Research released by the Association of Superannuation Funds of Australia (ASFA) in July found that 18-to-34-year-olds are significantly more likely to seek financial advice via social media than any other age group and are more likely to fall victim to online scams.
As many are driven online for help due to an inability to afford to access professional financial advice, chief executive of DASH Technology Group Andrew Whelan reflected on how the advice profession has reached its current state.
“Clearly, it would be ideal if everyone could speak to an adviser or a trusted source of some sort, but the regulations have made that near impossible. Post-FOFA, in 2011, was where it really started to get really onerous for advisers, and that royal commission didn’t help,” Whelan told ifa.
“Now the advisers’ expenses and PI and all that stuff have just gone through the roof, and the regulations requiring a lot of admin support as well, so all of that is like a perfect storm to raise the cost of advice.
“Advisers, in our experience, what they say to us is they hate the fact that they have the skill set to help more people, but they can’t, because they’re busy pushing paper around to justify their work to a regulator, or the spectre of the regulator looking over their shoulder.”
Notably, a study published by Investment Trends in July found that advisers are now servicing an average of just 99 active clients, the smallest number since they began the research in 2007, due primarily to fee increases.
While Investment Trends’ head of research, Dr Irene Guiamatsia, flagged this as a sign of the advice profession stabilising after spiking to 120 active clients in 2023, it also highlighted the growing need for alternative methods to service other Australians seeking financial advice.
Looking forward, Whelan explained that many advisers are frustrated at having to turn away clients they could help and so are looking for ways to service lower balance clients at a price point they can afford while not harming their ability to make money.
“Advisers who want to engage with those guys have been asking about digital advice journeys that offer simple advice. So, advisers are doing this themselves. It’s not just the industry funds and banks,” he said.
Whelan explained that through technology, advisers can “deliver a far more simple offering with a different style of technology stack, which reduces the price”, providing service to those who would be otherwise unable to afford it.
He added that “it’s not the full service, because the client can’t afford that, but they can do something meaningful for the client”.
“I think that it’s really important that advisers who have been doing it for a long time are actively seeking out ways to do things differently, and I think the key is thinking about different technological approaches to delivering advice,” Whelan said.
As institutions prepare to re-enter advice on the back of legislative reforms, Whelan said the government needs to ensure that the legislation doesn’t harm advisers in an attempt to smooth the way for super funds.
“I would like to see regulations equally impact advisers in a positive way. QAR is clearly making advice attractive for institutions to come back to. When you read the legislation, it is making it easier, and I think the regulator wants that,” he said.
He added that he would like reforms to be applied to provide equal benefit for both advice businesses and institutions, “so that the consumer can decide where they want to get advice and not be funnelled in a certain direction”.
This argument is particularly important given that the current draft of upcoming legislation will prohibit charging for services performed by the proposed new class of advisers, ultimately barring smaller firms from employing these advisers as their businesses will be unable to absorb the costs of having them, while super funds will be able to do so.
Appearing on Ausbiz earlier this month, Whelan spoke on the re-entrance of super funds to advice and how they, and the wider advice profession, can and likely will utilise technology to service low balance clients.
“Over the next 12 months, what we will see is a wide variety of industry funds coming out with follow the bouncing ball, self-help, advice journeys. So you can choose, ‘Am I in the right fund?’ ‘Do I have enough for retirement?’ ‘Do I need insurance?’ That is, it will be available for free to millions of Australians,” Whelan said at the time.
“I think give it 12 to 24 months, I think the industry will have pivoted to be able to offer this across the board.”
