Sydney, NSW: Adviser Ratings today announced an industry-first review register of direct-to-consumer digital financial planning solutions, or “robo-advisers”. Robo-advisers leverage the Australian public’s passion for technology and conducting business online, while addressing growing demand by consumers for assistance with their finances. This emerging sector of digital solutions should complement the traditional advice industry in improving accessibility and affordability of advice for consumers.
“There’s no question that the traditional financial advice industry today has an image problem, compounded by the findings from the 2018 Royal Commission,” said Adviser Ratings CEO Wealth Mark Hoven. “The fact that only 14% of Australians receive advice despite the large majority needing assistance with their finances demonstrates a huge unmet opportunity. We believe the digital financial planning world can start to bridge this gap and have launched a review register of 36 robo-advisers to provide consumers more transparency about this emerging world of finance solutions.”
Digital financial planning tools typically solve a specific need or life-stage-related financial challenge, although some offer comprehensive “advice-in-a-box”. The tools span many areas, assisting with budgeting, financial advice, investing, superannuation and post-retirement services. They are delivered on-line with the personalised user-experience that consumers have come to expect from apps and web-based services used in non-financial facets of their life. “Given Australians’ love of technology and smart phones, these tools offer significant potential to improve consumer engagement with and control of their personal finances,” said Hoven.
While the advice industry has purposely focused on more affluent customers, equally there are a raft of reasons why consumers have avoided the industry, including concerns about trust, affordability, fears of being judged or embarrassed, and a lack of solutions offered for simple advice needs. “Because these digital tools are breaking down holistic advice into its component parts and delivered through the streamlined anonymity of an online world, they are helping to overcome previous advice roadblocks and providing accessibility to professional financial help for more Australians,” said Hoven.
Robo-advisers have often been presented as a disruptor to the traditional advice industry, however a hybrid model of interdependency is more realistic. Digital advice solutions present benefits for traditional financial advisers if sympathetically incorporated into their business design. They can improve cost of new customer acquisition, reach new types of customers, broaden service offerings, transition certain service components online, bring advisers closer to the customer, and lower the overall operating cost of the business.
The digital advice sector is not without challenge. The large majority of providers are capital constrained, start-up fintech companies faced with the difficulties of building brand and scale, to stand-out in a crowded online world, although some are attracting the attention of angel investors and venture capital. Other challenges include building trust with consumers, protecting customer data, and managing the increasing administrative burdens imposed by financial regulators, although these are all challenges shared with traditional financial advice businesses.
* Growth in assets under management from $1.4b to $5.8b by 2022
