The major trends expected in financial advice in 2023

Further fee rises and embrace of new technology are some of the key trends likely to dominate the advice industry in 2023, according to Adviser Ratings.

Other trends included potential new or amended regulations with the Quality of Advice Review which would also address affordability of advice.

Unfortunately, affordability was still likely to be a “tension point” over the course of this year.

“The matter has been raised consistently by Treasury, the Quality of Advice (QoA) Review, industry groups, super funds and practices themselves,” Adviser Ratings noted.

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“While we expect some measures will be taken this year to bring down the cost of advice, as a result of the QoA Review, the effects will likely take time and prices aren’t expected to drop swiftly.”

Question marks still hung over what would be tweaked, removed or stay the same in the industry following the review, Adviser Ratings added, even as more than 90% of practices reported plans to lift their fees in 2023.

“Few would be surprised to hear this; in addition to general inflation, practices have faced rising costs for compliance, education and PI insurance, as well as continued high demand.

“In the three years to the end of 2021, the median fee jumped 40% to more than $3,500.”

Additionally, financial advisers’ investment expertise was expected to be prized now more than ever after 2022 presented plenty of challenges on the investment front. Early results from Adviser Ratings’ Landscape Report showed bonds and annuities were in retreat while preferences for direct shares had dropped over 20%.

Investors were experiencing a negative wealth effect from all assets simultaneously, meaning adviser inputs would be of increased importance to investors.

Finally, Adviser Ratings expected profitable advice practices to cleverly embrace new technology such as artificial intelligence in the coming year.

“As practices continue to be crunched by costs, more are looking at how they can incorporate technology into their offering.

“Increasingly, we’re seeing more profitable practices make better use of technology to manage clients, which includes workflows, automation and outsourcing. 

“We expect to see ChatGPT – the emergent software that mimics human speech – to play a bigger role; however, we also note some advisers are still dubious about how to best integrate AI while maintaining their more traditional service values,” it stated.