Digital advice providers move full steam ahead with new solutions

While technology stacks have been a common tool in advice firms for a number of years, some practices are now moving to adopt entirely digitised offerings, with positive reception from consumers and advisers alike.

As cutting-edge technologies make a splash in financial services, it looks like there is no turning back with some firms moving so far ahead as to employ the metaverse in their digital advice offering.

Last month, Fidelity International launched a metaverse experience within Decentraland — a 3D virtual world browser-based platform — with the aim to “educate users” on the importance of financial planning, money management, and investing.

Dubbed the Fidelity International Campus, the global asset manager said the platform “represents a new frontier in financial education”, providing a dynamic and engaging way for users to learn about finance in the digital age.

Speaking to ifa last week, a spokesperson for the company said that as more people gained access to the web due to the availability of high-speed internet, adoption of mobile devices, and the emergence of social media, “digital financial education became even more easily accessible and prevalent”.

Not only has Fidelity’s recent launch highlighted the greater scope of accessibility that comes with these technologies, but also the array of needs that can be met in the process, ranging from professional advice to general education.

“As Web3 technologies develop and start to integrate into everyday life, it’s only a natural progression for financial education to leverage these technologies and meet investors where they are at,” the spokesperson said.

According to Fidelity, its international campus has been positively received by its users, with the firm revealing that its first NFT collection sold out within days of launch, while its collection of 16 wearables — clothing for digital avatars — has been redeemed 7,000 times.

This innovative approach among digital advice providers had been brought to the attention of the Quality of Advice Review (QAR) lead, Michelle Levy, who pointed to digital advice as a vehicle that can mitigate the effects of a shrinking advice industry.

“I am convinced that digital advice tools can make good quality financial advice widely available,” Ms Levy wrote in the 267-page final report.

Ultimately, the QAR did not propose any separate regulation specific to digital advice but suggested that digital advice providers be subjected to a new duty to provide “good advice”, as extended to all providers of personal advice to retail clients.

“The Corporations Act does not treat the provision of digital advice differently from other financial advice and there is no reason for it to do so if the recommendations in this report are adopted,” Ms Levy continued in chapter 10 of the report.

“I am satisfied that the recommendations in this report will assist existing providers — financial institutions and financial advisers — to provide more digital advice tools to their customers and clients. In many cases they will do so at no additional cost.”

Joining the ranks of organisations that have supported Ms Levy’s findings in the QAR, financial planning software Midwinter endorsed the positive impact that digital offerings could have more broadly on advice.

Midwinter chief commercial officer Steve Davison argued that a whole segment of the market is locked out of receiving the service due to prohibitive costs today.

“The role of digital advice has been called out in the report as a key enabler for providing affordable advice offerings and reducing complexity for professional advisers,” Mr Davison said.

Importantly, Mr Davison emphasised that fintechs would never completely replace the role of an adviser but would rather facilitate advice for consumers with simple needs and offer a path to comprehensive advice through client engagement tools and advice journeys delivered by advisers.

“We believe technology will play a pivotal role for both relevant and non-relevant providers by increasing the reach and relevance of financial advice,” he concluded.

Since then, fund manager abrdn and three fintech firms, Ignition Advice, moneyGPS, and Advice Intelligence, have moved towards establishing the Australian Digital Advice Association (ADAA), aimed at advocating for change in industry regulation and improving the delivery of digital advice solutions.

ifa has learnt that financial services Minister Stephen Jones’ office expressed interest in a visible industry touchpoint with expertise in digital advice, with which it could interact as it tackled related policy.

Jacqui Henderson, chief executive officer of Advice Intelligence, told ifa earlier this month that the association was suggested after collective consultation with Ms Levy, alongside a brief audience with Minister Jones on the subject.

Alongside a shrinking industry, Ms Henderson emphasised that the most viable solution lies in enhancing economies of scale through the digitisation of financial advice. This, she said, could be achieved by adopting a “hybrid model” that combines the expertise of human advisers with the efficiency of digital tools and “robo” models.

“Consumers want to engage wealth services the same way they use technology in their day-to-day lives, via online and apps. Digital advice supports the progression of a new era of financial advice, and this is key to shaping the industry’s evolution,” she concluded.