Decades of involvement in the design and presentation of financial capability education programs has shown me that many younger Australians want (but can’t easily find) access to trusted and reasonably priced financial advice. They’ve been regularly told about the importance of not solely relying on the government-funded age pension for a comfortable retirement. And they’re worried that insecure careers based on the pervasive “gig economy”, falling access to home ownership and inadequate superannuation arrangements will leave them in a financial hole.
They often wistfully observe that this hasn’t been the experience of their parents and grandparents whose formative years have been spent in times of economic boom and secure employment during the second half of the 20th century. Inasmuch as they may have read the media stories about “the biggest intergenerational transfer of assets in the history of Australia” occurring between their increasingly long-living parents and their generation, most of them are not in the fortunate position that they will be beneficiaries of this extraordinary event or are wisely not relying on it.
Therefore, many of these younger Australians would like to source assistance from a professional financial adviser in whom they can confide and place their trust. What they want is someone with whom they can work (and afford) in the development of strategies to create a life-time financial plan. What they don’t want is a product salesperson.
Sometimes it’s simply one-off reassurance and advice they seek and sometimes it’s on-going. However, my observation is that a positive one-off interaction often turns into a trusted on-going engagement which is generally more productive, both from the client’s and adviser’s points of view.
The problem is that much of the shrinking financial advice industry is inadequately structured to meet this increasing demand. That’s because many advisers continue to seek out the much desired “high net worth individual” (typically older people and retirees) from whom substantial on-going fees can be derived; or are remunerated in such a way that they are incentivised to sell products or accumulate funds under management (which doesn’t always work well with financially challenged younger people); or don’t view one-off strategic advice as profitable; or believe that this kind of financial advice is not worth the professional risk; or a combination of the above.
All of this is completely understandable commercially. There’s nothing like a largish and regular annuity income to provide reassurance, security and profitability in any business. Nevertheless, my daily observation in the world of financial education is that this large and considerably younger cohort of Australians is keen to engage with trusted financial advisers to create the independence that many of their parents and grandparents almost accidentally achieved by virtue of never-ending property price increases and sometimes ridiculously generous superannuation tax concessions (such as effectively unlimited tax deductible contributions to private “pension” funds).
The point here is that there is an important commercial and professional opportunity for advisers who want to grasp it. Some will suggest that much of the demand will be satisfied by the development of online advice using Artificial Intelligence (often referred to as robo-advice). Certainly, this remote methodology of advice delivery has its place, perhaps even an important one.
However, I am more than happy to assert that nothing can replicate the strengths of personal human-to-human interaction. This is not just the out-of-touch musing of an older generation. Rather, it reflects the constant and loud feedback received from the cohort of younger people with whom I have daily interaction in my education work. This doesn’t mean that technology won’t be increasingly involved in service delivery. Clearly, it will be, but it will not (and should not) replace the ability of human beings to create a trusted, warm and nuanced professional relationship between an adviser and a client.
Fortunately, the legislative environment is moving in the right direction to facilitate this outcome for younger Australians. In that regard, there are two equally important regulatory pillars:
The first pillar is the controversial Quality of Advice Review which (so far so good) promises to reduce the complexity of that much unloved and unread document called the Statement of Advice. Of course, nothing in the law requires long and complex SOAs, but longstanding uncertainty and aversion to risk by compliance officers has led to where we are today. If the government manages to deliver on its undertakings, SOAs should be considerably shorter and more flexible, thereby lowering their cost and encouraging the delivery of profitable (and simpler) financial advice to younger Australians at a reasonable price.
The second pillar is the mandatory Code of Ethics. In some quarters, the Code is as unloved as SOAs, especially Standard 3 which requires individual financial advisers to not act where they judge a conflict of interest to exist. If the Code manages to survive lobbying attempts to remove, rewrite, dilute or reinterpret it over the next twelve months (as sadly occurred in the accounting profession some ten years ago), it will provide a perfect foundation for the delivery of ethical financial advice.
Importantly, these regulatory pillars must co-exist if the desired outcome of widespread access to reasonably priced and ethical advice is to be achieved for the expanding cohort of younger Australians who are seeking it. And they will support a new generation of financial advisers whose adherence to the highest standards will distinguish them as the true professionals about whom the industry talks a lot, but hasn’t yet been able to convincingly deliver to the community it serves.
