Why 2024 is the year of digital advice traction
When Minister for Financial Services Stephen Jones laid out his manifesto for the Labor Government’s proposed 2024 legislative revisions to financial advice, a centrepiece was addressing the quality advice supply/demand equation that is seriously out of whack.
His timing is spot on, coming just after the recent FAAA Conference in Adelaide where there was real evidence that the promise of digital advice tools is no longer a faraway dream but a very present reality.
Minister Jones’s platform has now accelerated that reality.
He also managed to catch the industry on the backfoot with a bold policy flourish complete with a ‘back to the future’ green light that caught the ire of the professional association. The burden of duty for delivering simple advice will now fall heavily on the shoulders of the superannuation sector, an increasingly harnessed workhorse saddled with the additional task of delivering a turn-key solution to a very large problem.
That problem of course is an immediate solution to the supply/demand inequity of too few advisers serving too many Australians requiring access to quality financial advice.
A large emphasis in Jones' speech on 7 December was placed on explaining the re-introduction of a limited advice model; simple advice to be offered by super funds, banks and other financial institutions. Further, he highlighted the significant role that emerging digital technologies play in solving the quality advice conundrum.
“The benefit of digital advice is that it enables the client to receive helpful advice at a time and place that suits the client."
The echo within our industry is clear: one of the most significant forces shaping the future landscape is the rapid advancement of digital advice.
We are now in an era in which we are starting to see the steady maturation of a digitised approach to advice, and the emergence of new capabilities signifies a pivotal moment in our industry’s evolution. For a former adviser myself, this isn’t just exciting – it is game-changing.
We haven’t reached a fully mature state but the increasing recognition of the role of digital is undeniable, and the evidence was showcased at this year’s conference. Dedicated presentations delved into the exploration of turning the realm of digital advice from a concept into our tangible reality. Thought leaders in the financial services space gathered to share groundbreaking tech innovations - live and in action.
Advisers seized the opportunity to engage with pilot offerings. All in all, there was an evident shift in focus toward the future of digital advice, and how it can shape the future of practices.
But to truly understand why this is significant, you need to understand what Australia’s financial advice ecosystem looks like right now, from the adviser’s perspective.
- Fewer advisers (just 15,700 according to ASIC) which sees an upward trend in the average number of clients (120) per adviser (as per Investment Trends)
- Less than 10 per cent of Australians receiving advice, despite ~40 per cent having indicated interest in advice (ASIC Report 627)
- Advisers seeking a “holy grail” of targeted technology (in other words, “improve my tech stack and integrate the disparate pathways that make up my existing - and frustrating - tech paradigm”)
- A great distance between advisers all realising the urgent need for integrated tech rollout and its actual implementation, due to risk, implementation, and cost challenges. The gap is far too wide and needs to close dramatically.
So, given these broader dynamics, is the role of technology in financial advice now more compelling than ever? Yes! Add to that the opportunity to plug frustrating gaps via the integration of existing technologies (both between and with other ecosystem participants) and we have within reach the holy grail for advisers – one that makes meaningful progress in delivering seamless, quality advice services for more clients.
The new benchmark? Seamless integration with existing tech stacks
In its recent Adviser Technology Needs Report, Investment Trends' Irene Guiamatsia, said: "There is no subsiding in the interest advisers express for seamless data transfers between the various systems they use. While the focus remains on traffic between planning software and investment platforms, there is also substantial demand for integration with bank accounts, trading tools, and appointment scheduling software – all of which can support advisers in meeting this growing client demand.”
It is clear that tech stack integration has obvious benefits for scaling advice to meet demand, and the quality of that advice, delivered to more clients. Another issue it solves is job satisfaction. A 2022 AdviceTech and Staff Experience report by Netwealth noted a staggering 78.2 per cent of advice businesses believe that an integrated tech stack improves staff satisfaction. However, the same report revealed that less than one in 10 (6.9 per cent) of firms have a highly integrated system of technologies.
The underlying problem is a lack of standardised datasets which is an issue that is not unique to Australia. In fact, this challenge is being experienced globally, including in the US. It is more than just a tech issue; it is a business problem that goes to the heart of an advice firm’s profitability, efficiency, and staff morale.
The message is clear: advisers are crying out for more integrated systems to streamline their operations and improve client service.
For licensees, they have a vital role to play in this shift to implement integrated data systems as advice businesses seek help from their licensee to achieve a more integrated tech stack. This gives licensees a pivotal place of influence to support advice businesses and manage other stakeholders like financial product providers.
By advocating for integration and setting it as a requirement for partnerships, licensees can encourage
product providers to prioritise this crucial feature in their offerings.
What's in it for the adviser?
The ultimate question, really: how does the adviser benefit? Well for advice businesses, seamless integration means:
- The ability to serve more clients efficiently
- Deliver advice more quickly
- Operate a more profitable practice.
As to the licensees, their support of advice businesses to win the holy grail of integrated systems will lead to stronger, more profitable partnerships. It is a win-win situation where both parties benefit from increased efficiency and reduced operational costs.
There are also benefits for product providers through seamless integration - increased profit, growth, and customer retention. It also helps to solve the great challenge of our time: access to affordable, quality advice that is both scalable and efficient.
Colonial First State’s enhancement to their FirstChoice platform in collaboration with Elemnta is a direct example
of this through facilitation of multiple advice tech integrations to remove the need to re-enter data.
The overwhelming positive feedback from on-the-ground advisers on the substantial time savings they have experienced through this capability speaks incredible volumes about the demand.
Back to this year’s FAAA conference. If there’s another thing that was made clear, it’s that this progress is not a solo act and it requires alignment between legislation and the evolving reality of our industry, supported by a shared understanding within the community.
This sentiment echoes Jones' recent address pinpointing industry consensus as a linchpin for the success of the Quality of Advice Review reforms.
As we look toward 2024 and beyond, the call for digital evolution becomes more than a mere theme - it propels us into the future of financial advisory services.
The industry is making strides, and it is encouraging to see.
Shaun Green is chief executive of Elemnta.