We are on the precipice of a significant financial advice boom...
As we re-enter the world of office meetings and overseas travel, we are simultaneously experiencing a post-pandemic evolution, resulting in a ramping up of the global pace of digital adoption.
We have now entered FY23, so it's the time to discuss how these shifts in economic, social and consumer behaviour affect the financial advice we give. In addition to that, the way our advisory practices must operate digitally overall, or our own communication as finance professionals.
According to McKinsey, companies have accelerated digitisation by 4 years, with executives recognising the strategic importance. This heightened role of digital is impacting our financial advice operating model, promoting a shift toward new innovative ways to interact with clients and deliver products and services, and in turn, solving the age-old conundrum of accessible and affordable advice for everyday Australians.
The economic growth of an industry is usually driven by the triangulation of regulatory changes, consumer demand, and technological advancements. This occurrence is happening within our industry and has the propensity to drive significant growth and opportunities for licensee and advice businesses alike.
Here's how these 3 factors are changing and evolving the financial advice industry in FY 23:
- Regulatory changes: Numerous regulatory changes have spun off of a new advice model as a result, redefining the value proposition of financial advice into one that's shaped around client goals, behaviours, and personalised strategies - away from the traditional product and commission-based model.
- Consumer demand: Demand for financial advice is at an all-time high, with ASIC reporting that 50% of Australians have unmet advice needs and 25% have an intention to seek advice.
- Technological advancements: Consumers encounter tech innovation in almost every interaction they experience in the marketplace. We are upon the fourth industrial revolution, Industry 4.0. Smartphone ‘life’ applications now play an integral role in how we bank, shop, and socialise. This widespread behavioural shift emphasises that both the financial advice process and advice client experience need to progress towards more digital means and move away from the likes of static, paper SoAs.
Our top five trend predictions for FY 23
With the industry agenda of accessible and affordable advice, we need to respond to the way consumers' transact via mobile, especially following the increasing trend of banking & payment application use.
Financial services will be required to make a significant investment into modern advice tech, digital platforms, and machine learning in order to successfully deliver financial advice to the mass market.
We have identified five key themes that advice businesses should pay attention to over the next financial year:
- Client experience is the new competitive battlefield
Consumers want an advice experience that's a hybrid of digital platform (app-based) and human adviser, the 'do it with me' model. The is also a significant demand from consumers to see and hear what you stand for and find a common ground in shared values.
- Digital advice transformation
Moving into 2023, it is more important than ever that the financial advice process leverages digital technologies. As we continue to operate within an industry with ever-changing regulations, and consumer market expectations. By enhancing your business model with advice tech, there is a greater capacity for your business to respond dynamically in a demanding marketplace.
- Environmental, social, and governance initiatives (ESG)
Consumer demand for ESG investing is on an upward trajectory. We are due to witness the largest intergenerational wealth transfer from Boomers, Gen Xs, Millennials & Gen Zs. With the latter generations being highly motivated to invest sustainably for the future, advice businesses must be prepared.
- Migration to digital efficiency
Technologies that encourage greater efficiency, such as digital SoAs and machine learning, can support the removal of unnecessary admin, compliance tasks, and data entry, to ultimately minimise any friction in the advice process.
- A heightened focus on cyber security
Threats on financial institutions are only increasing, and the precedent of the onus has now been set at both an AFS Licensee and advice practice making cyber risk too great to ignore. Businesses will need to drive greater focus on cyber security measures, as staying on the front foot in this space will be crucial.
There is no better time than now to boost your digital strategy to stay competitive and increase the value of your advice value proposition.