How can more Australians get the advice they need? The answer is obvious — a scalable online solution is the only way to fill the advice gap.
Of course, you’d expect a provider of online advice to say this, but the time for scepticism is over. The industry needs to embrace digital to begin helping the millions of Australians facing rising costs and falling income.
This doesn’t mean the death of traditional face-to-face advice. On the contrary, we believe there’ll always be an audience for this type of service, but today there aren’t enough advisers. Just like Minister Stephen Jones, who wants to “get more advice to more Australians in a safe way”, we think it’s important that more people have easy access to advice. When you think about the current hardships people are facing, more financial help can only be a good thing for them and the wider economy.
The question is, how do we ensure more Australians can access personal advice that puts them first? We need the right mix of sufficient access points at a suitable price point.
Approximately 10 per cent of Australians access personal financial advice by meeting with advisers and they receive great value for that service. But the average price for personal advice is $5,300 (according to KPMG research) which is well beyond the reach of most Australian households.
So how do we provide access to advice to more Australians at a price point they can afford as Minister Jones says is “…in a safe way that is centred on consumers”?
With the inevitable decrease in recent adviser numbers, we know there’s not enough capacity to provide advice to more Australians. Even if there were enough advisers, will face-to-face advisers be able to deliver personal financial advice at a price point the majority of unadvised Australians would pay?
Adviser Ratings recently revealed that 63 per cent of Australians would be interested in advice at the right price of $500 or under which is well below the average cost of providing personal financial advice.
Is it even worth finding a solution that can provide personal financial advice under $500 so two-thirds of Australian households — that’s 6.3 million households, can access personal financial advice and be better off?
I think the answer is yes, of course, it is worth it!
The only conclusion you can come to is delivering advice digitally. The trick is to do it safely without any risk to the end consumer. Just like other complex industries that benefit from technology like personal banking, insurance and online stock broking, we think consumers can benefit from embracing technology in the advice space.
Imagine an easy-to-use interface where an individual can build their own plan, and when their situation becomes more complex they can reach out to a traditional face-to-face adviser.
A self-directed personal advice service can provide much-needed help that is well below the $500 that Adviser Ratings research highlights. But more importantly, it can be done in a way that puts the client at the centre.
What does a world class personal digital advice platform look like?
First off, it needs to operate under the same regulatory constructs as face-to-face advice under its own full retail AFSL. It should be licensed the same way advisers are licensed. More importantly, it should be built with the same obligation of putting the client’s interest first.
It should be about optimising someone’s situation, so they know what to do next. Not be focused on selling specific products, but rather initially getting the most out of the products they have and only making changes when it is warranted.
The personal digital advice platform would seek to address the immediate point of interest an individual has. Maybe it’s about paying down debt, planning for retirement or different savings goals. Initially, it is important to address the main area of interest or concern of the client. Then the individual would provide information about the current financial situation for them and their family. Add in their goals (for retirement and perhaps what they are saving for). Once that is provided, the platform would automatically generate personal financial advice based on their unique situation and aspirations.
The advice platform should have the ability to provide advice across their entire financial life covering debt management, savings goals, super, retirement, insurance and investments.
When the individual also utilises Open Banking to link information from their financial institutions they would create a living plan that is updated daily to reflect their current situation. It can then provide nudges promoting them to return to the site to help them work out what to do next. These might be due to a change in their personal life like a new job, a new car, or a change outside of their control like a regulatory update or an increase in interest rates.
Being client centred, the platform doesn’t rely on selling products. Instead, it charges a subscription service that enables clients to play with scenarios and generate multiple advice points without fear of being charged more. The advice it generates will only focus on what the client should do next to be better off, rather than a need to sell a product.
The best thing? This be provided for well under the $500 price point that two-thirds of Australians are willing to pay. In fact, it can be offered for less than a cup of coffee per week.
Only part of the ecosystem
When the advice becomes more complicated, like utilising debt to accelerate wealth creation or utilising different structures to hold assets, then the platform should trigger a note that it’s time to see an adviser. The various data points of an individual client would be used to nudge them along their journey.
A digital advice platform is designed to help the vast majority of Australians with less complex financial affairs. The type of clients whose situation doesn’t reflect the fees professional advisers need to charge for their service and expertise.
Digital advice solutions will not replace advisers but rather will help improve the financial wellbeing of many more Australians, several of which will eventually seek out the services of face-to-face advisers.
The advice industry, banks and super funds have the opportunity to ensure more Australians have access to personal financial advice. All it takes is for an innovative leader to step up and give that access to their clients or members.