Paul Harding-Davis. Photo by Matt Fatches.
Financial planning is on the cusp of a transformation that will drive greater public trust and confidence in the industry and its practitioners, according to the former chief executive officer of Premium Wealth Management and general manager of advice at Australian Unity, Paul Harding-Davis.
Harding-Davis says three forces will work in concert to change the face of the industry in the next five years. The first is an ongoing drive to raise professional standards.
The second is the efficient use of technology to deliver affordable and relevant advice to more people.
And the third is greater commitment by other stakeholders, principally superannuation funds and accountants, to offer financial planning as part of their services to members and clients. Harding Davis says all three factors are intertwined.
He says there is “recognition by key players like super funds and accountants that…in areas like conflicted remuneration and disclosure and communication and documentation, the game has changed”.
“Accountants will come in and start to understand that the financial planning rules are far more robust than they really [thought], and the government will have more trust because they can see what’s happened as professional standards rise,” he says.
“And if super funds and accountants are no longer constantly criticising planners but are actually encouraging member and clients to actually get financial advice, their tacit message is you can actually trust this stuff – its good for you.”
Better use of technology
Harding-Davis says better use of technology will underpin “simpler advice to people who do not need complex holistic advice, self-managed super funds, trusts, etcetera, but fundamentally needing a budget, need to live to the budget, need to make good choices with their superannuation fund, and good choices around their insurances”.
“Technology can do a fair chunk of that work,” he says.
“For most Australians, if they put a budget in place and live to it, and make good choices around their super fund, and paid off their mortgage, that’s kind of it. Other than risk and a Will, that’s kind of it. For 60 to 70 per cent of Australians, if they did that, it would be the appropriate level of financial planning advice.”
And finally, financial planning will receive the stamp of approval from stakeholders well positioned to deliver advice to large numbers of people.
“Super funds will play a very significant role – in fact, I don’t think you’ll get anywhere near 80 per cent [market penetration] without super funds doing some degree of intra-fund and limited advice, and to a significant extent delivering that with technology,” Harding-Davis says.
“Accountants and super funds will come to the table and say, this is good stuff, you will really benefit from going through this process – whether it’s sitting down in the office of the super fund with a planner for an hour, or whether it’s gong online and following their tools, which will help you do the basics.
“So I see all these things enabling the spectrum of financial planning advice to be efficiently delivered, whereas right now it can’t be efficiently delivered.”
A belief reflected in new roles
Australian Unity acquired Premium Wealth Management in December 2014 and Harding-Davis left the business in October this year. He has since taken up roles that reflect his belief in where the financial planning industry is heading.
“Initially, as has been announced, that’s as a non-executive director of AdviserLogic – people who are playing a really important role in that whole technology and adviser and practice efficiency space,” he says.
“I’ll help them a bit with their business development and strategy and marketing as well.
“In addition, from the start of November I’ll be spending half a week doing two related roles with a small dealer group called AdviceIQ, based in Brisbane; and somewhat connected to that group is a badged wrap which sits in its own AFSL and has about 25 licensees signed up to use it. It’s a badged BT wrap and it’s a very useful platform, particularly for independents. When I say independent, I mean self-licensed.”
Harding-Davis says AdviceIQ currently has seven practices and plans only to grow to about a dozen.
“They’re all very high-standard practices, good sizes, and the model of the business is very akin to a co-op,” he says.
“The practices have a seat at the table in terms of where the group is going and its future.
“It has some similarities to some of my past work and some of the things I like to be involved with. And I’ve known some of the principals for a long time and worked with them in the past.”
Harding-Davis says he has a broader perspective in his new roles than he had in the past and says this serves to reinforce his belief that financial planning has a central role to pay in the wellbeing of Australians.
“Anybody who knows me knows how passionate or enthusiastic I am about what quality financial advice does in improving the lives of people,” he says.
“It’s extraordinary. Even somebody with my experience has benefited enormously from hiring a financial planner. The only regret is I didn’t do it a decade earlier.”
With great opportunities come great challenges
Harding-Davis says the opportunities for financial planning are great, but the challenges to get there should not be underestimated.
“In the next five years there’s a lot to wrestle with in technology,” he says.
“I’m going to use ‘fintech’ as a broad term. I don’t just mean simplistic robo-advice, because I don’t see that as a serious threat to quality holistic financial planning for many years, but I do see those tools as being an enormous aid to improving the efficiency of practices and enabling them to service more clients.
“As margins come down, that efficiency in a practice, that capacity to provide high-quality advice to more people, I think is one of the really important operational areas of focus for dealer groups.”
As professional standards are bedded down following the introduction later this year of the Corporations Amendment (Professional Standards of Financial Advisers) Bill, along with with “some of the other changes we’ve had and the removal of some impediments” trough the Future of Financial Advice (FoFA) and Life Insurance Framework (LIF) reforms, an environment will be create where “professionalism can take off and start and get cred with government and even relatively rapidly in consumer organisations”.
But higher professional standards that raise barriers to entry produce challenges in other quarters, Harding –Davis says.
“That links…to where do we get the next round of advisers from?” he says.
“The average age of financial planners is 57 and realistically the majority of them are still male, and probably Anglo-Saxon. So what happens over the next five years, if you pull back and think about a new person going to uni, doing a degree, coming out and having a couple of supervised years? They’re still too young to put in front of a 60-year-old. They don’t have life experience.
“There’s a significant gap where there really aren’t enough planners, which leads me in a sense to…my hope that a great many accountants choose to enter full financial advice and bring to the table 5000, 6000, 10,000 new professional financial planners.”