Using technology to reduce advice hours
The financial planning industry is in dire need of regulatory reform, but advisers no longer have the luxury of waiting for change.
More than 3,000 advisers left the industry in 2021 alone due to rising compliance and educational requirements.
While regulatory reform could reduce the cost of providing financial advice and save advisers about one-third of their time, according to a recent Financial Services Council (FSC) analysis, there is another way forward.
The power of technology can already cut the time advisers take to prepare advice – but only if advisers adopt a fully-digital approach.
This isn’t to say that abolishing the safe harbour steps for complying with the Best Interests Duty and replacing complex Statements of Advice with simpler Letters of Advice wouldn’t make a difference.
But these changes aren’t going to happen tomorrow, especially when many practices are leaving practical technology solutions laying idle on the shelf.
Fully leveraging advice technology requires more than implementing the right software to work – it requires a new mindset and the adoption of smarter ways of working.
This is the only way to create far more efficient businesses, which can lead to higher practice profitability and lower the cost of advice, while broadening the accessibility of advice.
CUTTING TIME-CONSUMING ACTIVITIES
Collecting data about a new client is one of the most time-consuming activities an adviser can undertake.
Too many advisers are still filling out fact finds on paper and then they (or their paraplanner) re-enter the same information online. This adds needless time to the process. Less than one-third (31.9%) of advisers say they are currently using an online fact find and risk profiling tool, according to Netwealth’s AdviceTech 2021 report.
An even better approach is to ask the client to fill in their own data online. Many people are comfortable doing this for most online interactions, such as tax returns, insurance applications, or other services that request personal information.
Perhaps if clients do this task themselves, advice practices can factor the time they save on data entry into their pricing structure. Given more than one-third of Australians think advice is too expensive, it could be a win-win approach.
The FSC’s report says regulatory reform could cut the time to produce advice from 23.9 hours to under 16.8 hours. Advisers could produce 2.2 Letters of Advice a week as opposed to the current 1.5 Statements of
Advice. These documents are too long and contain too much legalistic disclosure that does not help clients. Only one in five people who receive long financial product disclosure documents say they read them, according to ASIC.
It is possible to create more effective documents that still meet legal disclosure obligations by cutting down on manual effort and duplication.
Similarly, advisers also need to ask themselves why they spend time needlessly tailoring advice disclosure documents down to the structure of individual sentences. The key is to identify what makes the advice personalised and only make changes within those boundaries.
Making the most of face-to-face time
Spending quality time with clients is essential to learn about their needs and build the trust that underpins advice. But this can take a substantial two to four hours, particularly when the relationship is being formed.
ONLINE MEETINGS ARE A MORE EFFICIENT OPTION
Many advisers have switched to online communication channels such as video conferencing, instant messaging, email, and phone in the wake of COVID-19. The use of online meeting tools has risen from just 45.7% in 2020 to 75% of practices, according to Netwealth’s AdviceTech 2021 report.
However, much of these online interactions are with existing clients, with advisers still reticent to start relationships through online channels. There is no reason this barrier can’t be broken down, creating significant benefits for both adviser and client.
Many people used online psychological therapy for the first time during the height of the pandemic. Research trials (pre-pandemic) have shown that online therapy is as effective in reducing symptoms as face-to-face therapy. Client satisfaction with the online therapy and relationship with the therapist was at similar levels to face-to-face therapy.
If video conferencing works for such personal medical relationships – where trust is a crucial component of the relationship – there’s no reason advisers can’t start more client relationships online.
ONLINE ADVICE SERVICES
The shift to an all-digital approach requires new processes and procedures to ingrain habits. Yet many clients are already comfortable with the digital world.
Genuinely adopting digital advice at a fundamental level can create new business models, but too many advisers still think of digital advice as a threat rather than a complement to their existing practices.
ASIC recently said that almost three-quarters of 183 surveyed advisers did not want to provide digital advice in the future, although they were keen on regulatory technology (RegTech) solutions. These are technology solutions that help businesses comply with regulations efficiently and less expensively.
The reality is they are missing out.
Advisers could potentially add to their existing offer with more tailored online advice that catered to simple life situations with no manual effort. This is a step above existing robo-advisers that offer simple exchange traded fund (ETF)-based portfolios based on a client’s risk profile.
Clients could be encouraged to take up this service through lower prices, sharing in the benefits of a more efficient service. Many of these clients would never have been able to afford traditional advice, so there is no cannibalisation – it is making the pie bigger.
These are just some of the benefits that advisers can take up today if they exploit the true benefits of technology. If they don’t, many more will be forced to leave the industry while waiting for regulatory reform.
Andrew Zietara is head of product at Midwinter Financial Services.
AUTHOR
Industry Expert
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