In its Quarterly Report for Q3 FY2024, Novigi highlighted the issues the advice industry is currently facing regarding the delivery of digital advice.
“Australians yearn for financial advice. Despite this, financial advice remains difficult and expensive to obtain,” the report said.
“Though there have been some issues with the recent tabling of QAR-related legislation, providers of financial advice now feel that they have the certainty required to tackle the problem of advice.
“Given the dwindling number of financial advisers in Australia, and the increasing range and maturity of digital advice solutions in the market, technology will doubtless be an essential part of the solution.”
While it has become essential for advice providers to improve digital system efficiency, the report noted the importance of keeping the quality of the client experience front of mind while making changes, ensuring minimal description to services.
“The challenge here is integrating a digital advice tool from a third-party provider with internal data sources and … external data sources,” the report said.
“In doing this, seamlessness and consistency of advice across channels — i.e. digital, in person, phone etc. — is key.
“For organisations that already have data management platforms and data quality solutions in place, this will be relatively straightforward.”
As the low number of advisers continues to be an issue, the report said improving the efficiency of digital platforms has become paramount to meet the high client demand.
“The limited number of advisers and the rising number of clients per adviser point to a need for increased efficiency,” the report said.
“The back-office of financial advice providers generally includes an advice platform serving as a system of record, these are often described by their users as ‘slow’ and ‘clunky’.
“If this continues to be the case, it is likely that more will be done outside of the advice platform, through integration with best of breed applications and the use of data management platforms.”
To improve efficiency, Novigi said advice providers should integrate digital advice systems to address low stake inquiries to start, though this should be approached with caution.
“People will inevitably need to be carefully guided along the journey. Advice providers would be well served by starting with limited and scaled digital advice implementations and experimenting with ways to nudge customers towards using them,” the report said.
Data to deliver advice
Discussing challenges related to data gathering for advisers, the report said that although Michelle Levy proposed expanding consumer data rights (CDR) in the 2023 QAR, little has been done to achieve this and it doesn’t appear to be getting easier any time soon.
“Gathering the data required to deliver advice still poses a significant challenge. The expansion of CDR to superannuation and insurance has been paused, with Treasury not due to review this decision until the end of 2024,” the report said.
“Other valuable data is held by government agencies like the Australian Taxation Office (ATO) and Services Australia, and no current plans exist to make this easier for advisers and advice tools to access this data.”
Although Novigi recognised that the issue has yet to be resolved, it said that solutions likely already exist to fix the data issue but are not yet in place, meaning advisers will have to find alternatives for the meantime.
“Though this problem has not yet been solved in practice, we believe that the solutions are known. Some form of public utility, developed in partnership between government and industry, could make it possible for client data to be accessed for the provision of advice,” the report said.
“The solution here may indeed be an expansion of CDR, but the loss of momentum and lack of a plan to incorporate ATO and Services Australia data into the CDR regime is cause for concern here.
“Advice providers and their partners may need to explore other avenues.”
As the industry prepares for QAR-related regulatory reforms, Novigi shared a hopeful sentiment that financial advice may enter a period of growth and opportunity for the industry.
“With the regulatory handbrake taken off financial advice, we expect the number of advised Australians to grow rapidly in coming years. As well as improving our overall financial wellbeing, we anticipate that this will lead to a host of new opportunities for advice providers throughout the industry,” the report said.
The definition of “advice” in our regulations and legislation might need just a little bit of work.
Can I suggest that ASIC might like to consult the plain speaking Justice Michael Lee. I’m sure he could come up with a better definition of advice
Thinks there’s a few typos the regulatory handbrake and skyrocketing costs haven’t been taken off, they’ve been aggressively increased by Treasury and ASIC
So sick of these ads for sub par digital solutions which can complete basic models accurately or uncompetitive product providers spruiking nonsensical answers
“With the regulatory handbrake taken off financial advice…”
These comments are insulting and insensitive to financial advisers, who have suffered enormously from increased red-tape and compliance requirements. To date there have been ZERO benefits from QAR. If the legislation is implemented as drafted by Treasury, the annual consent process may be slightly improved but this will be dwarfed by the impost of forcing advisers to undergo product provider audits of advice documents every year for every client. This will bog us down with more red-tape and force advice fees to go through the roof. Meanwhile these same product providers will be advertising free financial advice, to be delivered by unqualified sales reps, skirting most of the consumer protections. QAR is now looking like a complete disaster, which will further decimate the profession and harm consumers.
“With the regulatory handbrake taken off financial advice”. Grossly mistaken. Shameful, throw away statement belittling the advice profession. Then, what do you expect from a product manufacturer.
“With the regulatory handbrake taken off financial advice, we expect the number of advised Australians to grow rapidly in coming years.”
Am I reading this right ?
Seriously, this is like the twilight zone !
My fees are going up considerably on 1 July to take account of inflation plus additional ACIC fees plus ADDITIONAL red tape.
What am I missing ????
“With the regulatory handbrake taken off financial advice…” ??!!??
Clearly another organisation more intent on regurgitating a false narrative than observing reality.
Australians want financial advice which is tailored to them and based on professional judgement and will pay for the conversation. They do not want retail advice waiting for SoAs or paying for inefficient idiotic government mistakes taxes on past mistakes and pi cover