2023 looks set to deliver significant change on the back of previous years, which have been characterised by a shrivelling workforce, compliance pressures and heightened education standards.
Advisers have given an inside look at some of the themes they think will dominate this year in a recent Adviser Ratings report.
Adviser expertise will be needed more than ever
Last year was challenging for investments, with several asset classes performing sub-optimally.
A previous Adviser Ratings study revealed the preference for direct shares dropped 23 per cent among advisers, with annuities and bonds also in retreat, while the use of managed accounts grew 20 per cent.
Analysts at J.P. Morgan predicted 2023 will contain a few more bumps before asset prices recover.
“Consumers with a cushion of savings from lockdown have mostly exhausted their post-COVID excess cash and for the first time are getting hit by a broadening negative wealth effect from all assets simultaneously — whether that’s housing, bonds, equities, alternative/private investments or crypto,” JP Morgan’s global head of equity macro research, Dubravko Lakos-Bujas, said.
“This proverbial snowball should continue to gain momentum next year as consumers and corporates more meaningfully cut discretionary spending and capital investments.”
Tech will dominate innovation
More practices are looking at how they can incorporate technology into their offering, with an increasing number making use of technology to manage clients, including workflows, automation and outsourcing.
Adviser Ratings expects ChatGP — a software that mimics human speech — to play a bigger role in 2023 and into the future.
However, the firm found that some advisers are still hesitant to integrate AI into their daily operations at the risk of compromising their more traditional service values.
Fee rises are on the cards
An Adviser Ratings survey found that 93 per cent of practices plan to lift their fees in 2023.
Practices have faced rising compliance, education and PI insurance costs, in addition to continued high demand and inflation. In the three years to the end of 2021, the median fee rose 40 per cent to more than $3.500.
Advice will continue to be unaffordable
Advice affordability is expected to continue to be a tension point, despite the matter being analysed by the Quality of Advice Review (QAR), industry groups, super funds and practices themselves.
While Adviser Ratings projected some measures will be taken this year to bring down the cost of advice in the wake of the QAR, this, it said, will likely take time.
New regulations could change day-to-day operations for advisers
Michelle Levy handed the QAR report to the federal government at the end of last year. Questions about which of her recommendations will be adopted remain as the industry awaits Minister Stephen Jones’ response.
Depending on what is changed, scrapped or adopted, several recommendations have the potential to influence fees and costs.
