As the financial industry continues to undergo transformations, the conversation about the sustainability of the ongoing service model has taken centrestage.
Speaking to ifa, Kelly King, director and senior wealth adviser at Iconic Wealth, said that while the current ongoing service legislation and wording is not conducive to the next generations, an ongoing service model of some sort is “absolutely sustainable” in today’s day and age.
“This has a lot to do with the majority of ongoing service clients being pre-retirees/retirees,” Ms King emphasised.
“Their numbers are not going to dwindle any time in the immediate future. This group generally have more complex strategic needs and want assistance to navigate social security entitlements.”
For individuals in the 50-plus age group, financial advice takes on a different role. “I find that people in the 50-plus group are more of a ‘do it for me’ group compared to, say, the Millennials, who want different levels of interaction with a financial advice professional,” Ms King explained.
“They often have investigated a lot more online prior to meetings and often want confirmation of what they are already planning to do. Then go and do it themselves.”
However, with the impending generational wealth transfer, financial advisers must consider how and when they provide advice.
Ms King believes that failure to adapt could lead to being left behind.
“With the Millennials and younger generations, the ongoing advice relationship, I think, will be significantly different. Their ability to get into homes, potential lack of superannuation due to an entrepreneurial side hustle environment will mean more debt and less mandatory retirement savings.
“Advice in the future will be more of a luxury item if the cost to serve doesn’t change significantly. They are not going to pay thousands of dollars per annum in a digital age where potentially ChatGPT will be able to tell them the best way to reduce their debt and save for their future. What value are you bringing as an adviser and at what cost?”
As technology and artificial intelligence advance, providing substantial value as an adviser will become paramount.
“I imagine a lot of hybrid models tailored to specific groups of people,” Ms King said.
“I expect that those firms that want to adapt and attract millennials will look at some sort of low cost Robo Advice arrangement for simple needs all the way through to being an exclusive consultant for a client and their more complex needs.
“Right now, as it stands, the current ongoing service legislation and wording is not conducive to the next generations,” Ms King cautioned.
To remain relevant and meet evolving client needs, adaptation is key.
“We need to adapt to the changing environment and generation.”
At 25 I knew that I knew everything, now I am over 50 I realise I didn’t know that much. The more things change the more they stay the same. Millennials will want a different interaction to their currently preferred approach once they have more money and have gone through a recession or two.
Academic research over the last 40 years has without doubt shown those with a Financial Planner and in an ongoing relationship, have a higher level of financial well-being. They’re happier, healthier, more confident. The amount of funds they have is not the issue. If that is what the research shows, then legislation needs to change to enable those ongoing relationships to thrive, and Advisers need advocacy that makes it easy for consumers to have an ongoing relationship….not some piecemeal or adhoc or transactional event-driven advice model. Unfortunately the FAAA and Governments are under the influence of Super funds that want to change that.
Some people need advice and some don’t…
Many people need would benefit from advice but either don’t know they do or don’t seek it…
Ongoing service is absolutely necessary for some and unnecessary for others…
At the end of the day it is the adviser and/or their client who determine whether they are receiving value for money (or not) and whether an ongoing service is of benefit.
Soon enough, retirees will start using ChatGPT and robo advice, too. Then what?
Chatgpt doesn’t give current advice, the AI’s knowledge base is capped at 2021
Without any preliminary qualifications, I just now asked ChatGPT “what is a DAP from RAD strategy?” and asked for an example. Perfect response. It even acknowledged MPIR was assumed. Anyone can Google MPIR for current rate.
I have no idea what this is. Nor do I want to know. To hell with AI (and ASIC, AFCA and the rest)
ChatGPT can give the right answer, but you need to know what question to ask it.
I can appreciate the sentiment of this article however so called self-taught investors are the most dangerous and represent more risk than benefit to an adviser practice. If they are prepared to follow the guidance of a computer programmed AI that is known to have significant errors and flaws it shows a lack of intellect not shrewdness as they would like you to believe.
An adviser’s role is to analyse situations and provide strategies and solutions, not to “yes” or “no” a strategy a client has derived. No different to Dr Google, these youngsters do not know what they don’t know!
Pooled costs where all super fund members pay a fee for their “advisers” to flog product is ongoing. No disclosure or fds needed
The intrafund advice (trail servicing) fee, charged without consent, is ongoing forever.