Rise of the robots comes to financial advice

The increasing robot density or the role of software in financial advice has multiple benefits to offer even through the digital transformation taking place in the advice industry is more nuanced according to Rice Warner’s study.

Technology will play in particular a key role in the area of advice for retirement through facilitating better engagement, efficiency and sophisticated simplicity, with the expectation being that the industry would need to move from a model of the provision of retirement advice to retirement counselling.

However, current models of engaging with members who need advice is lacking as 50% of accounts belonging to members aged 65 and over that are still in an accumulation product despite the potential tax benefits of moving to a pension product, the study found.

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But with millions of superannuants requiring early intervention, technology would need to play a key role in ensuring these members are reached while data analytics and member segmentation could ensure members were not left behind.

Further, funds would be able to engage with members more regularly, provide nudges to seek formal advice or change behaviour and track goals progressively over time on the pathway to retirement.

According to Rice Warner, RegTech (regulatory technology) would further drive efficiencies by both boosting the quality of compliance with regulation and reducing the cost of compliance, by pushing the burden of compliance onto computers.

At the same time, integrating software with customer data held in the registry and prefilling external data through open banking or online collection would be expected to reduce the cost of undertaking fact finds, fast tracking the provision of advice and increasing the probability that members will use online tools.

Finally, as the retirement market develops there will be a need for increased complexity in the delivery of retirement advice.

This would mean that more sophisticated retirement strategies that take into account potential for aged care, home equity release, and longevity products such as comprehensive income products for retirement (CIPRs) would require ever more sophisticated actuarial algorithms that could be used to give consistent responses across multiple channels.

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Now the Union Super Funds are moving into near monopoly status, with scores of salaried tied agency sales reps running around under the protection of the intrafund advice legislation, the real solution to this problem is to totally throw out FOFA & start again. Revert personal advice fee Opt-ins to Opt out, and overhaul the unnecessarily complex Statements of Advice with a simple one page consolidated Fee Disclosure Statement (including the investment manager fees) at the time of new investment/fund switching. Given that the "best interest" test is defined in the latest ASIC Regulatory Guides as whatever the client thinks it is on the day (or is whatever they read last week in the Barefoot Investor book), today's statements of advice are an anachronism in this day of robo-advice. It's interesting that online firms can engage in online hawking for new funds, but no one else can. It's is becoming a total joke.

Keep an eye out for who our journalist friend joins forces with next ;)

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