Government can provide “desperately needed reset” of financial advice in 2023
The Federal government has the opportunity to reset the rules around personal financial advice to benefit many thousands of Australians in its response to the final findings of the Quality of Advice Review, said Ignition Advice APAC Chief Executive, Craig Keary (pictured).
Keary says financial advice in Australia in 2023 will be largely driven by the Government’s response to the Quality of Advice Review final report handed down by Michelle Levy.
“This is an opportunity for a desperately needed reset of personal financial advice. We hope that the Government opts to implement the Review’s recommendations in their entirety, rather than being selective,” he said.
“We believe 2023 will see many organisations moving from strategic thinking to strategic execution around digital advice. We are also seeing executives and their teams think more broadly about how technology can play a role in making advice more accessible and more affordable, while also making it available at a time when customers need it most.
“Headwinds and economic challenges are almost certain to continue in 2023, so the need for Australians to have safe and affordable access to guidance and advice that can help them manage their money, protect their wealth and plan for a comfortable retirement is even more important.”
Reflecting on the Quality of Advice Review process throughout 2022, Keary says he was impressed with the quality of the debate and the collegiate approach of the industry and the diverse group of stakeholders who have a shared desire by to get Australia’s model for financial advice right.
“Levy’s brief was to think about affordability and accessibility for the end consumer, not interests of the industry, and the Proposals Paper reflected that significant changes to the current state were needed to achieve this.
“Post the Royal Commission, we have ended up with advice as a cottage industry which has become unaffordable for many who would benefit from it. Tinkering at the edges will not help. Levy clearly understood that and has indicated that her final report largely reflects the thinking in the Proposals Paper.”
Further, Keary believes the majority of the industry has acknowledged that fresh thinking and a logical narrative was required.
“Levy’s approach in starting with a ‘what’s possible’ model encouraged and fostered the industry to think about ‘how’ as opposed to ‘why not’,” he says.
“The objections we have heard are partly from those who benefit from the status quo, but also based on a misunderstanding of the scope of advice. Most contention has focused on product replacement, but this is just one small part of what Levy would consider as personal advice.
“For material improvements to be achieved, realistic solutions must be considered including the role of technology to scale advice and make good advice affordable and accessible to all Australians who want and need it.”
As a result, Keary says current trends continue to lend themselves to greater digital adoption of financial advice in 2023.
“Demand for financial advice continues to grow as the population ages; however, how people wish to consume it is rapidly evolving. We have seen an acceleration in digital adoption across most industries and it makes sense that consumers should be able to access financial advice in a way that suits them,” he said.
“The combination of human and technology, as in today’s hybrid digital advice models, is becoming more understood. Strong evidence out of the UK, as well as our own UK client experience, shows that hybrid adoption leads to greater access and affordability of advice.
“Bringing technology to financial advice is about growing the accessibility of financial advice. Technology removes the barriers of convenience, cost and confidence to make advice more accessible for all.
“Digital advice is perfectly suited to delivering single issue personal advice, for those with simpler or more episodic advice needs. It also clearly preserves the important value proposition of financial planners, who serve the more complex needs of consumers who have the need and budget for a holistic approach to managing their finances.”
Reflecting on how the role of digital advice has changed in the past 12 months, Keary says there is now widespread agreement that technology plays a pivotal role in helping organisations scale advice solutions to their members or policyholders.
“We appreciate there is growing awareness that today’s contemporary technology, which is supported by sophisticated advice algorithms and meets all compliance requirements, delivers confidence to the industry that digital advice is the only realistic way that advice can be scaled,” Keary said.
“We’re encouraged by the Quality of Advice Review and the significant reference to technology as an enabler for scale and how that can bridge the advice access and affordability gap.
“Implementing digital advice solutions is no longer a multi-year, expensive and complex, high-risk program of work, or enterprise-wide digital transformation. With the right provider, implementing digital advice can be faster, cheaper, and less disruptive than most digital projects.”
