Replacement Advice – What To Include

Before we begin, let’s take a moment to make it clear that some licensees do not allow modification of replacement advice tables. If this applies to you, we strongly suggest you make zero modifications to your replacement advice tables.

However, here we’re going over our view on the optimal content in a super or investment replacement advice table in an ideal working and licensing environment.

So what do we want to include in a replacement table? It seems fees are the primary issue and also the easiest aspect to compare between funds. So, suggest including the following:

  • All platform-based fees (administration, trustee, member, ORR levy, etc.).
  • All investment-based fees (including all indirect fees).
  • Exit/entry fees.
  • Buy/sell spreads.

You will note adviser service fees are absent from the list above, as we consider replacement advice tables to be primarily about comparing the cost of financial products. Adviser service fees are certainly an additional cost to the client, but it is usually inaccurate to position the new product as the entire service offering and assign the entire advice cost to it. In addition, it could certainly be argued that the advice fee would be applied to the existing product if it were retained and the other advice accepted in full.

What about qualitative comparisons?

To start, it doesn’t seem that a table structure is a good place to compare non-fee data. It is much more effective to address this in narrative or bullet format, although it should certainly be encapsulated in the replacement advice section.

The main thing to remember with qualitative data is that most of it is irrelevant. Does it matter whether one fund offers more options on its family law splits? Or whether they send statements quarterly or monthly? To both of those questions, we think not.

The key to qualitative comparisons is to make it relevant to the actual client. Over the last two years or so, we have, thankfully, seen the “number of investment options” comparison almost die out. It’s just not relevant unless the client wants to simultaneously use all of the offered investment options.

To contrast this with a valid comparison: if an adviser strongly favours index funds and believes they will offer a better outcome for the client, it would be reasonable to compare “number of index options.”

So there you have it, what should (and should not) be included in an investment and super replacement advice section.

The challenge for most practices is not so much the table, but the data that fills it! If it’s all a bit too much, talk to us about taking it over for you today and we’ll have our expert paraplanners get to work on your replacement advice straight away.

 

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