After the Hayne Royal Commission many advisers decided to steer away from large dealer groups in favour of becoming self-licensed. In the last six months, however, that trend has taken an abrupt turn.
While known for being the flagbearer for financial product providers, the Financial Services Council is now making serious inroads into the financial advice sector.
Zen and the Art of Financial Advice
How do you know you need advice?
Seeking advice can be a challenging endeavour for most people. It is not so much that advice is hard to find, but more so that the abundance of information out there offers so much but under it may lie hidden intentions but more on this later. Here are some typical steps that most people need to tread on the advice journey.
Firstly, there is a degree of introspection required to ascertain that you do not have all the answers and would benefit from an external viewpoint, who preferably have experience and a degree of culpability that the advice provider recognises to ensure their input into your decision is essential.
Once the need for advice is uncovered, the real task begins. Who do I turn to that I trust, is reliable and can provide me with the confidence that they will fully understand the situation at hand? What evidence do I need to ensure that the person providing the advice is worthy of the time it will take to illustrate the problem, and accept and implement the solution? Here is the rub, as there are many happy to provide advice, but should you take it?
You may not realise it, but most people accept some form of advice every day. The information you seek, read and absorb is continually shaping future decisions and changing your focus on where you should be devoting your time daily. It may come from recommendations from a friend or family, a salesperson in a store or, of course from the stream of information found online.
Have you stopped to ask yourself: is the constant barrage of information clouding the direction of your actual desired path? Be it what to have for lunch, where you want to live, what your career aspirations are or even how you reach your financial goals, such as buying a house or achieving a comfortable retirement?
Financial advice and you
This dilemma is especially relevant from a financial advice standpoint. Most people have a reasonable idea about their finances, or at least think they do. But due to the vagaries and busyness of life deviate from what they think they should do or where they think they should be. A good income can often also come with a good, but expensive lifestyle. And why not? If you work hard, you absolutely should be able to enjoy the fruits of that labour.
Around one in five Australian’s seek paid financial advice at some point in their lives. Be it for help with an immediate need, such as arranging life insurance or selecting the right super fund, or for more long term aspirations such as planning for a significant life event (think house purchase or dream holiday) or ensuring that they are on track for a secure retirement. They do this to ensure that the decisions they make today stand the best chance of serving them well into the future. It’s important stuff.
In the past, quality advice opportunities and avenues have been pretty thin on the ground. Financial advice (or planning) was often used (and subsidised) by product providers as a means of distribution of their products and services through either their own adviser networks or through paying high levels of commission to advisers to recommend their wares. You can see how this would quickly become problematic, as the old saying goes ‘when all you have is a hammer, everything looks like a nail’.
Looking forward to the new world of financial advice
Thankfully, through both external reviews like the recent Royal Commission into Banking and Finance, and the advent of better use (and acceptance) of emerging technology, the more suspect financial advice ways of the past are being eradicated from the future. New education standards and codes of conduct have raised entry barriers for both existing and future financial advisers who now need to ensure that the client’s best interests are observed and considered before recommending and implementing the advice. With high levels of compliance comes higher costs to the person seeking the advice, however. Now the challenge is to find ways to provide the right type at the right time for the correct cost.
One exciting development in the provision of advice has been integrating technology into the advice process. This can be done on a series of levels. 2020 has been a pivotal year on many fronts, and the shape and form of financial advice have not escaped the evolution. As working from home has now become acceptable in the mainstream for many occupations, advising from home is also becoming the rule instead of the exception. With this comes many efficiencies both for the client and the adviser, and ultimately means that some fixed costs can be lowered to help combat the rising costs of compliance that an adviser faces.
With the advent and acceptance of remote meetings, clients now can meet and discuss their affairs in shorter sessions, more often, as opposed to the ‘annual checkup’ if they wish, saving time on both sides which is always a good thing.
An online world of advice awaits
But what about seeking select areas of advice, that may not always need the long term planning commitment and associated costs? Thankfully, the advent and adoption of technology are here to help as well. One of the most time consuming, and ultimately expensive, components of advice provision is the collection of information, and the incorporation of it into documents whose structure is heavily regulated.
New approaches and methods, using technology, have allowed simpler or more scoped advice opportunities to be primarily automated from both information collection to creating these documents, drastically cutting the overall cost of advice in some areas. I’ll place a caveat here that digital advice, at this point, certainly has its limits of use which need to be demarcated. Where the solution is not suitable, the ability to bring the situation ‘offline’ and back into the hands of a trained professional is still the best course of action for broader and more comprehensive cases.
A pressure-free pathway to a solution
However, with that caveat out of the way, there is still plenty of scope and benefit from trying out the digital experience for more straightforward tasks like calculating an optimum superannuation contribution or seeking a suitable portfolio for an investment account. One big attraction (aside from the cost of course) is that the experience is mostly self-driven and free from pressure or obligation. Online tools provide you with an opportunity to ‘test out’ a scenario for yourself and often offer the documentation instantly, which can then be used to compare your existing investments or new alternatives you are considering.
Supplementing your own experience with some clear and appropriate digital advice can be empowering, and importantly run at your own pace, usually with opportunities to interact with humans to build confidence in your decision.
With the advent of the 24-hour news cycle and the explosion of information at your fingertips online to both help and hinder decision making of any form in your life, seeking advice for any significant component of your life is arguably more challenging now than it ever has been. From a financial advice point of view though, at least the future of making some right, long term decisions that you can have both confidence and comfort in, is now appreciably brighter.
Tim Fuller is head of advice at Nucleus Wealth.
