Speaking on an XY Adviser webinar yesterday, joint managing director of Netwealth Matt Heine discussed his recent study tour to Silicon Valley in the US, saying some of the findings should set off alarm bells for the Australian financial advice sector.
“There were two scary things that came out of the trip. The first one was that – no longer are our clients actually comparing our services to other financial firms, rather they’re saying ‘how does the service you’re delivering me compare to that of Amazon or Facebook or all the other services that I interact with every day?’”
“Amazon is talking about developing a button that sits next to your washing machine that you press and washing powder arrives at your home the next day – how is the financial services sector in Australia going to keep up with consumer expectations that consider that as the norm?”
If the advice industry is not able to build a market that addresses this issue and open up communication with innovative technology firms, “we’re going to become pretty irrelevant pretty quickly because that’s the new expectation of how a service is delivered”, Mr Heine said.
“The other scary fact that came out of the trip was that the majority of Millennials and X, Y over in America would trust Facebook or Google to manage their money before a bank or an institution,” he said.
According to Mr Heine, the new frontier in financial advice is going to be a focus on artificial intelligence for driving higher returns, managing processes and engaging with clients.
Mr Heine said the way forward for the advice sector is acknowledging that financial services businesses are not going to master technology, rather technology firms are looking at financial services.
“For the financial advice industry it’s going to be about looking at how can we partner with these firms who are doing this really cool stuff,” Mr Heine said.
Excellent article. I am middle aged and in the Financial Services industry. I am fearful of the next 5 years and would love to know how I could add value to the tech companies.“For the financial advice industry it’s going to be about looking at how can we partner with these firms who are doing this really cool stuff,” Mr Heine said.
I wrote a similar article to this 18 months ago for an industry mag. Having said that I doing much the same work…
In my opinion, I feel Netwealth are trying to evolve to a position where the advisers who have being supporting them will be eventually made irrelevant. The problem with efficiency that
Matt mentioned is that this does help create growth but so do all the back office mistakes
I agree 100% with Matt. If you expect have a viable advice business targeting XY clients in 5 years time then you need to keep pace with expectations from your clients. The “I won’t be replaced by a robot” line is just naive. BTW this view is also supported in the KPMG research paper Banking on the Future. Who researched Aussies….not Americans.
Hi Mervin, I’m not suggesting advice will be replaced by Robo or direct offerings but that the industry needs to evolve and use technology far better to engage with clients (when, where, how they want) and to drive efficiency in the back office. E.g. Partner with and outsource to technology. There are lots of advisers already using technology really well in Australia but we are still a long way behind some of the “bionic advice” offerings in the states which are gaining traction amongst HNW, mass affluent and millennials.
Its about knowing which button to push and why.
I recall the same was said when a US fund manager decided to go for it without advisers and when the market corrected it nearly took the fund manager to the wall. At the end of the day electronic and computer driven advice is going to be general in nature and not personal and unless the legislation changes then these sorts of comments are just a nonsense
I wouldn’t write it off – Plenty of information is readily available online on how one should manage their money, and then look at the success of Acorns. Thousands of members investing…..that’s thousands who didn’t bother to seek personal advice. We should ask ourselves, why? Currently we still have relevance to a certain market but increasingly we look like a slow moving relic of the 90s. Let’s face it, what do we do different now than we did 20 years ago……I’ll answer that: Nothing.
I fill out about 20 x the paperwork I did 20 years ago