Enough talk: Let’s start to walk before we run

Services, systems, platforms, and product providers to the financial advice ecosystem are fond of buzz words and ambitious goals, but a key question continues to evade us: what concrete first steps are needed right now to make quality financial advice accessible and affordable for those growing numbers of Australians who genuinely need it?

A fixation on exciting buzz words like artificial intelligence (AI), machine learning, and robo-advice are prime examples of a future vision. However, it overlooks the fact that the sector still needs to first make appropriate investment in its base data infrastructure. Just as one must take their first steps before being able run – the sector must first establish a foundational base before it can be expected to tackle the high-speed, fully integrated challenges of tomorrow. We wouldn’t expect to run the 400-metre sprint relay at record pace without first learning to walk, so why should we expect the industry to do so?

Timing is especially critical, given the current landscape: many Australians cannot access the financial advice offered by a relatively small number of financial advisers, and the fragmented nature of the supporting ecosystem (including services, products, platforms, and technology) is not effectively addressing this social and economic conundrum. An abundance of promises and enthusiastic talk does not necessarily translate to concrete evidence of progress.

The problem does not centre on any single industry participant but between them, and the solution also exists in this space. To resolve this issue, we need to address the data infrastructure and connectivity gaps to facilitate seamless collaboration with various participants in the ecosystem and ease the choke points that are holding back innovation and holistic technology solutions. Individual efforts, even with good intentions, cannot tackle this on their own. In other words, the sector requires a platform middleware solution and infrastructure that connects the wealth industry in Australia to enable the ecosystem to be truly cohesive and effective.

The Consumer Data Right (CDR) is a well-intentioned federal government policy aimed at addressing similar data challenges, but its top-down approach comes with a high price tag and has so far seen limited uptake. For instance, in addition to significant government investment, the banking industry has invested around $1.5 billion since 2018 to modify systems and data formats in accordance with CDR standards. This approach necessitates that incumbent organisations adopt a common standard, requiring costly changes to existing systems, processes, and business rules. New and existing participants seeking to utilise the data are also required to meet various criteria.

So, what structural changes should be implemented to the supporting infrastructure in financial advice that helps propel it efficiently towards the accessible, affordable, and easily-adoptable end of the spectrum?

And while some progress has been made through initiatives like the CDR, why isn’t there unanimous recognition that this is the most pressing issue at hand? That is, the need to get these foundational data frameworks – including transparency, open access, and interoperability – right, first.

Trapped in a hype loop

Returning to our examination of the broader industry’s focus – or rather, a misalignment in priorities. There is a lot of discussion and enthusiasm around the innovative potential of emerging technologies, but little meaningful action or attention on establishing the common data standards and infrastructure needed to support this innovation.

Consider the example of generative AI. Despite the substantial hype and investments, achieving the promised impact will require more time and money than anticipated. The buzz around AI is likely to wane before truly meaningful innovation takes hold and delivers material productivity growth.

Sticking to the example of AI – realistically, it will only be able to add value once the data infrastructure is adequately cleaned up, a process that will take time. Even then, AI may not directly address the core challenges of the advice process. Expert guidance by Gartner provides insights into where generative AI is currently effective and where it falls short. For instance, generative models are great for content generation (text, images, video) and conversational interfaces (virtual assistants, chatbots). However, they are far less useful for tasks like risk prediction, customer churn forecasting, and decision support.

There are intermediate areas, such as segmentation classification and recommendation systems, but the key takeaway is that AI is not a panacea. The true impact of AI will not materialise overnight. What we urgently need is a solid foundational base to help build robust access and take financial advice to the masses. If we get the preconditions right, then we can enable and accelerate the true potential of technologies such as AI, while also solving a key systemic issue of access and affordability by reducing the core administrative and compliance burdens of advice delivery that limit current processes.

The industry needs a Bunnings

Love it or hate it, the Bunnings business is a model of efficiency, broad consumer access, and pricing power. The “big box hardware” concept has become a national one-stop shop for all home improvement needs, streamlining multiple, complex supply chains into a single, accessible location. In much the same way, our thinking about improved access to financial advice can benefit from a centralised, integrated supply chain model.

I am not suggesting financial advice is a product you pick up off a Bunnings shelf with a sausage sandwich and sauce on the way home. I am saying our capacity to offer more quality and affordable financial advice would benefit from a model that drives cost efficiencies by taming the complexity of supply channels behind a vast array of products and suppliers. Think about how Bunnings simplifies the purchasing process by consolidating various products into one place and making the experience seamless for the customer. In the same way, financial advice could be more efficiently delivered if businesses didn’t have to face the daunting complexity of navigating the processes, systems and nuances of a wide range of product providers.

The parallel is really that similar “foundational” thinking is needed to make quality financial advice more affordable and thereby accessible to a broad consumer base.

The financial services sector is plagued by fragmentation. A disparate value chain – made cohesive by solving underlying complexities and fragmented sources of data – will drive enormous efficiency benefits throughout the financial services world, in turn, delivering convenience, access, and affordability of quality advice for more Australians.

Why fragmented? The most demanding challenge faced by market participants is the volume of legacy systems and the lack of data standardisation between those systems. These cumbersome dynamics hinder automation and make it difficult to integrate systems so that they are efficient and interoperable. It also leads to significant training time and increased likelihood of errors, all of which contribute to inefficiencies within the advice practice.

Moreover, the lack of capital efficiency in adopting integration solutions forces product and advice technology providers into redundant spending on “silo” capabilities that no longer offer differentiation. This presents a critical opportunity for adopting advanced middleware solutions that allow for integration of multiple systems; thus, allowing companies to license innovative technology and focus their capital closer to their customers, where they deliver more value and differentiate their proposition.

Why it matters for institutions

For the average Australian, the stakes of accessible and affordable financial advice are obvious. People need access to quality guidance and advice at a price they can afford.

And despite Australia having 43 per cent fewer advisers than it did six years ago, the benefits of receiving advice are significant, including improved quality of life, increased financial confidence and resilience, and greater satisfaction with one’s financial situation. According to a recent report, 80 per cent of those receiving financial advice reported feeling financially secure. In contrast, unadvised consumers reported higher levels of unmet financial needs, including not having enough money to live on or achieve their desired lifestyle, and reducing financial worries and stress.

But make no mistake, traditional licensee and advice practices should be prioritising this issue from a commercial viability standpoint, too.

Lowering the cost of delivering quality financial advice offers a compelling value proposition for advice businesses, enabling them to service a larger market. By achieving scale through efficiency, licensees, advice practices and practitioners can each unlock greater margins from existing customers, expand the number of clients that can be served and convert previously unprofitable clients into profitable ones. The result is increased commercial efficiency, and the added benefit of enabling and increased focus on client relationships.

Consider a people, process, and technology (PPT) framework for process improvement which delivers multifaceted benefits. Enhancing or automating processes through more effective technology reduces reliance on human intervention for repetitive, error-prone tasks. This boosts overall efficiency, mitigates risk, and accelerates end-to-end cycle times. As a result, employees are freed from mundane duties and can concentrate on higher-value activities, such as driving growth and enhancing customer experience. In this way, improvements in technology and processes create a ripple effect, amplifying benefits across all dimensions of the organisation and enabling business to scale with confidence.

As pointed out in my previous article, there is an obvious disconnect between product providers and the adviser experience, which has long led to frustration, inefficiency, and missed opportunities. At the heart of the issue is the volume of legacy systems and the lack of data standardisation between them. Institutions must invest in data infrastructure that enhances their existing technology and addresses current challenges, which in turn enables systems to effectively integrate both internally and with advisers’ technology.

This is fundamentally a bottom-line issue, magnified by the $3.5 trillion asset transfer between generations already underway. If the question is how is this relevant for institutions and business-to-business models, then the answer is simple: growth. It’s a simple equation of greater revenue, margin, and profitability from a larger pool of customers who would benefit through improved access and affordability.

The way to get more advice to more people

So, how do we get another 2 million Australians advised? The answer lies in enablement.

To achieve this, we need to focus on enabling affordable advice for all Australians by enabling the ecosystem to be truly integrated, cohesive, and effective. The key to advancing the industry is establishing the right preconditions – creating a solid foundation upon which genuine innovation, differentiation, and competition can thrive. This is crucial in supporting the advice profession to streamline processes and reduce the core administrative and compliance burdens that constrain growth.

Yes, the earlier AI example illustrates how this essential enablement can unlock the true potential of emerging technology. But more importantly, it addresses what needs to be a larger industry priority: laying the foundations for robust advice access. By building a comprehensive value chain of data connectivity, enablement and automation, we can effectively reduce costs of advice, improve accessibility, and enhance quality outcomes for all Australians.

Shaun Green, CEO of Elemnta.