There’s never been a more important time than right now for professionals in the advice and wealth management industry to look over the horizon and think about what the future holds.
Decisions made today relating to any number of factors – from education, investment in technology, services, business strategy and advice specialisation – will be critical in future successes and failures now more than ever.
In the wake of the Hayne royal commission, and on the eve of an historic Federal Election, in which political parties of all persuasions carry with them a mandate to legislate change in the financial services industry, charting a course based on a sound hypothesis for what the future holds is paramount.
Professional Planner has tapped the brains of some of the industry’s best known and important thinkers to traverse four separate categories – advice (what the client sees), investment implementation & research, licensing & business structures and technology – in order to triangulate on the question: “What does the future of financial advice look like?”
This article highlights the advice and technology themes, Professional Planner will publish the perspectives on business structures, licensing and investment implementation & research next week.
ADVICE (WHAT THE CLIENT SEES)
ADELE MARTIN Firefly Wealth / practice principal
Clients will expect advisers to help manage irregular income because the gig economy is expanding rapidly. People rarely have the same job for 40 years now – look at Airbnb, Uber and Airtasker. People are getting more unstable income from multiple sources so they’re looking for advisers to help manage that. It’s all about the side hussle! Life coaching and money management will be what people are looking for advice on, not investment. The delivery methods will be shaken up too; clients will become virtual which will remove friction, and advice teams will trend in the same direction. Learning will continue to shift online and advisers will get better at creating online communities for their clients, who will also demand more nextgen mechanisms like live podcasts for interactive learning and messenger bots for quick responses. Anything product-based is under threat; Google will be able to tell you what your best income protection policy is. It will know your occupation, smoking habits, medical history etc. People are also way more educated now thanks to the internet; they want a do-with-you approach to financial advice, not a do-for-you approach.
MATT FENNING Advise Wise / managing director
With technology continuing to converge in our daily lives and the breadth of data that is gathered we will see the emergence of engagement, management and feedback tools for clients that are customised to their values, goals and behaviours. The experience for the customer will be individually tailorable; this may include how information is communicated, including the form of communication, whether it’s visually, aurally etc, the channel of communication, face-to-face, video, written etc, and who it is communicated by, whether it’s an adviser, AI etc. Using existing sources of data from their own lives, such as social media, wearable data etc, centralised wealth portals, the client will have a more powerful view and advisers will potentially have far more information available to them to form a view of strategies for the future. Clients will see more insights in areas that are traditionally more difficult to measure – including emotions and behaviour – as predictive analytics continues to develop. They will also see advice merge with their everyday lives as feedback mechanisms are built into phones, wearables, or home and business assistants like Alexa and Siri. The future fundamentally will see a shift to uniquely customised, experiential, and immersive advice from a client perspective.
MATTHEW RADY Allianz Retire + Powered By Pimco / CEO
The advice industry is going to be challenged in the short-term, but in the long term there will be great opportunities emerging for advisers as the profession moves forward. Looking at the numbers it’s clear that advisers who specialise in retirement will be well positioned, and retirement advice is where things will evolve the quickest. Consider this: $100 billion over the next next ten years will transition from accumulation to decumulation, based on the average account balance that’s 1000 people transitioning into retirement every day. Advice in the area will change dramatically in the future, in particular when it comes to what good portfolio construction looks like and also what good conversation looks like. For instance the old idioms people use that were relevant in accumulation are completely wrong when it comes to saving and investing for retirement. Things like ‘cash is king’ and ‘it’s time in the market, not timing the market’ need to be thrown on their head for clients in decumulation. Cash doesn’t give retirees’ portfolios the ability to earn returns they need; meanwhile, timing is the most important thing retirees need to understand to address sequencing risk. I think some of the most noticeable progress on where the future of advice is heading will be made in advice in retirement.
JEFF THURECT Evalesco / director
Clients see a lot of value in consolidating their financial position and I think we’re going to see a continuation of that. Traditionally they come in once or twice a year to see that consolidated position but I think the expectation going forward will be that the information is going to be available to them at the touch of a button. The role of the adviser will be to interpret that information and build strategy around it, to help the client disseminate it, to work with the client to interpret that information. Advisers will need to ask: what does the information mean for the client? Are they making progress towards their goals? And if not, how do you correct the course and get them back on track? Transparency will also be key moving forward, and I think managed accounts will facilitate that. Clients want to see what’s happening and what fees they’re paying, and they want to be able to apply their own filters onto what should or shouldn’t be included in a portfolio. We’re already seeing a lot more requests for layers of choice to be applied into portfolio construction.
ANDREW ALCOCK HUB24 / CEO
Advisers will increasingly look for technology solutions to more efficiently service and engage their clients. This will of course be across advice itself, reporting, and implementation. However, technology solutions that assist with client engagement, education and the provision of simple advice will be used to support the differentiation of service offers to various client segments. Robo advice has been talked about but it hasn’t evolved to the point I believe it needs to evolve. Currently, robo advice is just an advice tool that pushes clients into a certain asset allocation based on answers to questions. Where it needs to go is towards client engagement and reporting plus education. I talk a lot about advisers as ‘delegators’ versus ‘collaborators’. Technology should lower the cost of advice by creating a technology enabled hybrid servicing model. Further than this, true data integration will also be key for providing advisers and their clients with a complete view of wealth sourced from disparate sources and the best providers. Integrating this data with planning and engagement tools, whilst also utilising technology to automate compliance and ensure suitability, will result in better outcomes for all.
JACQUI HENDERSON Advice Intelligence / CEO
In Australia, there are over 17 million smartphone users today. This begs the question, why isn’t financial advice aligning to the way consumers manage their lives? If we look at the current way we engage and distribute financial advice to consumers, there is a massive disconnect. This gap can only be bridged through smarter technology. Tech opens up new opportunities for licensees, investment managers and advisers. It is the enabler of smarter, safer and more efficient advice for Australian consumers. The smartphone will become the hub of personal-advisory, creating a more scalable and lower cost advice model. Not only will tech deliver advice more efficiently, but it will delight consumers with an engaging experience, where they feel empowered and engaged to pursue. Financial advice becomes part of their daily smartphone activity. Imagine this ‘new world’ advice model like google maps, where it pin points your location, you enter your destination and it guides you on the best pathway. Tech can help advisers model a consumer’s current financial position, plot out their life goals and provide the best path to get them to where they want to be.