Over the last few years, there has been a lot of hype about Robo Advice and AI in the delivery of advice in the field of financial planning. The aim has been to provide affordable financial advice.
None of these products have been a runaway success.
Robo Advice
In general, it is conceded that an investment platform providing Robo Advice is an efficient means of getting started in choosing investment products. In recent years, Robo Advisers have also been using more complex AI to recommend a specific risk profile based on information provided by the client, their income, and current assets.
However, they do not offer a platform where a holistic approach can be taken where both lifestyle and investment goals can be considered in one space. The report is more likely to be a set of graphs showing the predicted growth over a period of time, based on long term averages and uniform investing over that period of time.
Robo Advice is limited for either the DIY investor or the Financial Adviser who needs to include a much wider range of products and lifestyle considerations.
Affordable Advice
The Australian Government is committed to making financial advice affordable.
The consensus by the financial advice industry is that it costs the adviser $1,000 in compliance costs before any conversation can commence with a consumer. This cost immediately removes advice from a professional as a choice for any consumer.
Senator Hume has stated that the government is reviewing the current complexity of compliance requirements and the government plans to address this issue. The Government wants financial advice to be affordable for the average consumer. Unfortunately, the time frames seem to be listed in “years” rather than “months”.
Investment Trends recently stated that two in five Australians think financial advice is not affordable.
Financial Advice: What Consumers Really Think
In August, 2019 ASIC released Report 627. The report summaries some preliminary research commissioned by ASIC to establish what consumers really think about financial advice.
Overall Demand for Advice
The survey found that
- 27% of Australians had received financial advice in the past
- 12% of Australians had received financial advice in the last 12 months (Group A)
- 41% of Australians intended to get financial advice in the future
- 25% of Australians intended to get financial advice in the next 12 months (Group B)
- 20% of Australians intended to get financial advice in the last 12 months but had not gone ahead. (Group C)
According to the Australian Bureau of Statistics, 2016 Census QuickStats there were approximately six million families. Assuming that four million of these families are in the target range of requiring financial advice this, equates to
- 1,000,000 families intend to get advice in the next 12 months (Group B)
- 800,000 families intended to get advice in the last 12 months, but did not proceed (Group C)
Extrapolating from these figures some could assume that of the million families planning to seek advice only 200,000 families or 20% proceeded to get advice.
I believe there are many reasons why these 800,000 families did not proceed, with the cost of advice together with the format of the advice being major reasons for the failure of so many families to proceed with getting advice.
The survey found these are the key characteristics of consumers who intend to get advice in the next 12 months. However, the survey indicates that 80% of these people will not proceed with getting advice.
An interesting result was that of all Australians who want advice, 20% are seeking advice on Budgeting or Cash Flow Management.
200,000 families want this simple advice on budgeting and cash flow in the next 12 months – that’s a lot of new clients with very simple advice needs
Financial Mappers allows the provision of this affordable advice, together with Financial Literacy Program in a 5-year plan that should take less than one hour to create, where the consumer completed the digital Fact Find in Financial Mappers.
ASIC found these were the consumer perceptions of the benefits of receiving financial advice.
ASIC found the three top barriers to not getting advice were:
- Too expensive
- Financial circumstances are too small
- Like to manage their finances as DIY investors.
Simply “Not getting around to it” was quoted as 24% for Group B and 38% for Group C.
Young investors are going digital – Advisers need to adapt
Greg Iacurci published in October 2020, article, Young investors are going digital. Financial advisors need to adapt with them.
The key points were:
- Millennials are twice as likely as some older investors to consider using a robo-advisor, according to a recent Vanguard survey.
- Millennials and Generation Z have largely grown up in a tech-laden world. They’re also more likely to want financial advice in the age of Covid-19
- Many want advice beyond investments and prefer coupling digital help with a human advisor.
This group of investors is now the largest demographic. Financial advisers who don’t adapt to provide the services these new clients demand are likely to be left behind.
There needs to be a cost-effective means of servicing the Millennial’s current financial needs in the digital format they demand and at a cost they are willing to pay. This group are set to benefit from one of the largest intergenerational transferences of wealth in history.
The Millennials will be the future full-service client with considerable wealth either generated by their personal desire to save or from inheritance.
Building trusted relationships with this group now are likely to protect the financial adviser’s future business.
How can Financial Mappers help?
Financial Planning Software for Financial Advisers
Financial Mappers has recently undertaken a major upgrade in their software, with the introduction of a means of converting the creation of a financial plan into easy-to-read text that forms part of an automated report. A report called Simple Statement of Advice for 5-Years has been developed for advisers.
As the first step in providing affordable financial advice and delivering what the consumer wants Financial Mappers has the process to provide:
- Financial Advice for the next 5-years that excludes insurance, SMSF, and financial product advice.
- The 5-year Plan is shared within the Financial Mappers software for the client to review
- Financial Literacy Program that is built into the software and can be delivered in automated emails
- Access to Financial Mappers software for 12 months so the client can continue to explore their options as they work their way through the Financial Literacy Program and Tutorials relating to specific investment types, but not financial products.
- Seek Additional Specific Advice at any time, paying the appropriate advice fees. The client could share a self-generated report or plan with the advisor to commence the conversation.
- Use the Connect Client option so all communication is encrypted within the software – No More Emails
The client completes the Fact Find within Financial Mappers, and the adviser imports this information into a plan and optimizes the plan to give the solution to the client’s nominated objectives for the next five years. All the information is provided to the client within the plan that is shared.
Financial Mappers believe an adviser could complete this plan and SOA in less than one hour.
By engaging with the client through the Financial Literacy Program and offering more services such as short zoom meetings or additional advice on matters such as insurance, superannuation and investment product recommendations, the adviser can commence a long and trusted relationship with this new client.
Plan Map
As part of the upgrade, a new report called Plan Map was designed. This allows the user to generate a report, detailing in easy-to-read text.
Click on the image to view the report in the Client Review Gateway by selecting the TAB, Report. Other TABS allow the adviser to upload supporting documents and educational content.
Demonstration Video
For further information, register for the Demonstration Video of Financial Mappers Pro on the Financial Professionals page.
After you have watched this detailed video contact Glenis Phillips on the Contact page or phone 1300 162 945 to access the Financial Mappers Pro Resources.
Glenis Phillips SF FIN Designer of Financial Mappers
Further Reading
Disclaimer: Financial Mappers does not have an Australian Services License, does not offer financial planning advice, and does not recommend financial products.
