and drugs are better recognised by consumers as separate.

The separation of financial advice and financial products is easy and is happening today with good advisory firms – they reimburse any payment from products or product-providers to their clients and charge their clients directly in dollars for the value of their advice. Nor do these firms enter into ‘guaranteed buy-back’ arrangements with product manufacturers (i.e. banks and insurance companies) that value their business based upon quantity of products sold.

For those that continue to take their payment from products in any form (or tie their business valuation to a product manufacturer’s buy-back) let’s call them what they are – product providers. And lets stop referring to them as advisory firms or their people as advisers.

For the others – advisory firms pricing upon the value they deliver and separating themselves from any product bias either in their offerings or the models they use to build value in their businesses – let’s refer to them as advisers.

Advice isn’t a product.

What do you reckon?



  1. Blake
    Posted July 14, 2014 at 7:36 pm | Permalink

    Well said Jim. You have done a great job of articulating the value of advice.

    The further we can seperate financial products and financial advice the better off consumers will be.

  2. Posted July 15, 2014 at 10:36 am | Permalink

    Of course advice isn’t a product. I wish that those deciding on FOFA would actually go and see a Financial Advice professional. If they did they would see that my advice is all about strategy. Product is the least of what I do. Great article Jim – I was just having similar thoughts while being incensed listening to uninformed commentators on the news on the way to work this morning.

  3. Ian
    Posted July 15, 2014 at 3:05 pm | Permalink

    Great article Jim.
    Unfortunately I have very limited faith in the politicians ability to get this right and I fear what the final outcome of FOFA is going to look like.
    I guess we just continue on one fight at a time!

  4. Mitchell
    Posted July 16, 2014 at 1:02 pm | Permalink

    Well said. Although, it is in the clients interests for advice givers to keep working with product manufacturers to develop what we want. That is, something that delivers the strategy and ideal outcomes for our clients. The smart ones will head in this direction or soon find themselves irrelevant.

  5. Posted July 21, 2014 at 11:01 am | Permalink

    Well said Jim. There was an interesting (and quite funny) look at financial planning on ‘The Checkout’ on ABC which you can see on iView. Unfortunately, at the end of the episode, they referred to ASIC’s statement that good financial advice costs $2,000 – $3,000 pa!? Come on ASIC, how is that helpful to anyone! Perhaps CASA should tell Boeing how much it costs to build a plane.

  6. Posted September 4, 2014 at 7:26 am | Permalink

    Spot on. Still lots of comments ‘clinging’ to the past.

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