Left to right: Don Trapnell, Hans Egger and Neil Macdonald

It keeps being talked about, so we asked clients Don Trapnell, Director of Synchron; Hans Egger, Managing Director of AstuteWheel, and Neil Macdonald, CEO of The Advisers Association for their views.

Don Trapnell is firmly in the ‘no’ camp. 

“Relying on robo-advice to fill in the gaps caused, let’s not forget, by increased compliance costs and lowered commissions, is only creating more layers and standards of advice available to Australians and adding to confusion,” he says. “This was not the situation before well-meaning public servants meddled in our business.”

AstuteWheel Managing Director, Hans Egger says robo-advice should be viewed as a generic term that covers a range of outcomes from simplistic calculators and processes that DIY advice clients can use on their own, such as the Moneysmart website, through to the sophisticated modelling and processes used by financial planners to provide comprehensive advice to their clients.

“Where it becomes interesting is how tech providers progressively move the goal posts to try and provide software that allows the DIY client to receive a more comprehensive outcome without any input from an adviser,” he says. “This will transition the mostly free tools available now to a low-cost gateway for the bigger institutions to feed into their products or adviser network.”

At the other end of the spectrum, he says the challenge for tech providers is providing advisers with a solution that streamlines their advice process and improves the level of service they provide their clients. “The improvements here will be both on the strategic advice offered as well as the client communication through dedicated client portals.”

The Advisers Association’s Neil Macdonald says that if we start with the consumer, there is no shortage of product and educational information from the various fund managers and product providers. He believes the Government’s Moneysmart website is excellent.  

However, he also says it’s not as simple as just ‘filling the gap’. 

“When I was in marketing, we used to say the consumer needs to go through the process of Awareness, Interest, Desire and Action (AIDA), if there was going to be any change in their behaviours.”  

He outlined how this applies to potential consumers of financial advice.

Awareness

Unfortunately, most Australian consumers believe that the super guarantee will be enough to meet their retirement needs and that group insurance in super will protect them.  

This is blatantly incorrect. There is general recognition that contributions should be greater than 13.5%, and that assumes someone remains fully employed from age 21 to 65-67. Full employment is increasingly rare due to maternity/carer/unemployment breaks. All the data indicates a significant majority of people retire early or do not work full time after their mid 50’s due to ill health, underemployment, etc. Typically retirement awareness kicks in about 5-10 years before the expected retirement date, by which time it is too late. Insurance awareness typically kicks in due to some other trigger event, eg heart attack of a friend, loss of job, again often too late.

Interest

Super and insurance are both seen as ‘boring’, by consumers, and insurance in particular is seen as a negative end game ie pay premiums and not have a claim = waste of money, pay premiums and have a claim = sick, disabled or dead.

Taking action usually only happens when the consumer has an ongoing relationship with an adviser, or an episodic basis, triggered by an event such as marriage, death, redundancy, etc.

Desire 

Even if there is consumer interest, advice is seen as too confusing, too expensive, taking too much time and effort and too slow, in a world where we are increasingly used to instant answers.  Hence the increase in ‘intrafund’ and ‘roboadvice’ which is often viewed as seen as free, quick, and with respect to acquiring financial information, self-paced. However, this kind of ‘advice’ is often conflicted due to vertical integration with industry/retail super funds or the pricing model for robadvice.

Action 

There is so much choice, many consumers are confused about who to trust and whether they are doing the right thing.  This is not just about the individual deferring income today for some potential future outcome, it’s also about the impacts on their family and their lifestyle.

Mr Macdonald says artificial Intelligence, big data, gamification, etc will improve adviser efficiency, help target cohorts of people, raise consumer interest and potentially desire but, “In the end we need to be careful that the action taken is not conflicted, or if it is, the consumer fully understands what they are doing – which is hard without a second, less conflicted opinion.”

He says the solution is not more robo and intrafund advice, although that helps. “It’s actually about removing the impediments and red tape to give consumers access to affordable advice by allowing professional advisers to provide appropriate personal advice, quickly, easily and affordably, while at the same time ensuring consumers are protected by getting rid of bad apples quickly and separating product information from advice.”

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