To say it is interesting times in our industry would have to the be understatement of the century. Never before in my 25 years of working in the Australian financial services have I seen more disruption at the very core of multiple business models - from adviser businesses, to platforms, insurance and super.
I have had some fascinating and sometimes frightening discussions with leaders across all sectors, and it is through these conversations that I have come to realisations that are not always obvious when we look at what’s happening at face value.
One of the issues that has been rapidly rising to the surface is the viability of the advice business model - with up to 50% of advisers predicted to leave the industry, and only those with very robust existing business models or big balance sheets behind them to survive.
There seems to be a silent consensus that says a client with about $1m in investable assets is profitable business for an adviser. Anything under that would be unprofitable and therefore unviable.
I completely understand that the systems and process to provide personal advice is costly. The business of an adviser is heavily burdened (necessarily) with the cost of compliance which must be covered in the fee for service. A by-product of this however, is that mass Australia will not have access to financial advisers easily. In fact, many have predicted that there will be less advisers than ever before to serve the needs of a rapidly ageing population.
So it seems that good old Generation X are going to get squeezed on this issue too. (Yes, I am on that hobby horse again!) The generation that is sandwiched with ageing parents, children that don’t want to move out of home, an unfunded future pension liability and longevity with no plan to pay for it.
If advisers are forced to only take clients of a certain size above $1m to stay afloat, and mass Australia cannot afford to access advice, there really is the perfect storm of a nation heading to serious economic hardship, with no education plan to combat it.
With robo advice nowhere near solved, and advisers’ numbers and viable models diminishing by the second, there needs to be new ideas on how Australians are going to be guided to make the right financial decisions.
I believe it’s a combination of self responsibility, a deeper relationship with super funds and a new way to truly harness technology and compliance to create advice at scale. Something hard to move forward on anytime soon while the industry is grappling with the change before it.
While we continue to produce education and work with many of you to create content to reach people, it’s going to take one eye on the future while the other sorts the present to not lose our way for the next generation to retire post baby boomers. Because this change, and this level of adviser disruption could have massive unintended consequences on Generation X and beyond in the future.
Until next time,
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