The most important issues financial advice faces in 2023

Many organisations will be moving from strategic thinking to strategic execution around digital advice. And we are seeing executives and their teams think more broadly about how technology can play a role in making advice more accessible and more affordable, but also making it available at a time when customers need it most.

The headwinds and economic challenges of last year are almost certain to continue in 2023, so the need for individuals to have easy and affordable access to guidance and advice that can help them manage their money, protect their wealth and plan for a comfortable retirement is even more important.

Acceleration of adoption of digital advice expected

The demand for financial advice will continue to grow in 2023 regardless of how it’s delivered. However, we believe the way people wish to access advice is rapidly evolving. We have seen an acceleration in digital adoption across a whole host of industries so it makes sense that consumers should be able to access financial advice in a way that suits them.

The combination of human and technology, as in today’s hybrid digital advice models, is becoming more understood. There is strong evidence out of the UK that hybrid adoption leads to greater access and affordability of advice.

Bringing technology to financial advice is about growing the accessibility of financial advice, because technology removes the barriers of convenience, cost and confidence to make advice more accessible for all.

Digital advice is perfectly suited to delivering single issue personal advice, for those with simpler or more episodic advice needs. It also clearly preserves the important value proposition of financial planners who serve the more complex needs of consumers who have the need and budget for a holistic approach to managing their finances.

Technology pivotal in providing much-needed scale

There is now widespread agreement that technology plays a pivotal role in helping organisations scale advice solutions to their members or policyholders.

There is also growing awareness that today’s contemporary technology, which is supported by sophisticated advice algorithms and meets all regulatory requirements, delivers confidence to the industry that digital advice is the only realistic way advice can be scaled.

I’m encouraged by the Quality of Advice Review and the significant reference to technology as an enabler for scale, and how it can bridge the advice access and affordability gap. Implementing digital advice solutions is no longer a multi-year, expensive and complex, high risk program of work or enterprise-wide digital transformation. With the right provider, implementing digital advice can be faster, cheaper, and less disruptive than most digital projects.

Beyond the Quality of Advice Review

I’m also impressed with the quality of the debate around the Quality of Advice Review, and the collegiate approach of the industry and the diverse group of stakeholders who have a shared desire to get Australia’s model for financial advice right.

Ms Levy’s brief was to think about affordability and accessibility for the end consumer, not the interests of the industry, and the Proposals Paper reflected this through it’s recommended changes to the current state.

Post the banking royal commission, we have ended up with advice as a cottage industry, where tinkering at the edges will not help. Ms Levy has clearly understood this, and has indicated that her final report largely reflects the thinking in the Proposals Paper.

The majority of the industry has acknowledged that fresh thinking and a logical narrative was required. Ms Levy’s approach in starting with a ‘what’s possible’ model has encouraged and fostered the industry to think about ‘how’ as opposed to ‘why not’. The objections we have heard are partly from those who benefit from the status quo, but also based on a misunderstanding of the scope of advice. Most contention has focused on product replacement, but this is just one small part of what Ms Levy would consider as personal advice.

For material improvements to be achieved, realistic solutions must be considered including the role of technology to scale advice and make good advice affordable and accessible to all Australians who want and need it.

Craig Keary, Ignition Advice APAC CEO