Last week I had the opportunity to speak at a national industry forum in Sydney on the future of financial advice. The forum was pegged around the theme of ‘survive or thrive’ – and it couldn’t be more-timely as the industry shifts through an unprecedented period of change.
AMP is no stranger to the impact of this market disruption, but more recently, we are playing the role of the disruptor - and for good reason. The market has changed, and the commercial realities of the sector will never be the same. Ignoring the reality of the changed dynamics is not an option. But through disruption comes opportunity and that’s the mantra underpinning our efforts to reshape and transform both our business and the industry more broadly.
Is there a future for the financial advice sector? Our answer to this is a resounding yes and that was a key part of my message to financial advisers at the conference.
What we do know for sure is that there are still an incredibly high number of Australians who’ve never had any expert help managing their finances. And you can’t blame them. The average Australian working full-time earns just over $80,000 a year – on that salary, it’s hard to justify spending thousands of dollars on tailored financial advice.
Despite some of reputation-battering stories about the financial services sector in recent years, there are many Australians who remain open to getting advice. ASIC’s research supports this view but acknowledges there are barriers locking them out.
New AMP research has found two out of three Australians who want to receive financial advice still want to see a planner face-to-face and of this group, more than half want it to be cheaper.
Human interaction counts and we understand that - but advice also needs to be affordable. As the industry evolves this could mean some of these services will be done via a secure webcam or over the phone. This is the disrupted future of financial advice.
The same research found that Australians would be more likely to seek advice on their health and wellbeing, or their career, rather than their retirement. This is despite 82 per cent of them believing having a financial adviser would be valuable.
Separate recent research from Russell Investments revealed that an adviser can deliver value of at least 440 basis points or 4.4 per cent or more every year to their clients beyond investment-only advice. The same report shows that a trusted adviser can also guide investors to avoid common investment mistakes and this can add as much as 1.9 per cent per annum of additional return to an investor’s portfolio.
It all boils down to this: we have a job to do. We need to remind Australians of the value of financial advice.
As an industry, we need to work more effectively together to rebuild trust in our profession and leave Australians in no doubt, that financial advice is here to serve them. To help them.
At AMP, we’re building a model to support everyday Australians better manage their finances. We already have a robust framework in place to support holistic face-to-face advice, the next step is to develop a solution to deliver financial advice to an even broader market of Australians. We’re not just planning to survive; we want to thrive. And we want the same for the industry, for advisers and for clients.
Alex Wade is chief executive Australian Wealth Management, AMP