Episodic advice can’t be ‘cut down’ version of advice

Episodic advice to fill the unmet financial advice need might not be financial advice in the holistic sense given a “cut down” version of advice would cost just as much as holistic advice to service due to rising compliance, according to IOOF.

IOOF chief executive, Renato Mota, said episodic advice, scaled advice, or financial wellbeing services could include coaching or budgeting and needed to be largely digital in nature and have a much lower price point.

“Financial wellbeing is not a cut down version of advice because I think if you look at it as a cut down version of advice you end up with a problem that it's actually still too expensive to service,” he said.

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Mota said the industry needed to start with a blank sheet of paper on what this kind of advice looked like.

“If you're starting from scratch, with a view of helping to coach people helping to improve literacy, helping them make better decisions in a digital native way, how would you do it?” he said.

“You can still help people with the skills we have – you just can’t get into their personal circumstances, and you can’t provide strategy or product recommendations. But there's still a lot you can do.

“Product recommendation is not at the heart of financial wellbeing or financial advice. What is, are decisions that we can control in respect to financial affairs.”

Mota said this included understanding financial affairs, coaching, budgeting, understanding risk profiling, and helping people engage and have more confidence around their financial affairs.

“For many people financial wellbeing could be the difference between getting something or getting nothing at all,” he said.

“I think getting something will help them will help build their confidence, and possibly over time then choose to engage with advice.”

He said a lot of this episodic advice, or financial wellbeing service, would be delivered digitally such as podcasts or webinars.

Mota noted IOOF had established an incubator business that looked to explore how this service could work.

“With our business now, with MLC, we've got a million unadvised members in our products, so we can digitally engage with them. There's a lot of things that can be done – we can partner with our self-employed advisers in doing that,” he said.

“We can make the content more geographically based, and actually look into thematics that are more relevant to some geographies for some professions than others. There's a lot of ways you can customise this content in a way that is more meaningful to the client and actually engages with our community.”

Mota said the firm would launch the first version of its incubator financial wellbeing business later this year.

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There is new technology in the market addressing this need and it's a clear step forward compared to the early arrival of robo advice (which is merely ETF investment portfolios dressed up with a front end risk profile). Technology group Map My Plan chaired by ex parliamentarian Bernie Rippoll is a step forward solution to the looming unaffordable advice dilemma affecting millions of Australians. The technology work seamlessly with advisers and their clients or with super funds and members or with corporates and their staff. The opportunity for wealth companies is to address a national challenge using this type of technology as opposed to developing in house solutions aimed at competitive advantage and inevitably linked to product.

I find it highly dubious that Bernie, who was central to introducing FOFA legislation, is now capitalising on the decimation of the financial advice industry and nobody appears to be even the least bit interested.
His move from public sector legislator to private sector investor brings to mind the line from the documentary Inside Job which was essentially an investigation into the cause of the 2008 Great Financial Crisis: "It's a Wall Street government."

Isn’t it wonderful the good ole Bernie massively helped with significant over regulation and bs compliance Red Tape costs for Advisers that limit consumer access to Advice.
Lucky Bernie and his buddies now have a Robo Advice solution to try to flog to Advisers and the masses.
Here’s a tip Bernie, fix the max over regulation first you useless Canberra bubble clown.
No conflicts of interest in your roles are their Bernie?

‘Holistic advice’ is much more than financial advice. It should include longevity planning, and analysis of values. It may also require longevity coaching (also known as retirement coaching). Longevity planning is available online and stand-alone already. The remainder require some personal interaction – but none of it falls under the licensing and compliance regimes.

This is a turning point for traditional financial advice. The trend to ‘specialisations’ as a subset of financial advice (eg, aged care) are important, but add to the burden of compliance.

It makes sense to offer the personal aspects of ‘holistic advice’ as a separate discipline, preparing people for ‘financial advice’ (or AI online services), and for other professions such as preventive health (more than just GP services), career and estate planning. This advocacy role could be a great career progression for older financial planners, who want to continue to contribute but without the compliance burden hanging over them.

The problem with "cut-down" advice is the best interest duty. You have to consider everything that is or could be important to the client..... How to do this and SHOW you have done this properly is almost impossible.

"Product recommendation is not at the heart of financial wellbeing or financial advice" - Surely Mota said that with a smirk on his face! I'm sure the purchase of licensee's and IOOF own products on their AFSL are all one big coincidence.

He does have a point though. The whole system needs to be reviewed and start on a clean slate. I would suggest the AFSL regime would be one of the first things to go, with all compliance (rules, expectations, templates, etc) handled through a single body so it is uniform to the whole industry. Currently the swarth of compliance experts and lawyers all justify their means and create their own set of rules, templates etc which create more costs and uncertainty. We saw this with the Covid super release rules, where no adviser would touch it.

Next they would need to look at the corps act, BID, and of course the code of ethics, to actually make them workable in an efficient and commercial way.

I suspect he's thinking "how do I get my Call Centre Advisers to flog more product within the regulatory constraints." ..so the solution is let's expand intrafund advice and chop advice up into little pieces and no doubt seek an exemption....here's a thought why not reduce the regulatory red tape and compliance for fully qualified FASEA and licensed advisers and then it doesn't matter.

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