A recent article published in the The Australian Financial Review explains that process efficiency and leveraging digital channels is the key to producing low cost, high quality financial plans for a wide audience. The article nominates MOVO as the industry leader in this space, read about it below.
A financial plan used to be a whale of a thing. Up until a few years ago, no matter how clients might plead for advice on one specific issue, they were typically told that for their own good the plan should cover tax strategies, income needs after retirement, insurance, Centrelink strategies and superannuation contributions – all before the one thing that the client might want: creating a dynamically managed investment portfolio to provide sustainable returns over the next, say, 10 years.
Although there was never any regulatory prohibition against them, single-issue plans were seen as worrisomely short. The feeling in the industry was that the best defence if something went wrong was to prove the planner had considered everything about the client’s circumstances.
The full statement of advice (SOA) still has an honourable place within the financial advice toolkit, although, as Crystal Wealth executive director John McIlroy points out, typically at least 30 per cent of the true cost is subsidised.
But the days of the complete SOA as the only credible option are gone. Forty-six per cent of respondents to Investment Trends’ financial planning survey in May said they wanted to provide limited, or scoped, advice.
The catch is that not all of them can afford to. Investment Trends found the average break-even for simple plans was about $1050, based on 3.7 hours. However, few networks can make their processes so efficient, and there’s enough price competition emerging that even $1000 is starting to sound like a lot for single-issue advice. The future of financial plans has to be less subsidy, says Money Solutions chief executive Ross Bowden. “One way to do it is don’t overcomplicate the process.”
That’s where automation comes in.
Cameron O’Sullivan, head of product at financial services technology provider Rubik Wealth, believes there’ll come a time when only 20 per cent of statements of advice will be dealt with via a face-to-face interview that concludes with a comprehensive plan.
Rubik Wealth’s technology division Provisio provides software to some of Australia’s large superannuation funds – AustralianSuper, HESTA, NTAA and VicSuper, as well as Bendigo Bank and AMP – that enables the institutions to give free, online customised scoped advice about investment options within the fund, and also provide free customised advice on transition to retirement.
It’s free because it doesn’t require a financial adviser. However, the process incorporates red flags – if you answered “yes” to a question about maintenance payments, for example, you would be forwarded to a financial adviser.
Meanwhile, a handful of Australian networks are following the lead from the US, applying the principles of lean manufacturing to create “comprehensive” plans that cost much, much less.
Financial Index Wealth Accountants (Findex) late last year introduced a brand called MOVO, which targets low-balance clients. MOVO offers three levels of financial plan, all providing “comprehensive and individually tailored advice” and a “financial road map” with varying degrees of financial adviser contact. The plans cost between $200 and $350. Part of the reason they are so cheap is that the bulk of the fact-finding is shifted onto the consumer.
Assuming you had all your financial product information in a neat pile next to you, MOVO’s questionnaire would take about two hours to complete. It requests details of all products, and asks how much you know about investment returns. You will receive the result within seven days.
The sample provided to Asset, aimed at a fictional twenty-something couple, was too wordy for this writer’s taste – its 41 pages packed with admonitions such as: “Where do you want to end up? Do you want to risk leaving it to chance?” But the couple was given clear advice to switch to a named lower-cost super fund on Findex’s product list, and advised to buy trauma and income protection insurance. MOVO’s top two plans give limited telephone access to an adviser, while the basic plan allows feedback via email.
MOVO is not making money from the plans, but manager of marketing and e-commerce at Findex, Thomas Paule, says the prices cover costs.
“In this sense, we are currently running a break-even strategy as we look to grow our customer base and market presence,” he says.
Can MOVO really offer customised advice to everyone who purchases one of these plans? On this Paule is more circumspect. “Product advice is only provided where it is appropriate to provide advice on superannuation, investment or insurance and as a consequence, one or more products will be recommended.”
Director of Bluepoint Consulting Tony Bates says he wouldn’t be surprised if the supermarket retailers and other consumer-focused businesses move further into financial services with online investment advice.
So how significant is the trend to automation of financial advice? Rubik’s O’Sullivan says he doesn’t see any adverse consequences for planners, because the consumers of scaled, online advice are likely to be younger people who wouldn’t see a planner anyway. He concedes that telephone advice will become more common.
But we all know what happens when momentum shifts online. For a digital non-native, throwing open the doors of your life to people you can’t see is spooky. But years of bad news have informed consumers that a face-to-face meeting with a financial adviser is no guarantee of trustworthiness. And digital natives have few inhibitions about online sharing.
Get ready for disruption.
Click here to see the published article.