It is unlikely there will ever be enough financial planners in Australia to fully meet the need of consumers for advice but the gap can be solved through digital technology, says Craig Keary, CEO Asia-Pacific at Ignition Advice.
“The decline in the number of financial advisers in Australia is a cause for concern at a time when older investor segments are growing rapidly, but at the same time, the industry should also be focused on how digital advice technologies can increase the accessibility and affordability of financial advice,” Mr Keary says.
“More advisers will not make advice more efficient or cost-effective for the majority of Australians. The answer does not lie in planner numbers alone but rather in how advice is provided and how people wish to access it.”
He says a large advice gap has opened up between the growing demand from retail investors and super fund members who would benefit from advice that is cost effective and easily accessible, and the shrinking supply and rising price of traditional human-delivered financial advice.
“Whilst many of the recommendations from the Royal Commission have been adopted, accessibility and affordability of advice has not improved. Rather, what has been observed is a reduction in financial adviser numbers and a significant rise in the cost of traditional advice delivery – in part due to complying with much higher costs of industry regulation.
“As well, from the perspective of the consumer, we have seen a fall in the ability of the industry to deliver advice at affordable price points.
“This advice gap can only be solved by digital advice technologies – there is no other realistic route to providing low-cost, consistent, compliant, robust personal advice at the sort of scale required to materially close the advice gap.
“The main hurdle for the industry is a lack of conviction about whether digital advice can be delivered in a compliant manner, at scale. This contrasts with the UK financial services industry, where the value and compliant nature of digital advice is now well accepted by institutions and moving towards mainstream adoption.
“Our submission to Treasury in respect of the Draft Terms of Reference for the upcoming Quality of Advice Review offers a definitional framework of digital advice for the industry, encompassing a broad spectrum of services that include basic financial tools and calculators, to robo-advice, to the digital enablement of financial advice delivery.
In our view, digital advice is the digital delivery of personal advice, and a related Statement of Advice, which complies with the Best Interests Duty and other obligations, and encompasses retirement, insurance and investment needs. It is also an ideal way to deliver intra-fund advice by super funds to their members. “While each category in the framework has a part to play in assisting and advising retail investors, it will be only via digital advice, which allows advice at scale, that more Australians will have access to the advice and support they need for their financial future,” Mr Keary says.
You can access Ignition’s full submission to the QAR here