In a recent Adviser Innovation article, Richard Arnold, an independent director of Financial Simplicity, said there is software disruption in almost every market, and consumers are becoming more conscious of their costs and seeking better deals from legacy providers.
“By my rough mathematics, we are headed towards a day where the average client wants to spend not $5,000 per year for financial advice, but $500,” he said.
“If I am right about this, then the average financial planner will need to maintain not 100 client relationships, but perhaps 1,000.”
At the same time, Mr Arnold said both regulatory pressures and markets demand are pushing advisers to be able to offer more customised portfolio solutions and to take greater care to ensure that those portfolios are properly monitored.
“At first glance, it would seem that advisers and the firms that employ them cannot possibly accommodate these simultaneous market demands for higher levels of personalisation, higher levels of diligence, lower levels of fees and much higher customer numbers per adviser, but with automation, all things are possible,” he said.
“What I believe is about to emerge to address these needs is the era of the ‘bionic adviser’, a human financial adviser who concentrates on building and maintaining personal relationships and structuring financial plans, armed with the bionics of an automated digital assistant who ensures that all elements of the plan are not only implemented but also properly monitored in real time.”
Mr Arnold added that because humans are by nature somewhat flawed, these new bionics will be able to overcome weaknesses and biases.
“We are already aware of digital assistants like Siri and Alexa in our consumer life, and now it is time for us to have digital assistants in our professional life as well,” he said.
I wonder when we will see the first FOS robo case ? Then the whole Robo system not even developed may have to be redeveloped.
Whilst modern IT can help efficiency, i think the personalisation of good advice relationship will stand for a long long time.
Robo advice is completely different to digital advice, don’t confuse the 2! This article is talking about advisers doing what they currently do, more efficiently, through technology. Robo, however, is replacing advisers…. as I say, 2 completely different things. But yes, robo could completely come unstuck!
Guys, the reality is this isn’t a hypothetical situation, it is running and profitable in the US right now. Through digital advice, there are practices offering value based, highly customised and personalised advice via digital advice solutions where 1 adviser has gone from servicing 100 to over 500 clients with no change in quality or complexity of advice. I have seen it! Many are charging $20-$50 per month for what we can/do charge $300-$500 per month here, exactly the same advice, just far more efficiently! There are research papers showing that clients over there are now spending hundreds of percent more at ‘non-digital’ practices, for no apparent difference in the quality of outcome…. and that’s the ball game.
And ‘not dead yet’, I agree that there may be some sort of complexity in areas you mentioned that digi advice won’t replace, but the bar is much higher than you think. You absolutely can digitise advice around CLink, financial education, tax, super, investing etc. Anyone who thinks certain types of financial services or levels of complexity are sacred cows is about to receive the mother of all disruptions!
What profit do they make ? Specific Numbers please.
What quality advisers do they attract ? Specific Examples Please.
How will commoditisation of advice deal with mediocrity ? ie How will quality of advice be measured ? What specific criteria please.
If the only job you do as a financial planner is to rebalance portfolios and provide investment advice then yes you’re going to be in trouble and i’d reckon you’d need 2000 clients. But most advisers also provide advice around Centrelink, cashflow, education around markets, tax and super, estate planning etc etc so we’re not quite extinct yet. It’s just going to be harder to get clients that’s the only issue so smaller client bases that are prepared to introduce friends will be the solution and this will lead to two types of businesses, advisers with small client numbers and higher touch businesses or the second type working for AMP.
Can you sue Siri if they take you in the wrong direction ? No. However advisers can be sued if the advice does not meet the needs of the client. Charging $500 pa and being exposed to the risk of being sued is an unviable business proposition. Advisers and start ups may try and do it but I won’t be investing in them. Reminder me again – how much is Uber losing each day to disrupt their market ? Now there is a women to women service to disrupt Uber. Great idea but when will either start to make money ? And their models are based on floored insurance arrangements that leave customers exposed. Will the regulators wake up ?