I was interested but not necessarily surprised to read two articles this week relating to financial fortunes of the general Australian population. The first article talked about financial literacy, where a study by Zurich and Oxford University found that Australia ranked near the bottom of the tables. In the second article, a study by the Actuaries Institute found that almost a third of Australians are in danger of running out of money because they are drawing too much out of superannuation.
With the percentage of Australians that do not currently seek any ongoing financial advice sitting at close to 80%, these reports should not be surprising to anyone. The risk of not achieving any long term goal without some form of coaching, mentoring or external direction is extremely high and it makes sense that those with a trainer, coach or in this case an adviser, have a far better chance of maintaining discipline and achieving their goals.
Why is it that so few Australians reach out for financial advice to help improve their financial literacy?
One of the reasons provided by respondents to many surveys on this subject is that the cost of ongoing advice is just too high and many feel they don’t have sufficient assets to justify the cost. This leads to a situation where those who are in most need of advice are the very ones that don’t receive any. From an adviser’s perspective, the compliance cost of providing advice in the first place drives costs up. Therefore, under the current model, I would argue that this situation is unlikely to improve.
So, what is the solution to increasing the percentages of those that do seek financial advice and thereby starting to redress the issue of poor financial literacy?
This is where I believe the role of automation, in many of the time-consuming back office processes, as well as ‘robo advice’ can make a big difference. These factors can assist advisers to drive down the cost of advice to the end consumer.
I believe that ‘robo advice’ will eventually be embraced by advisers as an opportunity rather than a threat to their profession. It can play a large part in assisting advisers to deliver a ‘bionic’ advice solution to their future generation of clients.
We have already witnessed the start of bionic advice in the US where advisers are able to combine their knowledge and strategic advice in combination with a ‘robo advice’ investment solution. This has assisted in delivering digital advice to a much larger group than otherwise possible under the traditional face to face advice model. My view is that, in doing so, a new generation of adviser will be able to efficiently inform a larger group of clients in a cost effective manner that not only meets their needs but ultimately leads to an improvement in adult financial literacy.
In summary, you don’t need to know and be across all financial jargon. The burden should be on advisers to translate the financial lingo into plain English. New apps like Superstash make this easier. Superstash is like a Fitbit for your super – convenient and game-changing.