Back To The Future?
Still, the new AppleTV documentary about Michael Fox, shines a light on the ravages of Parkinson's disease. It is also a reminder of how bright his star was as Marty McFly in the 1985 classic, Back To The Future. What a great movie, going back in time to change things for the better in the future.
If only time travel was possible for the financial advice industry. But wait.....!
Now, coming back to the year 2023
It finally arrived. The highly anticipated announcement last week from the Minister for Financial Services Stephen Jones. He confirmed that the Labour government will accept 14 of 22 recommendations from the Quality of Advice review, although legislation isn’t expected until late 2023 / early 2024. Clear winners are advisers and super funds. However, for the forseeable future, banks and other financial product manufacturers will be kept on the sidelines of providing advice.
Bottom line, we are seeing a reversal on multiple fronts of the over-reaching "consumer protections" that successive governments and regulators rolled out for the last 10+ years that have literally brought the advice industry to its knees. Was that Marty McFly in Canberra?
What does this mean for advisers?
The proposed changes for advisers relate to the removal of red tape in a number of areas including to SOAs, fee disclosure statements, safe harbour, and ongoing fee renewals. This reduced compliance burden represents a great opportunity for advisers to streamline their business operations and improve the client experience. And for licensees, platforms, life insurers, fund managers and the many existing and emerging technology players to continue to innovate around advice enablement.
Having said that, these changes still have to be successfully implemented. This may involve revisiting and even potentially reversing extensive work already performed by many advice businesses over the last few years, remodelling their workflows and investing in fit-for-purpose technology solutions to meet the heavy regulatory obligations of the past.
Jumping back? to the future
It’s exciting to crystal ball what lies ahead for the advice industry:
- 💡 Will the adviser drain be reversed and ceased advisers be enticed back, supported by the proposed experience carve-outs to education standards?
- 💡 Will the industry attract more tertiary entrants? New supply exists in adjacent courses like accounting, legal, mathematics, business management and information systems.
- 💡 Will overall profitability of the advice industry improve? It could reverse the consolidation trend of small self-licensed practices, forced through economic realities, to join large corporatized licensees.
- 💡 Most importantly, will more consumers be able to access financial advice? Advice businesses adopting more digital capabilities could nurture a greater variety of high balance and low balance clients across the advice spectrum.
Expanding consumer access to advice through super
While super funds may be chomping at the bit to deliver more scaled advice to members, there is much work for them to do too. For starters, they need more clarity about the scope of advice they can deliver and the requisite educational standards for employees. Other priority areas include:
- 💡 Reviewing their systems and technologies in back office and front office
- 💡 Continuing to expand engagement with third party financial advice businesses through referral panels customised for a fund’s membership, and
- 💡 Streamlined member and third party adviser authority and communication processes.
More opportunity for industry service providers to step-up
For the myriad of other product and service providers to the advice industry, Minister Jones' announcement simply serves to remind us how much the adviser and advice business landscape continues to change. It requires the most persistent, forensic approach to understand market gaps and identify opportunity when it emerges. Then there's knowing how to approach directly, or partner with other providers to deliver meaningful solutions that solve a problem, rather than simply sell product. That applies equally to investments, insurance, administration, systems and technologies.
Adviser Ratings is in the same camp, as a provider of actionable data solutions. It's investing in new data sets, data lakes and machine learning to extract the most value out of the collective content for different customer use cases. That includes:
- 💡 Identifying ideal audiences for different vendors through customised segmentation;
- 💡 Building algorithms to classify advisers and advice businesses under risk categories to support differential treatment from licensees, lenders, insurers and super funds; and
- 💡 Spotlighting future investment flow intentions of advisers over the next 6+ months by asset class, products, investment styles, and platforms.
Partnering is another way it is expanding reach, with the ProductRex collaboration, then recently announced acquisition, a perfect example.
So, to all you financial Marty McFlys out there, buckle up. In the wise words of Doc Brown himself, "Your future is whatever you make it. So make it a good one." And with that, let's set the coordinates to a future where financial advice is streamlined, client-focused, and powered by data.
See you in the future, Marty!
