Now is the time to be brave

Recently, the first Delivering Better Financial Outcomes bill passed in both the Senate and the House of Representatives, marking a significant step forward for superannuation funds, corporate Australia, and everyday Australians.

Finally, some clarity is emerging around the provision of financial advice and lifting the fog of uncertainty that has clouded superannuation trustees' concerns over the past few years. This is welcome news.

But here's the rub... It's also welcome news for financial advisers as it will usher in technology that will enable them to reconnect with clients who can't afford high fees, engage with intergenerational families who haven't sought advice, and cater to millennials who want a different financial advice experience.

The bill streamlines the advice framework and provides a clear path forward, eliminating any uncertainty around affordable advice. Now is the perfect time to seize the opportunity and leverage the technological advancements in the advice sector, enabling funds and advisers to offer accessible, affordable, and most importantly, personalised advice solutions.

As Garry Weaven, an early pioneer of industry super, once said, "It's time to be brave." He was speaking to the trustees of super funds long before the current surge in demand for advice, yet he had the foresight to warn that, without embracing change, the superannuation industry risked following the same path as the mutual societies of yesteryear.

Many superannuation funds are grappling with the question, where do we go from here? Do we build, buy, or rent the advice engines? And or, do we expand our advice teams for face-to-face services and broaden our call centre offerings?

Fortunately, the decision making is not as binary as it would seem because a multiple of solutions can be embraced and it's not either or, it's a combination of both options working in tandem beneficially.

For example, so-called digital advice can and should be complementary to face to face. Amongst other things it can deal with the mass market in a scalable way that then filters into face to face if required. A great winning combination that caters for all... Not just a few.

Notwithstanding the available options, speed to market is a critical step for members and for most funds. But building internal systems - contemporary digital platforms that compete with the market will take years, cost members upwards of $30 million and still require ongoing cost and innovation.

This is a massive challenge when one considers the current round of consolidation and the number of mergers which require the technology chiefs to focus on integration of multiple systems. It's also most likely that the time and allocation of resources will compete against specialist providers that are ahead of the curve and who will partner at lower cost.

By partnering with established technology providers, super funds can offer real advice at scale, with reliability and quality, efficiency, and cost effectiveness - within a few weeks as opposed to a few years. Even with a full technology integration it only takes months.

The question for trustees therefore should be why not as opposed to why so - given the member benefit and lower cost.

Interestingly during the government consultation stage with Treasury, many funds requested the government water down existing red tape to enable faster delivery by unqualified staff for simple enquiries, particularly in an intra-fund environment.

Understandable, but arguably just refining yesterday's broken model with one that still doesn't work at the scale required. Possibly even reducing consumer protection which the government is unlikely to support.

The good news is that rather than adopting expensive face-to-face models, technology can offer personal as well as intra-fund advice at a fraction of the cost, all through a platform that's easily accessible to members. While scaled advice at some super funds can cost nearly $1000, online digital planning can provide the same service for under $200.

This not only offers significant savings for members but also makes advice more accessible, affordable, and compliant. In a highly competitive market, this kind of offering can greatly enhance member retention and engagement. It's an approach that financial advisers should also consider for similar reasons.

Imagine having a wide range of common questions answered, personalised to each member's balance and account, and then receiving a tailored Statement of Advice (SoA). It's now possible, live, and incredibly user-friendly through the right provider. That's a game-changer!

With this level of innovation and interaction, it's time to rethink the idea that older members only prefer human call centres. One only needs to consider how many people aged 50 and over are using smartphones, iPads, and internet banking - it's second nature to them.

One inevitable challenge is the lack of clarity around what digital advice really is.

There are several models but the purest is where advice is issued with an SoA via the platform under an AFSL of the provider or the fund. That's real advice as opposed to process efficiencies in advice.

Many technology partners use terms like 'digital advice', but what they're really doing is digitising the process of a human providing advice. While this approach can be helpful for in-house advisers, it still relies on face-to-face interactions and only reaches a small fraction of members.

True digital advice, on the other hand, can engage the entire member base, not just the 2% who contact call centres. This is where the real opportunity lies for super fund engagement managers as opposed to the advice managers.

Another thought to consider when embracing new technology is the old adage, "perfection is the enemy of good." Not surprisingly with anything new and innovative, the market searches for an ironclad, perfect-world perfect entry solution that simply doesn't exist.

This mindset can stall decision-making and slow down innovation. Instead, it's more effective to start with what's already available, engage early, and focus on continuous learning and improvement. This iterative approach is far more productive than sticking with something that's known to be ineffective and likely to deteriorate over time.

So where to now with the slogan "affordable accessible advice"?

With an estimated 15,000 financial advisers in Australia, many are not interested in low-balance accounts or clients who can't afford the typical $5000 advice fee. This leaves a large portion of Australians without the help they need. Something transformational is needed.

The reality is most people don't require complex advice - just timely and accessible support. Digital platforms can bridge this gap, enabling super funds to offer affordable advice to members who would otherwise miss out.

Financial advisers who adopt these platforms can also benefit by scaling their services to reach thousands, not just hundreds of clients. It's a win-win that aligns with our responsibility to support those who need it most.

Finally, digital advice platforms also address the growing issue of orphaned clients in adviser driven investment administration platforms - the so-called 'pre-advised client' (PAC) who is now stuck with an outdated risk profile and investment strategy that no longer serves their needs.

Who really cares about them and what to do? While platforms have largely been silent on this issue due to the complexity of duties, the solution is now here, and digital platforms can bridge that gap.

In summary, the DBFO bill provides the perfect platform for super funds and investment platforms to transform how they serve their members better and more efficiently.

Digital financial advice is no longer an experiment, it's a proven, scalable solution that can be integrated quickly. Members deserve the best, and younger generations are eager for online solutions over face-to-face advice. This natural segmentation of account size and age will find a home with multiple solutions.

Now is the time to be bold, to step into the future of online financial guidance and to embrace solutions that genuinely make advice both affordable and accessible. Australia will win as a country and as Weaven said, "Now is the time to be brave." It's a time for leadership by example.