Is the ongoing service model sustainable for the next generation?

As the financial industry continues to undergo transformations, the conversation about the sustainability of the ongoing service model has taken centrestage.

Speaking to ifa, Kelly King, director and senior wealth adviser at Iconic Wealth, said that while the current ongoing service legislation and wording is not conducive to the next generations, an ongoing service model of some sort is “absolutely sustainable” in today’s day and age.

“This has a lot to do with the majority of ongoing service clients being pre-retirees/retirees,” Ms King emphasised.

“Their numbers are not going to dwindle any time in the immediate future. This group generally have more complex strategic needs and want assistance to navigate social security entitlements.”

For individuals in the 50-plus age group, financial advice takes on a different role. “I find that people in the 50-plus group are more of a ‘do it for me’ group compared to, say, the Millennials, who want different levels of interaction with a financial advice professional,” Ms King explained.

“They often have investigated a lot more online prior to meetings and often want confirmation of what they are already planning to do. Then go and do it themselves.”

However, with the impending generational wealth transfer, financial advisers must consider how and when they provide advice.

Ms King believes that failure to adapt could lead to being left behind.

“With the Millennials and younger generations, the ongoing advice relationship, I think, will be significantly different. Their ability to get into homes, potential lack of superannuation due to an entrepreneurial side hustle environment will mean more debt and less mandatory retirement savings.

“Advice in the future will be more of a luxury item if the cost to serve doesn’t change significantly. They are not going to pay thousands of dollars per annum in a digital age where potentially ChatGPT will be able to tell them the best way to reduce their debt and save for their future. What value are you bringing as an adviser and at what cost?”

As technology and artificial intelligence advance, providing substantial value as an adviser will become paramount.

“I imagine a lot of hybrid models tailored to specific groups of people,” Ms King said.

“I expect that those firms that want to adapt and attract millennials will look at some sort of low cost Robo Advice arrangement for simple needs all the way through to being an exclusive consultant for a client and their more complex needs.

“Right now, as it stands, the current ongoing service legislation and wording is not conducive to the next generations,” Ms King cautioned.

To remain relevant and meet evolving client needs, adaptation is key.

“We need to adapt to the changing environment and generation.”