But Financial Services Minister Jane Hume has also made it clear that she believes the solution lies with industry, not government. “Technology has a big role to play here,” Hume said during a webinar hosted by publisher Conexus Financial last week.
Over the next fortnight, two separate start-ups will open, both of which say they have finally decided to provide financial advice in an affordable digital format while adhering to the complex laws plaguing the space.
“Our desire is to ensure that every Australian has the ability to improve their financial situation,” says Paul Feeney, founder of Otivo, a digital financial advice platform and app due to launch this week.
A former financial planner and private banker, Feeney has been trying to advise regular consumers via technology for the better part of a decade. He founded digital advice pioneer MapMyPlan in 2014 with chairman Bernie Ripoll, a former Labor MP who ironically led the parliamentary inquiry responsible for many of the tough laws introduced for financial advisers since the global financial crisis. .
MapMyPlan has engaged leading clients, including mining giant Rio Tinto and professional services firm EY, who provide the tool to employees as a wellness benefit. But critics said it failed to hit the holy grail of digital advice because it focused on budgeting and saving rather than investing in financial markets.
Now the seven-year-old fintech is relaunching as Otivo and expanding the scope of its services to pensions and insurance, advising consumers on how to choose the right investment option within their super fund. and make voluntary contributions. Over time, it will add advice on non-super investments.
“We now cover all aspects of your financial life,” says Feeney.
Low cost subscriptions
Otivo significantly reduces the current rates for personal financial advice, that is, advice tailored to your personal situation. A subscription to the basic version costs $12 per month or $120 per year, just over 2% of what it costs to receive comprehensive guidance and the price of a weekly cup of coffee. The $30 per month premium version offers limited access to a licensed counselor over the phone.
Costs are kept low with automation software, which analyzes data captured during an onboarding process and makes recommendations. Unlike a traditional advisor, Otivo explains how a consumer can carry out the advice but does not transact on their behalf.
The government’s impending “consumer data right”, which will require banks and superfunds to share customer information with third parties upon request to facilitate provider switching, will help the new batch of digital consultancy start-ups in enhancing their data collection. This will strengthen the early inquiry process and help them to ensure that the advice is truly relevant to their personal situation.
Digital consulting startup MoneyGPS also partly relies on a DIY implementation system. The product has been tested for two years with groups such as tax agents H&R Block and the YourLifeChoices consumer information service, which has about 250,000 members. It will be launched to the general public in the coming weeks.
“This is an offering for people who can’t afford traditional financial advice,” says George Haramis, a seasoned wealth manager who developed the tool with fellow industry veteran Drew Fenton. .
A MoneyGPS financial plan – or “statement of opinion” in legalese – costs between $50 and $270 depending on the level of complexity. It’s a little more than a cup of coffee but well below average prices for full advice.
A questionnaire completed by the consumer provides insight into their financial life. MoneyGPS then provides a list of “needs” and recommendations. The user can either implement the advice themselves, pay an hourly rate of $100 for a digital advisor to do it, or be referred to a traditional financial planning company.
Haramis says he first tried to create tools that provided financial advice via the internet in the late 1990s. “The technology and the timing weren’t right, but we were sure the idea was the good,” he said.
“Now technology is absolutely there to provide [digital] personalized advice, tailored and directed by the client.
“A significant and growing advice deficit”
MoneyGPS makes recommendations for investing in non-super financial products. It does this through a partnership with wealth management platform OpenInvest, which offers retail investors access to bespoke managed portfolios managed by leading global fund managers such as BlackRock.
OpenInvest founder Andrew Varlamos says it’s “inevitable” that fintechs providing investment advice and those providing investment execution and brokerage are increasingly connecting with each other.
“The large and growing advice gap can only be solved through technology,” he says. “It’s the only way to extend the intellectual property needed to reach the mass market that is currently prohibitively expensive compared to current traditional advice.”
Technology is absolutely there to provide [digital] personalized, scaled and client-led advice.
— George Haramis, MoneyGPS
But while he intends to expand into non-super investment advice in the near future, Otivo says it’s not what most Australians really need – contrary to mainstream opinion in the world. ‘industry.
“Wealth management is about taking your cash and putting what’s left, or any lump sum you have, into the right basket so you can do the things that are important to you,” he says.
“For most people, it will be about reducing high-interest debt and making sure [they have enough] cash or other liquid assets in case the car breaks down. »
Either way, regardless of their scope or range of services, industry insiders expect more digital consultancy attempts to hit the market.
Ignition Advice, a global fintech that provides digital advice tools as software as a service (SaaS) to third-party financial companies, says consumer demand for advice delivered digitally is clearly on the rise.
But Ignition’s managing director for Asia-Pacific, Craig Keary, believes it’s big financial institutions like banks and super funds that hold the keys to the widespread adoption of these new technologies.
“As the downward trend in the number of advisors continues and the need for advice (and different types of advice) increases, institutions are absolutely thinking about how they can meet consumer demand for advice at large scale,” he said.
“We believe that start-ups can bring contemporary and agile thinking
delivery to market, and we’ve seen great innovation happen in start-ups,” he adds. “[But] these start-ups must be of institutional quality.