When regulation hampers advice innovation

Innovation might be an opportunity cost borne by Australia’s regulatory environment, but there could be a section of consumers who will continue to place value in the human element of advice, according to these advice executives.

Maria Lykouras, executive at JBWere Australia, noted leaders needed to “continue to invest in that business in a way that it continues to respond to the different market conditions that you’re operating in”. 

“You’ve got a certain amount of funding each year, and what you find is that non-discretionary items end up taking most of the money that you have to invest in your business, and that holds you back from your ability to continue to evolve,” she said at the 2023 Stockbrokers and Investment Adviser Association (SIAA) conference in Sydney. 

“That’s a real problem in the industry. We’re very reliant on technology to support us, but we’re not the quickest industry to move [on it].

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“I look at the way consumer behaviours are changing and the way they want to interact with us, particularly with the younger generation, and I have yet to see many players really moving forward in that space and trying to drive change in a way that’s going to respond to the future needs of our clients.”

She attributed this, in part, to time and energy devoted to regulatory changes that pulled away from investments in business and industry development. 

Mark Ryan, director of wealth advisory at Deloitte Australia, welcomed technological advances that would cut down the administration in advice delivery. However, he questioned if, as the industry underwent its innovation cycle, human advisers would come back on top. 

“If we think about in a decade’s time where we’re going — yes, these new technologies might come and maybe they are reasonably invigorating and intuitive, but I wonder whether we’ll end up doing [a] full cycle again as we go through this innovation cycle over the next decade, and it comes back to you in the room that’s still standing in the industry with your deep personal connections, your relationship, and how you connect with your clients,” he said. 

“To Maria’s point, who’s coaching to this stuff at the moment? We end up spending money on rent, we end up spending money on innovation, but back on our own professional development and how we actually communicate, surely this is going to be a key point of differentiation into the future?”

Already, firms like Morgan Stanley Wealth Management had implemented AI to the business, with a Next Best Action tool that acted as a platform for personalised communication and client engagement.

In the US, JPMorgan Chase announced it was developing its own IndexGPT product to deliver investment advice.

According to Ryan, there could still be a segment of consumers distrustful of such digital interactions.

“I wonder if in a decade’s time, as we watch ChatGPT run through and there’s a few scams and worries, whether we just come out on top again as a professional group that has invested in ourselves and connections with our clients, to create more sustainable business models that aren’t tied down by red tape and the admin we’re doing,” he said.

“The admin is extraordinary at the moment [...] This is where I think computers can come to our assistance.

“But I also feel there will be a level of trepidation around that trust factor as it pertains to the digital interactions.”