Clients are infinitely more informed in the digital age, but that doesn’t necessarily mean they know how to discern the useful information from the misleading. Addressing this divide is the role advisers will need to embrace as the new era unfolds.
Secondaries aren’t new, but the growth of private markets in the last decade has propelled the assets into the mainstream as investors from different pools of capital line up the benefits.
Surging appetite for episodic advice validates government’s DBFO plan
New research from Investment Trends has confirmed not only that millions of Australians want financial advice, but that over 50 per cent of potential advised clients prefer one-off, episodic advice to ongoing holistic advice.
According to the 17th annual edition of the Investment Trends Australian Financial Advice Report a record 16.4 million Australians indicate a need for guidance on finance-related matters, and 10.2 million adults plan to seek a financial adviser. “The top areas where support is most needed include ensuring money lasts throughout retirement (30 per cent), developing investment strategies (30 per cent), managing tax planning (27 per cent), and navigating home buying (25 per cent),” the report states.
Of those 10.2 million adults planning to use a financial adviser, however, most would prefer to have intermittent access to piecemeal advice than a traditional, full-service model, which dovetail’s neatly with the recommendations outlined in the government’s Delivering Better Financial Outcomes legislation.
Last week the minister for financial services, Stephen Jones, announced that the second, more meaningful tranche of DBFO reforms would focus on providing “simple” advice to consumers that wasn’t “too expensive and strangled by red tape”.
Among the reforms will be the creation of a new class of adviser who will deliver less complex advice such as how to select a life insurance policy or understand basic retirement concepts. Crucially, the government will also “modernise” the best interests duty by “providing legal clarity that will allow advice on single or limited scope issues if this meets the client’s needs”.
This latter step is an important one in that is should pave the way for traditional advisers to provide limited or scoped advice in a compliant way at a more reasonable cost. To this point, doing this has been problematic for advisers because satisfying the legacy best interests duty, even for scoped advice, is too onerous. By clarifying a simpler framework for scoped advice, the hope is that advisers will be better able to perform the function at a reasonable cost to consumers.
And that, combined with a second class of “simple” advice, is just what consumers are after according to Investment Trends.
“It is abundantly clear that episodic financial advice – tailored to fit budgets and life circumstances – is what Australians want,” said Olivia Beringer (pictured), research director at Investment Trends. “Customers are calling for it, and organisations will be able to meet consumer needs through evolving business models. Once legislation is finalised, this will benefit all Australians.
“Australians are demanding advice that is both affordable and available when they need it,” Beringer added. “Our data highlights a clear opportunity to inject greater flexibility into the industry, enabling organisations to offer targeted services that directly address consumer needs.”
