The real future of financial advice

Steven Manning, a friend in Australia (an expat who was a legal adviser while here) recently shared a his views on the situation down under in a series of posts, the last of which was titled “The real future of financial advice – the Rise of the Robots”.

It is important to note that this article was written after a royal commission in Australia which saw most banks close down their financial planning arms after devastating findings of conflicted selling by them. What remained is what Manning calls “the existing Frankensteins”, packaged financial planning products which were designed with one outcome in mind – to sell a specific product, normally the one with highest fees.

An article by Peter Panigiris, business development manager, Midwinter Financial Services in IFA, a magazine for independent financial advisers notes that many advisers are leaving the industry, while others are consolidating their operations, focusing on a fewer number of higher-value clients.

“There is strong demand for financial advice, but it is a superficially enviable position that hides a deeper paradox:

The challenges are well known; rising regulations, higher educational requirements, pricing pressure, and reputational damage following a royal commission. The answers are also no secret; more streamlined regulations, a clear client value proposition and productivity-enhancing technology.

Proven technology is an important area that advisers can directly control to support their client engagement and reduce cost to serve. Great execution is the key to creating a more efficient foundation that can attract a wider range of profitable clients. Below is an extract from the article.

1. How fast and accurate are the advice calculations?

An advice platform should be able to perform multiple calculations showing the impact of different client options accurately and quickly. Is it better to save more for retirement or pay off the house? Should I prioritise my short-term goals above my longer-term retirement goals? Is it worth saving more super if it reduces my age pension payments?

2. Does the solution drive improvements in financial literacy?

The best financial calculations count for little if clients can’t understand the information. To reach their goals, advice needs to be presented in a simple and intuitive way. That means building customer-centric design into advice technology because it’s as much for clients as it is for advisers.

3. Does it make compliance monitoring easier?

There is a growing realisation among the public that increased advice regulations are not translating to better outcomes for consumers. Two in three consumers support simpler financial advice, reducing paperwork and complexity, and lower cost (provided consumer protections are not eroded), according to the FSC research. But while regulation may eventually be more streamlined, it will always be rigorous enough to present a challenge for advice practices. Technology is crucial to meeting this challenge and serving more clients.

4. Cloud-based technology versus desktop?

Desktop software, or manually updated Excel spreadsheets, inevitably fall behind as regulations are updated (such as new contribution caps), and as new cyber-security flaws are exposed in old software versions. Cloud-based software is continuously updated with new regulatory and security patches, ensuring all advisers have the latest technology. This also creates an ongoing backup. Key files, such as SOAs, are never lost and are easily searchable. That’s essential for high-quality service as well as compliance and business continuity.

5. Is support there when you need it?

When technology underpins the core operations of your business, it should offer an online 24×7 help centre and ongoing local support and training. As borders continue to reopen, people are making plans for nights out and trips away from home. Although the advice industry is a long way from a holiday, maximising the potential of technology gives advisers the chance for a much-needed break.

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