Is the industry entering a transformative 12 months?

The beginning of the 2023–24 financial year has brought with it an underlying sense of transformation, although the exact nature of this change remains uncertain.

Many of the associations that represent Australian advisers have provided their responses to the more recent developments in the industry, including the increased ASIC levy and the government’s Quality of Advice Review (QAR) response, but how the next year will play out remains largely unknown.

Moreover, it is clear financial advisers have differing viewpoints depending on their areas of expertise within the industry.

ifa spoke to some leading voices to gauge how they expect the landscape to change, if at all.

Legislation: A waiting game

My Money Buddy and The Savings Squad podcast founder, Adele Martin, was doubtful that any major changes would occur from legislative reform over the next 12 months

“Without using my crystal ball, [it’s] hard to say. But I don’t think we can expect a lot of legislation changes,” Ms Martin told ifa.

In the meantime, she urged advisers to reorient their focus to the technological transformation she foresees the industry undergoing in coming years.

“I think we are going to see, maybe not over 12 months but longer term, technology and advisers working more closely,” said Ms Martin.

“I can see how a client might go to an AI bot — it feels like you are talking to a real person.”

This, she said, could either “solve advice issues with a ChatGPT style solution” or help consumers realise they need to see an adviser.

Ms Martin also noted the experience pathway that hit Parliament last month may help to retain some advisers but didn’t see this equating to a substantial growth in the number of advisers due to pre-existing entry barriers and talent scarcity.

“If we want more Australians to get advice, we need to look at other ways … because finding talent and experienced advisers in Australia is hard.”

Meanwhile, Jim Hennington, chief executive officer of Apricot Actuaries, looked to the future from the lens of retirement planning.

“The next few years are likely to see dramatic changes in the retirement advice landscape. This will impact most advice given about superannuation,” Mr Hennington explained to ifa.

Specifically, he said the Retirement Income Covenant, which came into effect in July 2022, was introduced at a time when super funds wanted to “turn people’s balances at retirement into sustainable income for life”.

However, a key problem advisers face today, and into the future, he clarified, stems from the fear retirees have about spending their super.

“There’s a wide range around what investment return each retiree will get from year-to-year (market risk) and a wide range for how long different individuals live (longevity risk),” Mr Hennington said.

“Every Australian deserves a robust answer to basic questions like ‘how much do I need to retire with confidence?’”

As such, he said the first big change advice will likely encounter is the push within superannuation funds to offer new products to protect members from “run-out risk”.

“Several ‘lifetime’ products have already been launched recently.

“These products incorporate a form of insurance — meaning that people who live a long time will get more income than those who don’t, but everyone gets more confidence they won’t run out.”

More room will be made for innovation

Glen Hare, co-founder and adviser at Fox & Hare, told ifa the next 12 months will present an opportunity for advice practices to look towards and embrace innovation that benefits both the adviser and their clients.

“Some of the recommendations put forward in the QAR are going to open the industry up to greater innovation and make sure that we’re not just doing what we have done over the last couple of decades,” Mr Hare said.

Specifically, he applauded the industry-wide discussions surrounding the scrapping of lengthy statements of advice (SOAs), asserting “drafting documents in the same fashion and delivering it in exactly the same way” is an outdated way of providing advice.

“Removing some of that red tape is just going to free advice firms to be able to focus more on the advice experience — that’s going to be exciting,” Mr Hare said.

“Our clients may no longer expect to receive a 120-page document outlining their advice strategy. What they are really wanting to see is probably for us to identify what their goals are really clearly and the specific steps and financial advice to enable them to achieve those goals.

“There’s going to be room for that innovation which I’m personally very excited about.”

Moreover, Mr Hare said the merger of the Financial Planning Association of Australia (FPA) and the Association of Financial Advisers (AFA) to form the Financial Advice Association Australia (FAAA) was a welcome development going into the new financial year, and one that advisers should have faith in.

“Having a unified professional body through the FAAA headed up by Sarah Abood, who is a huge advocate for advice and what we do for our clients, is really exciting,” Mr Hare said.

“Creating that one community is going to create or deliver greater collaboration between advisers, enabling us to learn from each other.”

Lastly, Mr Hennington added that advisers who embrace change will be the ones to emerge as “winners” over the next 12 months.