There is significant demand among superannuation fund members for digital advice and those prepared to pay most for it are not the members most funds probably imagine.
Research conducted by digital advice firm Otivo released last week found the optimum price point (OPP) for advice among 18- to 24-year-olds, as well as 55- to 64-year-olds is just over $150 a year.
This is contrast to 25- to 55-year-olds who are willing to only pay double digits.
The OPP is the point between the product being too cheap and of questionable quality versus being too expensive and out of reach to buy.
| Age group | Optimum price point |
| 18 – 24 | $153 |
| 25 – 34 | $97 |
| 35 – 44 | $85 |
| 45 – 54 | $86 |
| 55 – 64 | $152 |
| 65 – 74 | $127 |
| Source: Otivo Pricing Research, conducted in March/April 2023; n = 1012 | |
Otivo chief technology officer Nathan Isterling says he can only speculate from the data, but he suspects younger people are looking for savings guidance while pre-retirees/retirees are looking for certainty during the transition.
“I would say the older generation because they’re approaching retirement have higher anxiety,” Isterling tells Professional Planner.
“For the same reason people feel lost and out of place and panicky, the older people are facing those same emotions but for a different reason.”
A new frontier
The research found 68 per cent of super fund members want their fund to offer advice – a figure that rises to 86 per cent among members who say they’re prepared to pay for advice online rather than from a human.
This has implications for how super funds communicate the benefits of advice to members: the research found younger people want more help with issues like savings or servicing a home loan over investment advice, but Isterling says super funds still have inquiries over investment strategy.
“We’re working with a few corporate super funds now and that’s the number one topic they want to address,” Isterling says.
“Let’s say they get 100 calls a day, 50 per cent of those are going to be about their investment options. That is the major concern.”
Isterling describes the example of an elderly person in a high growth investment strategy which the fund can’t give advice on the change as “tragic”.
“You have to wait in line and pay a lot of money,” he says. “It would be great if they could give that advice over the phone.”
Moving down the alphabet
Otivo’s business model focuses on the C and D segment clients that have been unserved by advice practices that have needed to tighten their books either because those clients aren’t profitable or the business doesn’t have capacity to service them.
While the Quality of Advice Review has presented a fresh regulatory regime to expand digital advice, it has little impact for Otivo’s business model.
“We’ve been operating under the current legislation for five years now,” Isterling says. “We have our own AFSL, we’re delivering compliant financial advice, we deliver SOAs digitally. We don’t need any alterations to the current legislation to expand.”
Isterling says the broader feedback the company receives on the service is that Australians transitioning to retirement want certainty, even if the preference is via a digital advice process.
“The feedback is they’re transitioning to retirement, so they want advice around how am I going to fund my retirement,” Isterling says.
He adds this includes assessing assets outside of super, as well as configuring the risk strategy in a portfolio to avoid potential market bumps on the path to the decumulation phase.
“They’re looking at annuity products and downsizing their house, how can I get more money into super so I can take it out tax free, etc,” he says.
