Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Adviser-friendly investor forum to plug gap with millennials
Investment app creator Pearler believes it has developed a way to provide general advice without violating ASIC’s finfluencer rules, with an online investment forum that will see advisers and investors build an online community to share knowledge.
Research conducted by CoreData during the last two years showed that the pandemic prompted more than one in four Australians to seek affordable financial advice, with the highest demand coming from millennials (32.2 per cent). CoreData also found that affordability was one of the main barriers from seeking financial advice.
While demand is high for financial advice, the ‘advice gap’ has widened as regulation and compliance have pushed up the cost of advice. As ‘finfluencers’ have moved in to address this gap with unregulated quasi-advice, the concerns of ASIC have grown. The corporate regulator has issued repeated warnings to finfluencers this year, reminding them that they must have a financial services license when recommending a financial products or service.
This presented a unique opportunity for Pearler to offer a service of value and in high demand.
“The way we share information has changed and if the wealth industry doesn’t adapt, young people lose out,” says Nick Nicolaides, co-founder and CEO of Pearler . “There’s a giant gap between TikTok and traditional advice, and this is a step towards the middle ground.
“We love how social media has helped millions of young people develop an understanding of personal finance. But we know there are pitfalls on any social media platform.”
The ‘Pearler Exchange’ will have in-house professional oversight to protect the interests of those who come to the forum, Nicolaides (pictured) explains, including those both asking questions and those with information to share.
The new investment forum will be moderated and will not allow personal advice, he adds. Nicolaides insists the forum will be structured on three concepts: it enables open conversation from real investors and advisers, it will not share or sell personal data and it will be a transparent and open forum where everyone feels comfortable.
“Pearler Exchange does not allow product spruiking, sales or personal advice,” he says. “We are keeping out the bots and the sales representatives by asking people to set up a Pearler account before they ask a question, and we are verifying the identification of anyone wanting to answer questions.
“A key difference, compared with other forums, is that people offering comments will be ‘badged’ or identified as an adviser, investor or Pearler so the audience will know if someone is licensed,” he adds.
The original response paper for the ongoing Quality of Advice Review, put out by Allens partner Michelle Levy, proposed that ‘general advice’ would no longer regulated, which could open the door for finfluencers to recommend financial products without addressing personal circumstances and without requiring an AFSL license.
Irrespective of the outcome, Nicolaides’ believes the Pearler Exchange can help bridge the gap between advisers and the broader Australian advice market.
“What attracts investors is our emphasis on helping young investors navigate their wealth journey over the next 20, 30 or 40 years, while giving them the tools to navigate any market environment,” he says. “We think the Pearler Exchange will be a game changer.”
