A new report produced by Deloitte for Iress, Advice 2030: The Big Shift, has found technology will play an essential role in the advice profession in coming years as new competitors disrupt the market.
According to the report, the number of advisers could see an estimated increase of 1.1 per cent annually, reaching 16,708 by 2029. The report noted that this is a conservative estimate, not taking into account potential new market competitors or the impact changes to legislation may have on attracting new entrants.
Despite the minimal growth expected in the talent pool, surveyed advisers expect their client base to increase by an average of 27 per cent over the next five years, servicing an additional 486,000 Australians.
Furthermore, if advisers are able to increase their client base as predicted, advisers could be generating an additional $2.1 billion in revenue over the next five years.
While the advice sector has enjoyed the lack of competition for clients over recent years due to banks no longer providing advice, the steep decline in the number of advisers, and the high demand for service, regulatory change could introduce new competitors to the market.
In particular, the Delivering Better Financial Outcomes (DBFO) reforms are expected to introduce a new class of advisers and allow institutions to re-enter the advice sector as well as focusing on using technology to make advice more affordable for the Australian community.
Combined with the rise of robo-advice and self-serve technologies in the market, advisers will now be forced to become more competitive in their service offerings and pricing.
“Businesses that fail to be proactive in response to recent changes stemming from the Quality of Advice review and emerging competition from superannuation funds, finfluencers and mobile application solutions, may fall behind more aggressive competitors and struggle to adapt their traditional business models,” the report said.
Of the advisers surveyed, those that were more optimistic about their potential revenue growth placed greater importance on the use of technology and automation in changing how advice is delivered, rather than changes to their business model or the way fees were charged, to help them increase their revenue.
Megatrends in the market
As the advice profession has shifted to become more competitive, the report has identified megatrends in the advice market, some of which are in direct opposition to others.
Some of these trends favour “high-fee, personalised service offerings” with advisers working with a smaller number of clients and charging a higher fee for service.
Others suggest advisers need to prioritise “scalable advice products delivered digitally to reach a broader client base”, providing clients with access to investment products and general advice, leveraging emerging technologies to deliver more affordable services.
The report also recognised the increased use of technology to improve practice efficiency, integrating automations and digital delivery tools to both reduce the cost of service and enhance face-to-face delivery.
Of the surveyed advisers, 60 per cent believe a greater use of technology and automation is important for their business, and 76 per cent say the sector needs to evolve to serve a greater volume of clients using technology just to remain profitable, highlighting the importance of advisers utilising new technologies.
This strategy also allows advisers to access clients outside their immediate community, providing new opportunities to expand their client base, however, the report also cautioned advisers to “be mindful of varying digital literacy among customers and adjust accordingly”, ensuring they don’t isolate existing clients by using technology beyond their capabilities.
And the headline was meant to say CSLR could increase their levies oops!