With an inability to effectively address the unique circumstances of individuals and a growing sense of uncertainty around trust and security, a new system was brought to life and it is labelled as hybrid advice.
Hybrid advice offers a digital solution that uses aspects of traditional advice and elements of modern technology to automate labour-intensive services without removing the human connection provided by an adviser. Above all, this technology provides the client with greater visibility and transparency while allowing them to access the time cost savings of more efficient advisers.
In recent years, the advice gap has shown few signs of narrowing. Research from Investment Trends has shown that 12.4 million Australians have unmet advice needs, a figure that is only likely to grow as cost-of-living pressures continue to rise across the nation. It is particularly prominent among young people, with 81 per cent of Australians aged between 18 and 34 indicating they are in need of financial advice, an issue that needs to be at the forefront of ongoing industry discussions.
The digital advice technologies needed in order to increase the accessibility and affordability of financial advice are already available, offering a way to deliver a low-cost, quality service at the scale needed to begin bridging the gap. With the Quality of Advice Review expected to be handed down in a matter of weeks, we anticipate technology to be a centrepiece of these reforms, as a way of acknowledging the increasingly important role it will play in the industry moving forward.
intelliflo’s eAdviser Index measures customers’ business metrics against their use of intelliflo office. The latest research from May 2023 showed that “champions”, who maximise their use of technology, generated 54 per cent more revenue and 76 per cent more ongoing revenue per adviser. This signifies the ability for hybrid advice to reduce costs by promoting automating labour-intensive services.
From video conferencing tools to secure client portals, consumers are continuing to grow their digital literacy skills at a growing rate as using these forms of technology becomes standard practice across our everyday lives. While these client-facing tools and digital solutions are bridging the advice gap through greater efficiency, the most significant growth is happening on the back end for advisers themselves.
Whether it be the pre-population of client information or the ability to access real-time data feeds within a hybrid advice solution, reducing manual labour-intensive tasks is significantly increasing efficiency, with the time savings able to be passed through to the client.
In contrast, while on paper, the robo approach may appear to provide an effective and affordable solution; it is not the preferred approach by consumers. Within the sector, we are seeing that growth for these providers is slow, patient capital is required to support robo-advice providers, and there is not a viable number of people who are happy to trust their finances with an algorithm. It is for these reasons that we see the future of robo-advice as simply not feasible and sustainable.
At the same time, the industry lacks the capacity to significantly broaden its reach using traditional methods only. As the usage of digital tools and processes continues to cement its position as the standard for industry practice, it will be difficult for advisers using traditional methods to offer a service that is comparatively affordable, engaging, and fully transparent.
To coin a common phrase within the advice industry, it is clear that technology will not replace advisers, but advisers who use technology will replace those who do not. With clients able to see their banking and superannuation information on their mobile phone and computer at any time and from anywhere, it makes sense that they expect their financial adviser to offer the same service.
Promisingly, we are continuing to see innovations within the advice sector that empower consumers and allow them to take more control of their personal finances, without losing the human connection they get from talking to a real person with lived experience.
Within this, clients can choose to review and keep on top of their portfolios with the level of adviser interaction that suits them. Some might be happy to manage their finances with relatively little adviser interaction, while others will gain greater reassurance and engagement from more regular contact and input from their adviser. The key is that a hybrid advice model provides that flexibility, a factor that consumers have come to expect from many of the services they use daily.
Hybrid advice will go a long way in bridging the advice gap, while also working to alleviate the stigma that advice is not affordable. As an industry, we need to encourage more people to access advice and making it more affordable is the key to doing so. Improved technology usage is the future of advice in Australia and it is here to stay.
Stuart Alsop, head of sales at intelliflo
Excellent points in this article. Compliance remains a burden that, mercifully, technology has been able to absorb some of the cost-inefficiencies. Let’s hope ASIC / AFCA does not see the need to punish us with a pseudo SOA.