Digital offerings can eliminate the need for personal advice

Digital advice may provide an avenue for advisers to be able to circumvent the complex regulatory burden associated with providing compliant personal advice, by allowing advisers to implement a low-touch, general advice only relationship with lower balance clients, according to Quantifeed.

The digital advice provider’s head of partnerships for Australia and New Zealand, Graeme Brant, said by setting up a digital advice offering in such a manner that the adviser was providing factual information only to the client, advisers could potentially implement a low-cost offering to service clients who could not afford personal advice.

“You can actually provide some quite comprehensive wealth services without crossing over into personal advice,” Mr Brant said.

“If you come in and I’m not asking you any questions or getting any information from you, I show you a supermarket shelf of investment opportunities and you completely self-direct and say well that [portfolio] looks interesting to me, you can remain in the camp of general advice, and of course the cost of providing that is a whole lot lower.

“If I was to say to you ‘do this risk profiling questionnaire because I want to know where to put you’, then I’m starting to get into personal advice and the cost of SOAs and that sort of thing and it’s hard to provide that type of advice at [a lower] price. Whereas remaining in general advice can then be at the lower end of the price spectrum.”

Quantifeed chief commercial officer John Robson added that the Asia-based firm had received legal advice that its digital platform would fall under the definition of general advice in Australia.

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He said the group had launched a number of recent partnerships with Asian financial services organisations including Singapore’s DBS Bank and Taiwan’s Cathay United Bank, with advisers in these markets facing similar issues as their middle class swelled and the traditional model of advice became less accessible and affordable.

“What these organisations are realising is that there is an opportunity in the vast numbers of customers they have who don't warrant a personal advice relationship, to still give them guidance on what they should be doing with their wealth,” Mr Robson said. 

“If you look across Asia, wealth is growing very quickly, it is growing most in the mass affluent area and if you take the traditional model of the adviser giving each one of them a game of golf every year and a bottle of red wine, there’s not going to be any economics of scale in that.

“The only way to get to that vast number of customers that are going to need wealth management advice and sensible portfolios to invest in so they can reach their retirement with dignity, you’ve got to employ technology. That’s the awakening that’s coming.”

Digital offerings can eliminate the need for personal advice
Digital offerings
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