Regulation making advisers ‘gun shy’ on strategies

Australian financial advice and tech firm Padua co-founder Matthew Esler said while there has been a proliferation of platforms on the market with a range of feature and fee benefits, it has been the opposite on the strategy side.

“The number of strategies that have been recommended is narrowing, which is a real concern,” he told ifa ahead of the Adviser Innovation Summit 2023.

“I think this is largely driven by the compliance and regulatory regime that advisers have been operating under, which has placed extra pressure on them in the last five to 10 years.

“Because red tape has increased, advisers have stuck to what they know. It means maybe that they're a little bit gun shy to move outside of those parameters.”

According to Mr Esler, over half of the strategies recommended by advisers are within the first 20 strategies.

“There are over 1,000 strategies that we’ve identified but advisers are probably recommending 100 of them,” he said.

When asked how to shift this trend, Mr Esler said advisers need guidance on the strategies available to them that could suit their clients.

He said Padua’s technological tools allow advisers to complete a digital fact find with their client, which helps the adviser understand what strategies could meet their clients’ objectives.

“It’s a binary equation, from zero to one. Clients are either eligible or not eligible,” Mr Esler argued.

“Most strategies are based on key client demographics like income, age, whether they're a homeowner or not, whether they're single or married, and those sorts of variables. So, it’s important that the adviser understands which strategies the clients are eligible for.”

Secondly, advisers could use technology to model and implement those strategies, and quantify how it could boost the clients’ cashflow, he added.

“We rank the strategies to help the adviser understand the quantifiable benefit and which ones they should implement for their client,” Mr Esler said.

“We’ve been doing a lot of work around that to take that compliance and technical strategy heavy lifting off advisers.”

The best time to be an adviser is now

Mr Esler also commented on the recent uptick in adviser numbers from 15,833 to 15,857 (according to the Adviser Ratings Musical Chairs report), a reversal of a downward trend that began in 2018.

He said this trend could continue as new entrants come into the market.

“With FASEA winding up at the end of 2021, I think we’re going to see a resurgence in the industry,” he said.

“I think there’s no better time to be a financial adviser than right now. There are over 15,800 advisers advising over 2.6 million clients but there’s another 7.5 million or so Australians who want advice.

“As such, there’s a huge opportunity for existing and new advisers to meet the demand for advice.”

Padua partners with Adviser Innovation Summit

Mr Esler’s comments preceded his session at the Adviser Innovation Summit, for which Padua is providing support as a platinum partner for the first time.

“The Quality of Advice Review has shone a spotlight on the problems facing advisers, particularly the regulatory burden that came through from the Future of Financial Advice (FOFA) and the Royal Commission,” he said.

“I think the Adviser Innovation Summit is going to highlight the technology and the different software applications available to advisers to alleviate some of that pressure. We'll be meeting as many advisers as possible because it's important to ensure that they are providing high quality advice in a timely and cost-effective manner.”

To hear more from Matthew Esler about how to use technology for efficient, high-quality advice generation capability combining digital capability with internal human resources, come along to the Adviser Innovation Summit 2023.

It will be held on 8 June at the Great Hall, University of Technology Sydney, and 15 June at Grand Hyatt Melbourne.

Click here to buy tickets and don’t miss out!

For more information, including agenda and speakers, click here.