Wealth management in a ‘midlife crisis’ and advice is the solution

Speaking at the Stockbrokers and Investment Advisers Association conference in Sydney, Bell Financial Group co-chief executive Arnie Selvarajah argued that there is a “real imperative” to create more self-funded retirees.

“I think we're in a midlife crisis. I think we were mature, we're experienced, but we're looking around and asking ourselves, what's next?” Selvarajah said.

“I think there's an imperative for change. There's a lot of positive about this industry, but I think we all know that there has to be change.”

Top of the list is the number of Australians over 65 that are reliant on the pension to some level, with the CEO noting that 58 per cent of this cohort receive a pension, while two-thirds of those are on a full pension.

“Our pension bill, or our superannuation payment bill per annum is about $55 billion a year now, and that's projected to go to $110 billion by 2050,” Selvarajah added.

“In that same time, the ratio of work age people relative to pension earners is going to go from 4.1 to 2.7, so demand is going up and supply is coming down. There's a real imperative as an industry that we work out how to provide advice and to create more self-funded retirees, or the country is going broke.”

Also speaking at the event, Otivo chair Ian Knox said the challenge for wealth managers and advisers is making the process of getting advice to consumers “scalable”, given there are “nearly 14 million people in this country seeking guidance and advice, and we've got 14,000 people doing it”.

Responding to this point, Selvarajah said outside of the roughly 2.2 million people currently receiving advice, the probability of the rest of that 14 million “getting to a point where they can fund themselves through retirement is low”.

“There's an imperative for us as an industry to change, to be able to work out how we can get them that advice – and technology, obviously, is part of that solution,” he said.

“I think the last imperative for change is that the clients have changed. What they want from us as an industry has changed. There's a generational change to how they use technology. There's a generational change to how they engage with advisers or with providers of service.

“All those three things means that we're at a point where we have the opportunity to actually to grow as an industry, but it is going to take some thinking on our part and how we're going to change what we do today.”

He added that while clients are seeking a single point of contact – one adviser, one portal, one trusted relationship – it is difficult to get everything they need from one provider.

“At the moment, as an industry, we're very siloed in how we provide services to our customer base, our client base, or the investors. We find that investors effectively go to multiple providers to get all the things that they need,” Selvarajah said.

“But that's not necessarily how they want to deal. The top reason that people don't engage with advice today is they can't engage in the way they want and when they want.

“As an industry, we're not designing the service proposition as an industry to supply it to clients in the way they want to receive it. But I think if you wrap all of that up, there's this one thing that they need from us, and that's peace of mind. We have to think about how we deliver that, rather than performance numbers and rather than thinking about portfolios, we're going to start thinking about people.”

Vanguard Australia managing director Daniel Shrimski echoed these comments, adding that wealth managers and advisers will continue to move further towards relationship management.

“[Advisers] are going to find themselves sort of focusing more on the the behavioural coaching, the goals-based advice, and I think a lot of the investment management, the stock picking, might actually end up with the investment specialists and the investment management folks within firms,” Shrimski said.

This, he added, should lead to advisers ultimately being able to “increase the size of their books”.

“I think we've democratised investing. Over the next 10 years, we're going to democratise advice,” Shrimski said.

“I think there's no doubt about that. I think the second one is, as it relates to that, is the personalisation of advice. You think about spending habits that people have, how people are living their lives, how they want to live their lives, I think the technology working in the background will create personalised advice for the individual, not something generic, which is maybe where we are today.

“So, personalised advice, that high-touch white glove service, that's still going to be needed. Nothing of that sort goes away, but the technology will be doing its thing in the background, and I think it'll create great solutions for investors, and it can be really powerful.”