Regulatory red tape impedes abrdn’s investment in Australia’s advice sector

It’s no secret that digital advice providers in Australia have faced significant challenges in staying afloat due to the strict regulatory red tape that governs the financial advice industry.

Earlier this year, AMP’s new Digital Financial Advice Market Scan, which among others, surveyed abrdn, Ignition, Iress, Mercer, and Midwinter found that digital providers want greater certainty regarding regulatory parameters that will enable their solutions to provide personal advice with confidence.

The report also noted that all of the recommendations made by the Quality of Advice Review (QAR) would remove these regulatory barriers, inadvertently supporting digital financial advice.

While speaking to ifa at the recent Adviser Innovation Summit, Jason Nyilas, abrdn’s head of retirement and digital innovation — who previously stated the firm could begin operating in Australia within weeks if the QAR proposals go ahead in their entirety — confirmed abrdn would opt to stay out.

He said the government’s adoption of only 14 out of the 22 recommendations made by the QAR is insufficient in terms of removing red tape.

“It doesn’t encourage us to invest more money into Australia,” Mr Nyilas said.

The specific recommendation he is eager to see implemented is Michelle Levy’s good advice duty.

Namely, Mr Nyilas believes the industry will not witness a transformative shift without the adoption of the good advice duty — a duty which Ms Levy said would be enshrined in the Corporations Act and would apply to all providers of personal advice to retail clients.

“Good advice is the foundation,” Mr Nyilas believes.

He told ifa that in addition to good advice, abrdn wants to ensure “all of the other people that have been excluded” are included in the QAR response.

“So we’re sitting on the sidelines with an opportunity to invest here and we see this as being a market that can accelerate really quickly for digital and really help both the advice force and consumers, but we’re not prepared to do that in its current form,” Mr Nyilas said.

“But who knows if the rest of the recommendations get adopted then we may well see more presence here.”

While abrdn is active in Australia, it operates in a limited capacity in the advice industry.

“We do have a presence here. We do have digital journeys in place in Australia, but the bulk of our total package that we work with, our own advice force, is in the UK. abrdn has the largest advice platform in the UK, has its own advisors called 1825, which is the year abrdn was founded. And it also has digital journeys that support advisers,” Mr Nyilas explained.

He added that if abrdn were to expand its presence in Australia, the company’s relationship and engagement would be influenced by its approach in the UK.

“On our own platform in the UK, we have 1825, our own advice force and when people, for example, come up for retirement or at retirement, we target them with emails from those advisers and they click through and they can actually see how to what their likely retirement income will be,” Mr Nyilas said.

“That then leads into a digital journey which allows them to get, because they’ve completed the journey, 15 to 30 minutes free with an adviser, and then after that the adviser can articulate what value they can add to complete that whole process,” he continued.

“So, what we’ve seen in terms of metrics is a 10 per cent click-through, in terms of those emails because we’re targeting the right people, and 85 per cent completion of the digital journey and a very, very large take up with advisers for actually putting in place their retirement plans.

“So, we think those metrics if we can replicate anything like that here, we would define that as success.”

Industry at an inflection point

AMP’s digital advice report has painted a picture of an industry at an inflection point.

“There will not be enough financial advisers to service the Australian population,” the report reads.

“This provides an opportunity to leverage technology and the propensity to ’buy’ online services, including financial advice. The industry needs to work collaboratively to support providers and focus on the collective objective, which is to get advice to more Australians.”

This collaboration, AMP stressed at the time, is crucial.

Success for advisers, according to the firm, will involve working with digital advice providers on a “seamless service” across all parts of the financial advice value chain, as well as a continued effort to focus on comprehensive advice and ways to bring the cost down through digitisation.