Advisers want to spend more time doing what they do best which is providing great financial advice, while running a profitable business.

Surveys highlight adviser profitability is challenged, driven in part by compliance as well as poor technology and systems. The result is higher adviser operational costs and revenue constrained to the number of clients an adviser can compliantly serve.

With the Quality of Advice Review (QAR) final report handed down on February 8, the industry is poised for change. While some advisers are embracing the findings and their potential to reduce the compliance burden and cost to provide advice, others are sceptical they will provide positive change for the financial advice profession.

In either case, there remains a level of uncertainty, with the details and timing of any legislative changes yet to be determined, and the Financial services minister Stephen Jones indicating he plans to ‘stress-test’ the review’s recommendations before taking them to federal Cabinet.

However, the report is clear in its view that personal advice is not the sole domain of financial advisers, and this transition has already commenced. There are at least 12 superannuation funds in Australia offering personal advice services to their members, underpinned by Midwinter’s digital advice technology.

These funds are offering predominately scaled (intra-fund) advice via digitally enabled services augmented by professional advisers, providing millions of members that may not otherwise seek traditional face to face advice with a means to get financial help.

These organisations are investing significantly in digital advice technology to enable a consistent, compliant, and scalable solution that provides members with flexibility in how they access advice. This digital approach is integrated with other technologies that are core to the end-to-end advice process. For example, member portals at the experience layer can support self-service and engagement, and registry systems at the administration layer enable straight-through-processing of advice.

Rather than stand by as super funds leverage digital technology to provide efficient, engaging, and scalable advice offerings, now is the time for dealer groups to look at how they can adopt similar technologies as part of their proposition to advisers.

The same digital advice technology that super funds use to enable intra-fund advice services, can be used by professional advisers to reduce the time, cost and risk associated with serving their high-net-worth clients. This technology can also help advisers extend their reach and relevance to a broader set of Australians that currently do not access face-to-face advice, unlocking additional value and growth opportunity.

The last few years has seen consumers increasingly embrace online services for everything from grocery shopping to telehealth, legal services and banking. Expectations for digital services that enable more convenient, simple, and secure interactions will ultimately require professional advisers to adopt digital technology to stay relevant.

The QAR final report highlights digital advice tools as an important enabler in the delivery of personal advice services for both relevant and non-relevant providers.

However, this technology is unlikely to replace the human adviser. Robo-advice, which failed to thrive in Australia and the UK, is stalling in the United States according to JPMorgan Head of Digital and Client Solutions Dr. Kelli Keough. It is being replaced by a ‘hybrid’ model that combines the empathy and trust built through a relationship with a human adviser, and the efficiency and convenience of engaging digitally.

This hybrid service model is poised to become the future for progressive advisers that want to keep pace with client expectations.

During the last reporting period, dealer groups highlighted a need to develop innovative technology to enhance the efficient delivery of cost-effective services as well as improve their client experience and digital capabilities.

For an industry heavily reliant on human processing and intervention, fully leveraging the efficiency enabled through digital advice requires a shift in mindset: one where participants are comfortable to automate easily repeatable processes and provide more customer self-service.

Advice businesses have already started down this path, adopting digital technologies such as client portals where their customers can securely view performance reports, update personal information, and access financial documentation.

But these services are just the tip of the digital advice iceberg.

A shift towards radical efficiency requires the use of technology to automate manual tasks across the preparation, implementation, and administration of advice, as well as the optimisation of business processes for data collection, implementation, advice formulation, and documentation.

Reducing the time spent on mundane tasks and tedious background work will enable advisers to put their focus where they provide real value to their customers – educating and guiding them through their financial journey – with the help of visually engaging digital experiences.

In an age where concerns around data security and protection of sensitive information are on the rise, a smarter approach to protecting customers while handling sensitive data and producing advice is critical.

For example, transmitting confidential information by paper or email opens multiple opportunities for a data breach through email transmission, lost documentation or just human error; establishing a secure and integrated online solution with digital fact find and client portal for collecting and sharing client data eliminates a lot of the need for this insecure data transmission and handling. For many advisers this may be the first step to offering a hybrid digital – human service.

For dealer groups that aim to be here long-term, adopting a digital technology ecosystem of services that connect the client to their advice and money is not a question of if, but when.

As an industry, we know that financial advice has a long way to go to offer the seamless digital experiences people consume in their everyday lives. Professional advisers who value practice management support from their licensee will turn to those groups that offer access to integrated technology that reduces their time and cost serve. The by-product is compliance by design that supports the licensee operations and keeps everyone ahead of the curve.

Avoiding change is not the answer. Dealer groups can use their scale to help advisers evolve their offering to include engaging and accessible digital advice experiences, supported by a deliberate technology architecture that considers the adviser total cost of ownership.

As soon as a hybrid advice model becomes the norm – and a piece of advice can be developed in a matter of hours rather than days or weeks – advice businesses that have not adopted these digital technologies will become uncompetitive.

Dealer groups that are already planning, or better yet progressing their digital advice strategy will be the ones that charge ahead of the rest.

Want to find out more about Midwinter’s digital advice capabilities? Click here to request a demo with our sales team.

This article first appeared in Money Management on 22 February.

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The requirement for a more comprehensive due diligence process, additional compliance burdens and more time to meet best interest duty have collectively increased the regulation of personal advice since the Royal Commission.

This has simultaneously increased the cost of financial advice and reduced the number of advisers available to provide it.  

Meanwhile, the need for financial advice has only continued to grow, with one in five people saying the pandemic has led to dramatic financial changes and 25% of people worrying more about money above other concerns. 

Financial advice improves wellbeing and should be both accessible and affordable for everyone who wants or needs it. 

Traditional comprehensive financial advice has become more expensive and less accessible and not everyone wants or needs to deal with all their potential financial goals simultaneously or continuously, as in a comprehensive financial plan.

Consumer trends on what the modern client is looking for from their financial planning relationships has also shifted. The modern client values simplicity and the use of technology is essential to streamline the client experience and remove roadblocks from the process.

Successful businesses are rethinking the way they interact with their clients and are leveraging technology to better deliver to their customers’ preferences, scale their business models and leave more time to focus on delivering a quality advice experience.

The fast change in current market conditions has underlined the need to make a genuine shift to goals-based advice rather than intuitively incorporate it into traditional advice processes.

A goals-based discussion can help reveal a client’s priorities and values and evaluate whether their goals are achievable and make the difficult trade-offs needed. It can substantially improve the outcome of advice and fosters a conversation that is highly tailored, holds great meaning and relevance with a focus on the areas that matter the most to the client.

Midwinter has recently launched MultiGoal – a simple yet powerful goal optimsation engine for advisers. Here we explore how MultiGoal enables advice businesses to effectively innovate, increase efficiency and find new ways to reach and engage clients.

Foster strong long-term adviser-client relationships.

It’s likely that over time, customers who start with MultiGoal as an entry piece of advice will evolve to seeking comprehensive advice for more complex circumstances from traditional advisers. 

Having used MultiGoal to demonstrate the value of advice to your clients, and changing their lifestyles, the likelihood of them as a returning customer increases given the value demonstrated and pre-existing relationship.

MultiGoal is a great tool for many stages of the customer life cycle. It also encourages clients to imagine and connect with their ‘future selves’ and to think about their goals for retirement. A traditional review typically focuses on easily measurable areas such as investment performance when they should measure whether a client remains on track to achieving their goals. MultiGoal is key in reviewing strategies and, if needed, pivoting to ensure the client is on track to achieve their goals.

Introduce new service offerings to expand your target market.

MultiGoal will help advice practices and advisers take their business to the next level. The cost effectiveness and scalability of MultiGoal lowers barriers to entry to advice for everyday Australians and allows advice businesses to address a large unadvised market who need quality, easy to access and affordable advice. MultiGoal is an opportunity for advice business to provide a new service offering and pricing model that allows them to profitably service entry level clients and grow their client book.

Additionally, by giving these consumers easy and affordable access to financial advice, advice businesses can make a significant positive difference to their customers’ long-term financial wellbeing and support the health of the financial advice profession.

Gain efficiencies so you can focus on what matters most – delivering a quality advice experience.

The need to streamline the advice process is crucial in the already demanding financial planning profession. With little more than the click of a button, MultiGoal will automatically suggest strategic recommendations tailored to your client which they can takeaway to start them on the pathway to their ideal financial future.

These actionable items are delivered in a statement of advice that can be issued and charged for after a single meeting.

Adviser’s clients can complete their personal and financial information in the Client Portal prior to their appointment and have this information securely flow through to MultiGoal, reducing double-data entry for the adviser and ensuring the appointment time is spent where it’s most valuable.

Click here to find out more about MultiGoal.

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As a Midwinter customer, you have access to a range of security features to help protect your data, including data encryption, ethical hacking and a security framework that adheres to industry standards.

How Midwinter keeps your information secure

Midwinter’s Cloud-hosted financial advice software has robust security designed to keep your data safe.

• Customer data in the Midwinter production databases are protected with the highest level of security and access control.
• No Personal Identifiable Information (PII) data is stored outside of the Midwinter production databases.
• We regularly conduct penetration testing where friendly “hackers” ensure there are no vulnerabilities in our defences.
• Data is encrypted inside the database, meaning that if someone could bypass the security layers the data would be meaningless.

What you can do to protect your business and clients’ data

There are other simple steps you can take to further safeguard your data.

• Be aware of the common types of scams.
• Enable two-factor authentication when logging in to Midwinter.
• Use a password manager which automatically generates and securely stores long and complex passwords.
• Be cautious of any requests for your personal or financial details.

 Want to learn more? Check out this article from Midwinter’s CTO Fraser Hamilton: Five simple ways to improve cyber-security in your advice practice.

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The advice industry has been discussing goals-based advice for years, but successfully implementing it has been another matter, according to Midwinter’s Head of Product Andrew Zietara.

Everyone’s talking about it, but few actually do it, and those who aren’t feel under pressure to say they can. Despite all the talk about goals-based advice in the profession, the reality of how to deliver it still seems unclear.

A goals-based advice process helps clients pinpoint what really is important in their life before exploring the strategies, trade-offs, and probabilities those choices entail.

The initial results from the Quality of Advice Review indicate a move towards regulating the outcome of advice rather than the process. Goals-based advice represents the epitome of the proposed obligation to provide ‘good advice’ as it is directly shaped around the goals of the client.

And while most advisers would acknowledge that a client’s objectives should always be the starting point for advice, traditional technology hasn’t kept pace. Many goals-based solutions have tended to be too simplistic to provide useful results or over-engineered and complex; finding the right balance is crucial.

For advisers, this means working around client goals within these technological limitations. The outcome is client goals are often still retrofitted to fit a pre-existing risk profile, advice strategies and products.

Start with goals, not strategies

Goals-based advice can help reveal a client’s priorities and values. It’s a great way to start a discussion because clients are often unaware of what is driving their own actions. For example, it’s not common for discussions to reveal basic financial and lifestyle issues between couples.

Unfortunately, it’s all too easy to take a short-cut to investment strategies without a clear idea of the goals driving them.

A client may want access to the Age Pension (a strategy), but this is just one means to an unspoken goal. Another client may want to buy an investment property (another strategy) but without a clear understanding of the reason why, a better alternative strategy may be left on the table.

Goals-based advice aligns perfectly with advisers’ current best interests duty and related obligations – as well as the future obligation to provide ‘good advice’ as proposed in the Quality of Advice Review – by ensuring advice meets a client’s objectives, financial situation and needs. Goals are specific to each client and untethered from products and investments.

But even client reviews may neglect goals – they tend to focus on easily measurable areas such as investment performance when they should measure whether a client remains on track to achieving their objectives. By actively reviewing the latter, strategies can be changed as needed.

More pressure to make a goals-based approach scalable

The fast change in current market conditions has underlined the need to make a genuine shift to goals-based advice rather than intuitively incorporate it into traditional advice processes.

Inflation is soaring at the fastest pace in decades, placing new cost of living pressures on clients. Official interest rates have quickly risen, adding hundreds of dollars each month to the average mortgage.

Common goals, such as home ownership, are becoming harder to achieve. A rising number of retirees are being forced to use their super to pay off their home. The percentage of pre-retirees who owned their home outright fell from 70 per cent to 47 per cent between 1990 and 2015, according to research by the ABS.

A goals-based advice approach can help clients evaluate whether their goals are still achievable and make the difficult trade-offs needed. It can substantially improve the outcome of advice – even the act of writing down goals significantly increases the odds of achieving them, according to research.

Tech to support goals-based advice and boost engagement

The relatively high cost of advice, partly driven by regulations, has long been in the spotlight. Goals-based advice takes time and can be expensive without the right tech solution.

However, change is underway, with the government’s Quality of Advice Review explicitly calling out digital advice as playing a key role to lift innovation and improve accessibility.

Savvy advisers are looking for technology that supports their business now and can help it transition with the changing regulatory environment and consumer expectations.

The tools are increasingly available to make goals-based advice a fundamental part of the advice process, with tools that are:

• Engaging and effective for clients, yet simple to use for advisers.
• Separated from products and strategies.
• Encourage clients to achieve their goals by helping them imagine and connect with their ‘future selves.’
• Demonstrate the value of advice to clients by changing their lifestyles.

Goals-based advice is now set to take centre stage as the industry continues to evolve.

Midwinter’s new MultiGoal module provides a simple and visually engaging way for advisers to provide a real-time goals-based strategy for their customers. To find out more, head to midwinter.com.au/multigoal or click here to request a demo.

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The advice opportunity is huge.

Only 1.8 million Australians, or 10% of adults, receive financial advice, according to the 2021 Investment Trends Financial Advice Report. A further 12.6 million people have unmet advice needs and 3.2 million want advice but are discouraged by the perception of high fees.

The industry has a compelling proposition for ongoing personal advice but has been unable to develop alternative options.

But the Quality of Advice Review may be the catalyst for change, with Treasury signalling its intention to make the regulatory framework more supportive of new forms of advice.

Part of that includes a review of the definitions and requirements for general versus personal advice.   

When it comes to general advice, many advisers are (understandably) scared to seize the opportunity.

A key aim of the Quality of Advice Review is to improve understanding of the different regulatory requirements for general versus personal advice, so providers of advice can easily distinguish between the two.

Treasury recognises that this is likely to have a significant impact on advice affordability and accessibility by giving advisers greater confidence to pursue alternative advice models.

The Quality of Advice Review Issues Paper states: “Broadening the scope of general advice is likely to increase the amount of advice that is provided to people, due to the lower cost of providing general advice relative to personal advice”.

Theoretically, there is nothing stopping advisers from giving general advice now.

However, if advisers want the status bestowed by a profession, a scalable personal advice model may provide a more appropriate solution.

Advisers could offer digital advice for consumers with simple advice needs or improve the efficiency of delivering holistic advice through digitising the advice process.

Some advisers are already doing this, using technology to drive efficiencies and scale, but most are yet to grasp the full potential of extending their customer value proposition so that it truly puts them and their advice directly in the hands of their clients.

Waiting for the Quality of Advice Review Final Report due in December – then waiting for enactment of any subsequent regulation or legislative changes that may or may not happen – is simply kicking the can down the road.  

Advisers serious about growth can take steps now to scale their personal advice offering and meet evolving consumer needs.

Even if Treasury’s recommendations are favourable and the government implements reforms in a timely fashion, there is no such thing as a silver bullet. Like today, there will remain a degree of business risk in interpreting regulation and legislation.

Therefore, advisers should be taking action now to adopt technology that can drive efficiencies in their business, automate repetitive low value tasks, and increase their capacity to help more clients.

With adviser numbers falling, and a global skills shortage making it hard for businesses to recruit talented people, a supply and demand crisis is on the horizon.

In order to thrive, advice businesses need to get creative to increase their capability and capacity to provide advice.

If advisers don’t step up, the void will be filled by product manufacturers, finfluencers and social media, further undermining the importance of advice as a profession.

Technology holds the key to a scalable, compliant solution and there are already solutions available.

This session provides attendees with:

• An overview of general advice versus personal advice;
• Summary of key interim findings from the Quality of Advice Review;
• Understanding of the general advice opportunity and potential threats;
• Examples of how technology can help advisers drive business efficiencies and build a profitable scalable personal advice solution; and
• Midwinter’s vision to deliver technology that supports the way forward for advisers.

You can find the full conference agenda and details of Steve and Stacey’s presentation on the AFA Thrive website: www.afaconference.com.au/program.

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Technology powers today’s advice businesses, but all tech is not created equal.

The average advice firm now spends 7.4% of its revenue across 14 different types of technology, according to Netwealth’s 2021 AdviceTech Report.

Technology delivers a range of benefits such as allowing advisers to spend more time with clients, improving affordability, growing client numbers, and increasing revenue – but only if the right type of tech is selected.

Some technology has become so ubiquitous that it’s now effectively a commodity with barely any difference in the core product between providers.

The differences between email, cloud storage, and document signing services are often minimal. One product rarely provides an advantage over another: while there are differences such as cyber-security or ancillary services, few of these are game changers for an advice practice.

Advisers should instead focus their time on selecting technology where the differentiation is significant, and where solutions may vastly vary in terms of the cost saving, efficiency boost, or improved client experience they deliver.

A better client experience and greater personalisation

I recently requested a change to my life insurance policy. In response, my insurer sent me a 90-page document. I had to print 12 pages, then sign and scan the relevant sections, before returning it.

This is an unacceptable client experience, yet one that is still all too common.

Archaic paper-based processes like this still dominate financial services, despite a massive digital uptake among consumers in the wake of the COVID-19 pandemic.

The technology for simplified digital interactions exists today. Financial advisers just need to identify client facing solutions that suit their business and ensure they are digital friendly, engaging, and easy-to-use.

Examples include easily generating and sharing a Statement of Advice or offering clients the ability to complete a well-designed digital Fact Find at home.

A good design aesthetic can also help make financial matters – which many people view as dull or complex – clearer and more compelling. A visually engaging interface is more than a luxury; it is a necessity if advisers are to effectively educate their clients and demonstrate how their decisions will impact their overall financial situation.

Boost efficiency, review common processes

Creating a better client experience that is more personalised traditionally takes more time, which advisers can ill afford. It is crucial that advisers select the right type of technology to improve their efficiency.

Examples are everywhere, yet many advisers remain mired in manual processes.

While my insurer recently asked me to fill in a paper-based form, even the NSW’s government has created a more efficient pathway. Paper-based forms are no longer required for many NSW government services, for example a car registration renewal – these can all be done online at the Service NSW site or app.

Similarly, advisers now have multiple technology options that can streamline their common tasks.

Making the right choice requires a review of the full advice process and client touch points: what areas are taking the most time and can be streamlined? What areas do clients pay attention to and what do they truly value?

Manual steps should be automated where possible.

Software should be able to automatically access and incorporate common external data feeds into an advice platform. Modelling tools should be able to run complex calculations quickly using common economic and financial assumptions.

These examples highlight areas where selecting the right technology can make a significant difference.

Tech should make compliance a foundation

Advisers have been grappling with a heavy regulatory burden for years.

Even as markets plunged in the wake of the first COVID-19 wave in April 2020, compliance ranked as advisers top concern according to research by Investment Trends.

It has prompted the government to announce a quality of advice review to streamline regulations and make advice more affordable; although it is unlikely this will lead to a regulatory change anytime soon, and even if and when it does, technology will still have a significant role to play.

“The review should have regard to enabling innovation and the development of technological solutions including the use of regulatory technology and digital advice,” the review discussion paper said.

It’s impossible (or at least impractical) to stay compliant without technology while servicing an average 100-200 clients. Many practices still struggle to implement basic processes to remind them when client fee renewal notices are due or to turn off ongoing fees.

An advice technology platform should make this simple while storing such information in the cloud so that it is easily available. Does it allow for a quick comparison of options on the approved product list (APL) based on a client’s personal needs?

Streamlined compliance underpins a more efficient practice, as well as a higher quality of advice, but technology must be the foundation.

Reviewing the unique needs of your own practice will help you select the right type of technology that will deliver the greatest payoff.

Our free eBook ‘How to choose the right advice software for your practice’ provides a framework to help Advisers and Practice Owners review their advice technology requirements so they can select the software that is best suited to their needs. Download the eBook here.

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Cyber-attacks are on the rise as the world becomes increasingly digital. And advice practices – particularly small businesses that deal with large sums of client money – are at risk of being targeted.

No-one is immune. One major dealer group was recently ordered to pay $750,000 by the Federal Court over cyber-security breaches that allowed criminals to gain access to confidential and sensitive client information over several years.

The landmark ASIC case serves as a warning to other advice practices to strengthen their cyber-security defences no matter how busy they are helping clients or running their business.

“It is not possible to reduce cybersecurity risk to zero, but it is possible to materially reduce cybersecurity risk through adequate cybersecurity documentation and controls to an acceptable level,” Justice Rofe said in the judgment.

Fortunately, there are simple steps that advice practices can take to ensure they’re protecting their business and client assets from most cyber threats.

Use a password manager

Passwords are a common point of weakness. Simple passwords are easy for hackers to guess (“123456” remains the most-used password in the world).

Another common point of weakness is re-using the same password across multiple sites. If one site has a data breach which exposes passwords, it leaves users vulnerable across many sites where they have used the same email address and password combination.

The solution is to use a password manager, such as Dashlane, 1Password, and LastPass. They require remembering just one strong master password – every other password can be generated randomly and stored within the password manager.

Use two-factor authentication

Two-factor authentication (or 2FA) provides a second line of defence beyond passwords. It requires confirmation on top of a password via a second channel, such as text message or email.

While it can be slightly inconvenient compared to using a password alone, it provides a significant security upgrade. Many people are now accustomed to 2FA given banking apps commonly require a second confirmation via text message when transferring money.

If your software supports 2FA, switch it on.

Use client portals for sensitive information rather than email

Email is a popular fallback to send sensitive data but it remains inherently insecure.

It leaves both advice practices and clients exposed to phishing attacks, where cyber criminals send fraudulent communications that appear to come from a reputable source. They can harvest personal data, make false requests, or change bank account details contained in emails.

Even if cyber criminals aren’t at play, it’s all too easy to send sensitive information to the wrong email address, which can undermine client trust.

The 2022 Future Ready IX advice report, sponsored by Midwinter, showed that 22% of advisers say they don’t have adequate security and file encryption for transmitting sensitive data.

Good advice software should include a secure client portal to communicate or send information. Clients can set their own password (or the password can be delivered over a different communication channel, such as in person or by text message) to use the portal, which is significantly more secure than sharing client information via email.

Use cloud-based storage and software rather than local storage

A secure cloud-based workflow is more efficient and secure than storing information locally or on paper. It is easier to provide an audit trail, search for information, and ensure ongoing business continuity. It is cost-effective and flexible, with major cloud-based vendors investing huge amounts of money to secure their systems.

Software applications that run in the cloud are seamlessly updated with new features and security patches while desktop software often requires manual checks.

When using a cloud-based service, it is pertinent to check where the data will be stored. Storing data in Australian-based data centres not only ensures it falls under Australian legislative protections but also that these protections can be enforced in case of a breach.

While most practices are using the cloud in some form, practices should also review their backup strategy. The Future Ready report found that while 93% of advisers now back up their critical data daily or in real time, one-in-three (32%) said they haven’t tested or restored from their backups in at least six months.

Review cyber-security of suppliers and software providers

The cyber-security of any advice practice is only as secure as its weakest link. A breach at a small supplier could give cyber-criminals a way into your sensitive client data or advice practice.

Ensure that suppliers have strong cyber-security controls in place and be wary of free software – if you are not paying for the product, you are the product.

Most large companies invest heavily in security and technology. Companies such as Midwinter have the resources to adopt international standards such as the ISO/IEC 27001 on information security management. Compliance with these standards is independently assessed and provides a heightened level of confidence.

The post Five simple ways to improve cyber-security in your advice practice appeared first on Midwinter.

Technology can provide a much-needed efficiency boost to help advisers stay on top of their workload, and with Midwinter’s 2022 EOFY offer*, now is a great time for practices to take a second look at their financial advice software.

Advisers know the march towards the end of the financial year can be hectic.

Many clients traditionally consider implementing tax-effective strategies such as boosting their super contributions ahead of June 30, but it’s also a time to consider how clients are tracking towards their overall financial goals.

Markets have been volatile and uncertain amid rising inflation, the Ukraine-Russia war, and the ongoing fallout from the pandemic. Many clients are becoming concerned about higher food and petrol costs, as well as home loan interest rates, which are predicted to rise substantially over the next one-two years.

Add in a change of federal government for the first time in a decade and advisers have a lot to talk about with their clients.

While not all of the average 200-plus clients each adviser now manages will need EOFY advice, fitting those that do into a meeting schedule can be difficult. Unfortunately advice clients rated their advisers’ review service as their worst performing area, according to the 2022 Future Ready IX advice report.

The EOFY should be seen as an opportunity to touch base with clients and make sure they are on the right track; technology provides a way to do this efficiently.  

Prepare clients through virtual channels

Building personal rapport is always time well spent with clients. However, clients who take the time to consider their financial position and goals beforehand can lay the foundation for a better meeting.

Encourage clients to use advice software to improve engagement and prepare ahead. Those clients who are not comfortable filling in an online Fact Find can still use financial calculators to get a sense of their current position and how it relates to their goals. They may be surprised how much it can change over a year, which prompts new discussions about savings or retirement.

While many clients started with in-person adviser meetings, a growing number are now just as comfortable online.

Some clients even prefer online meetings as they don’t have to make extra time to come into an adviser’s office – it’s good practice to offer the choice to every client. If even a small number prefer online meetings, it can save time.

Review retirement goals, not just super contributions 

The lead in to June 30 is the perfect time to re-assess how clients are tracking against their retirement goals given many will already be considering voluntary contributions.

A voluntary super contribution can help manage a client’s overall personal tax obligations, but there are many other factors at play.

A rising interest rate environment presents a new headwind for future equity and bond returns compared to historic levels.

Potentially higher inflation and lower investment returns over the next few years should serve as a prompt for clients to reassess their retirement goals – will they need to save more or re-consider the level of investment risk they are taking on?

Younger investors may be in a different position, with superannuation guarantee contributions (SG) set to increase. The SG moves to 10.5% on July 1 (and 12% by 2025), which will raise final retirement incomes.

Rising cost of living: an opportunity for budgeting services

Inflation is now tracking at its highest rate in more than a decade, prompting the Reserve Bank of Australia to start raising rates. It has come as a shock to many Australians after the RBA initially said it wouldn’t raise rates until at least 2024.

Many clients will now need to adjust their lifestyles to cope depending on their life stage. Homeowners can expect significantly higher mortgage rates over the next two years while pensioners on fixed incomes may also have to consider cutting back.

Advisers have traditionally shied away from budgeting services but it is increasingly playing a role in holistic, goals-based advice.

Some advisers are offering specific fee-for-service budgeting by asking their clients to fill in spreadsheets or analysing their spending using software.

Advice software can also incorporate calculators to help clients manage their cashflow and providing them with a view into their financial situation in between adviser reviews.

Legislative changes and a new government

The 2022 Federal Budget was light on major changes but did include several small tweaks for clients to consider.

The lowered minimum pension drawdown rate has been extended into 2022-23, allowing retirees who don’t need to withdraw money to keep it in the tax-advantaged super environment. People approaching retirement age can now make voluntary super contributions without having to meet the work test and the downsizer contribution scheme is open to those aged over 55 rather than over 65.

The new Labor government is also planning policy changes that will have an impact on many clients’ financial situation, such as raising the childcare subsidy to 90% for the first child in care and taking up to 40% equity in up to 10,000 first home buyer home purchases a year.

Advice platforms should be kept updated with any new legislation so advice calculations are always up to date; if they are run in the cloud these updates will be available automatically for software users.

Australians are becoming more financially savvy than ever and, after two years of grappling with a pandemic, they’re keen to enjoy life. Advisers who use technology well are set to play a crucial role in helping them achieve their goals through a challenging market environment.

*With the 2022 EOFY offer, advice practices get 2-months access to Midwinter’s financial advice software, basic data migration and a 1-hour training session at no cost. Register interest here by 30 June 2022 to be eligible. Terms and conditions apply and can be found here.

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The number of advisers across the industry has plummeted in recent years as public scrutiny, heavy regulation, higher educational requirements, and a pandemic have all taken their toll.

With the Australian unemployment rate falling to a level not seen in over a decade, the skilled labour market is tightening, employees are increasingly leaving their employment in search of ‘better’ options, and the employee – not the employer – now has the upper hand in negotiations.

For practice principals trying to run an advice business, navigating the turbulence caused by this competitive environment seems like an additional and unwanted challenge.

But the reality is more nuanced.

The best advice practices are using it as an opportunity to reset their businesses. They are investing heavily in technology to support their staff, operations, and clients, and finding smarter ways of working after pivoting through one of the most volatile periods in recent memory.

The 2022 Future Ready IX report, sponsored by Midwinter, shows the average practice still posted a profit margin of 24% last year – an impressive result given the challenges facing traditional business models.

While advisers are doing an amazing job, the report reveals some potential strategies that can help practices attract the right talent and turbocharge growth into the future.

Invest in building a great business

The removal of grandfathered remuneration and product and marketing subsidies, as well as lower life insurance commission caps, have taken away steady revenue streams. It now takes a larger investment to run and grow a practice under a fee-for-service model.

Yet more than two-thirds (70%) of businesses are owned by a single principal, who has often established the business and manages it in a very hands-on fashion. Only one-quarter have clearly articulated their planning for the next 3-5 years.

The skills that make a great financial adviser are not always the same as those that make a great business manager. It takes an investment in training or an acknowledgment of your own personal skills and preferences – and then plugging any skill gaps with the right staff.

Practices that meet with an external business coach posted an average 35% uplift in profit per owner, according to the Future Ready IX report. An investment in business management skills can pay off.

Seek more feedback from clients

Clients rate their personal relationship with their adviser as their most valued attribute of the service.

Yet only about one-quarter (26%) of businesses formally sought feedback from their clients in 2021, down from about one-third (32%) in 2019, according to the report. Meanwhile, only one in four advisers said they were in touch with their best clients ten or more times per year. 

Even when advisers do seek information from clients, it is often not recorded systematically in their CRM. Less than 10% are recording key relationship building data such as wedding anniversaries, children’s and grandchildren’s birthdays, or client interests.

A CRM that is integrated into your advice platform can make this a simpler process that becomes a habit.

Technology enables efficiency and compliance

While the average practice recorded a 24% profit margin in 2021, it is still down on the 28% margin posted the previous year, due to higher operational expenditure.

The quickest way advisers can tackle this fall in profit margin is to maximise efficiency gains from their technology stack.

While Treasury is looking to cut regulatory costs and duplication through its Quality of Advice Review, compliance will always be a key challenge given the importance of advice.

Yet one-third (33%) of advisers are “not very confident” that they are meeting breach identification, assessment, and reporting requirements – significantly higher than one-in-five (22%) reported in the previous Future Ready analysis.

With the growing responsiveness seen in the advice tech industry, practices should consider performing a regular review of their systems, to ensure they are fit-for-purpose. For example, in 2022, an advice platform should offer an out-of the-box solution that makes compliance simple and reliable. Similarly, a cloud-based platform should make it simple to produce Statements of Advice and other required documentation.

Another area of efficiency is online communication. Society has rapidly adapted to digital communication following the COVID-19 pandemic yet more than one-third of practices still conduct almost all client appointments in person.

Explore new advice streams

Financial advice has become holistic and personalised rather than product based – and clients have shown they are prepared to pay for it when they understand its value.

Many top practices are now expanding their offerings into new areas such as cashflow management, aged care, and estate planning.

Many of these are areas of untapped demand and represent potential new revenue streams for practices.

For example, one in three advised clients say they don’t have a current will and less than half of advised clients with superannuation have a binding nomination in place, according to the report.

But only one-third (35%) of businesses currently offer advice on aged care, less than half (42%) offer an estate planning solution and about half (52%) have a service to assist with Centrelink.

Grow through acquisition

Small practices with revenue of less than $500,000 are being hit the hardest in the current environment, with average notional profitability dropping to an all-time low of 6.8%, according to the report.

The people running these businesses are, in many cases, talented advisers who aren’t getting the rewards they deserve. But advisers who are part of the ‘great resignation’ don’t have to be lost to the industry. 

Once the foundation of a strong business is in place, practices have an opportunity to attract other quality advisers or to grow through acquisition.

Attract and retain talent

In 2019 almost half (46%) of practice principals thought their staff would rank the morale in their office as ‘very good’ – this has now dropped to 37% according to Future Ready IX.

Maintaining company culture when staff have been forced to work from home for extended periods due to COVID lockdowns has been difficult. Although the flexibility of work from home arrangements has also been seen as a positive shift for many employees.

But even when they’re not in the office on a regular basis, employees want to maintain a regular dialogue with the owners and leaders of the business; they want to understand how their employer is tracking against its objectives.

Over half (52%) of employers have not conducted performance review or appraisals with their staff in the past 6 months, 49% do not have agreed and documented performance objectives and 37% do not have position descriptions. The Future Ready IX data in this area is clear – businesses that have invested in an effective performance management system are delivering considerably more profit than those that are not yet leveraging the full potential of their team.

Where to from here?

The advice industry has faced significant challenges in recent times, but the best practices are continuing to turn them into opportunities for growth.

Practices that invest in their future and people, establish strong business processes, and implement systems to support them will continue to thrive.

Stacey Cowan is the Head of Advice Sales at Midwinter. To find out more about Midwinter’s financial advice software, visit midwinter.com.au or email sales@midwinter.com.au.

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General advice may help you reach a broader audience, but personal advice provides a better way to meet client needs, drive business growth and manage compliance risk, according to Midwinter’s Chief Commercial Officer Steve Davison.

There’s a difference between general advice and personal advice. The problem for the industry is the consumer doesn’t appear to care and the line separating them isn’t always clear. A 2019 research report commissioned by ASIC found that consumers find it difficult to understand the difference between general and personal advice, even when it is explained[1].

The paradox for advice providers is that general advice – which must not consider a consumer’s personal circumstance or make product recommendations – is at odds with the goal of personalisation for client experience, marketing and providing financial help.

The rule of thumb that general advice is easier to provide and promote to a wide audience has been challenged. ASIC’s case against Westpac is one of the few examples of case law in this area[2]. It suggests the scope of general advice may be narrower than first assumed and that financial services are to be provided efficiently, honestly, and fairly[3].

Arguably, general advice has become too generic to be relevant to consumer expectations for guidance and help.

For advice providers, the restrictive boundaries and business risk of providing general advice mean the commercial returns may no longer outweigh the costs of providing personal advice. It is now accepted that personal advice remains even more difficult to produce because of the administrative burden; it is strangled by excessive regulation and red tape, making it expensive and putting it out of reach of most ordinary Australians.

Treasury has been tasked to review how the regulatory framework could better enable the provision of high quality, accessible and affordable financial advice for retail investors as part of the Quality of Advice Review[4].

With a report from the Quality of Advice Review not due until 16 December 2022 and no certainty about when potential regulatory changes would come into effect, the industry should not wait for regulations to catch up – there are already options in the market seeking to make a difference to consumers and advice providers’ needs around personal advice.

The right technology can make personal advice very efficient for common use cases – covering the needs of many Australians – and digital has the potential to become the go-to channel for these needs.

Consumers often wait to build their wealth, and with it their financial confidence, before seeking professional advice. Access to an affordable entry-level advice option could encourage consumers to seek personal advice at an earlier stage. With financial products so readily accessible, helping consumers get strategic advice before purchase may be a small step to improved financial decisions.

Some superannuation funds and fintechs are already using digital advice technology to offer online and adviser-supported statements of advice. Midwinter’s digital advice technology underpins these types of services for some of Australia’s largest superannuation funds.

Advice providers can use this technology to offer their clients more efficient, simple personal advice that is digitally engaging and may just set them on a path to building a longer-term relationship over their lifetime. Digital advice technology also improves the efficiency of their entire advice process, from collecting client data to automating statements of advice that address the client’s circumstances and objectives.

Few advice groups and wealth managers are doing it today because they aren’t ready to invest or have become inherently conservative after years of excessive regulatory oversight. The unfortunate reality is, they are passing up an opportunity for significant growth.

A more efficient way to provide personalised advice could also help onboard a new generation of younger clients that do not yet have substantial assets but are set to spend or inherit trillions of dollars from their Baby Boomer parents[5].

These investors could benefit from advice but are often turning to less-than-optimal sources.

About 3.5 million (or 17%) of Australians aged 14 and over say they have been asked for financial advice by their friends or families, according to Roy Morgan research^[6].

‘Finfluencers’ and social media sources are becoming a go-to source of information for generation Z, millennials and first-time investors. The reach of these unlicensed individuals has become substantial with ASIC now taking a closer look at their activities and warning companies to be mindful of regulatory risks when engaging the services of finfluencers[7].

These sources of financial information – or misinformation – are ultimately a form of competition, and whilst regulation may reduce the chance of poor advice, the alternative is to ensure more people seek good personal advice and the consumer protections it affords.

Advice providers can differentiate from the finfluencers by pre-emptively moving ahead of possible regulatory changes and help existing and prospective clients before they turn to friends, social media, or simply choose to go it alone.

A digital advice journey enabled through Midwinter’s software can provide personal advice around a specific topic such as retirement or insurance and is an ideal introduction for younger consumers, or those new to financial advice, who often have simple or single-topic advice needs.

By providing an accessible digital advice offering, businesses can minimise a clients’ reliance on alternatives such as general advice – or the sometimes-questionable information [advice] from finfluencers and chat rooms – helping their brand differentiate the substance of their offer.

The businesses that adopt digital advice technologies now may find they have a significant head start – and thus advantage – over their competition.

Steve Davison is the Chief Commercial Officer at Midwinter Financial Services. To find out more about Midwinter’s financial advice software, head to midwinter.com.au or contact sales@midwinter.com.au.

[1] ASIC Report REP 614 Financial advice: Mind the gap. https://download.asic.gov.au/media/5054882/rep614-published-28-march-2019.pdf

[2] 21-013MR ASIC successful against Westpac subsidiaries’ appeal to High Court | ASIC – Australian Securities and Investments Commission. (2021, December 03). Retrieved from https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-013mr-asic-successful-against-westpac-subsidiaries-appeal-to-high-court

[3]Mills Oakley, Personal advice and ethics – crossing the line? (ASIC v Westpac Securities). https://www.millsoakley.com.au/thinking/personal-advice-and-ethics-crossing-the-line-asic-v-westpac-securities/

[4] Review of the quality of financial advice, Draft Terms of Reference, December 2021. https://treasury.gov.au/sites/default/files/2021-12/c2021-224992_qar_draft_tor_final.pdf

[5] No More Practice – Wealth Transfer Report. August 2017. Retrieved from https://www.nmpeducation.com.au/wp-content/uploads/2017/08/McCrindle-No-More-Practice-Wealth-Transfer-Report-2017.pdf

[6] Roy Morgan, 3.5 million Australians are ‘trusted advisors’ for finance and investment decisions. https://www.roymorgan.com/findings/7834-finance-trusted-advisors-201901110042

[7] ASIC Media Release: 22-054MR ASIC issues information for social media influencers and licensees:  https://asic.gov.au/about-asic/news-centre/find-a-media-release/2022-releases/22-054mr-asic-issues-information-for-social-media-influencers-and-licensees/

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