The 30th of August saw the release by ASIC of RG255 on digital financial advice. In their media release ASIC says:
“ASIC supports the development of a healthy and robust digital advice market. In an environment where only around 20% of adult Australians seek personal advice, we think that digital advice has the potential to offer an attractive, convenient and low-cost advice service to retail clients who may not otherwise seek advice.”
We agree. For many people, getting their investment strategy right is not complex and should be something that is done actively but in an easy, quick and affordable way. Too many people are in default investment options because they don’t have access to the advice they need at a price they can afford, or just can’t find the time to see and advisor. And this could cost them dearly in retirement. For these people, digital advice could be just the ticket. It can be provided anywhere, anytime, quickly and at low cost. So long as the advice algorithms are appropriate, digital advice may significantly improve financial outcomes for millions of people.
Of course, for a reasonable chunk of the population, seeing an advisor makes sense because their financial situation is complex or they would like a more flexible, more diverse and hands-on investment strategy. Seeing an advisor can also bring a sense of comfort and assurance to investors that someone else is on their side and always on the look-out for ways to improve their financial outcomes. But even for financial advisors, digital advice tools can be a blessing in disguise. Rather than seen as competition, digital advice tools such as Investfit can not only improve financial outcomes for the advisors’ clients but also can contribute to:
- growth in sales (when used as a lead generation application)
- increased profitability (through substantial productivity gains)
- decreased risk (by giving the client more information about short-term volatility, level of certainty of reaching goals and the relationship between these and retirement incomes, legacy etc)
The next step is to work through RG255 and find out which digital advice tools meet the requirements of ASIC and, where relevant, also provide the advisor with the opportunity to improve their own financial outcomes. More on this in the next post.