A declining number of financial advisers in Australia, combined with an increasing regulatory burden, has resulted in many of the advisers that are left focussing on high net wealth clients. Unfortunately, this means there are millions of Australians without financial advice but who would seek it if they could afford it. But nature abhors a vacuum and a number solutions are currently evolving to solve this advice gap.
The digital solutions now being put forward have moved beyond the original DIY cookie cutter offerings and are providing a combination of digital and in-person advice. For example, dealer group Lifespan Financial Planning has recently teamed up with fintech OpenInvest to launch Lifespace Invest - a digital investing solution designed to service those investors priced out of financial advice.
"In an ideal world, every Australian would be able to afford a personal financial adviser, however, the reality is that delivering personal advice has become increasingly expensive over recent years, inevitably excluding more and more people," Lifespan chief executive officer, Eugene Ardino, says.
Lifespan Invest will offer a professionally managed portfolio by Lifespan along with access to a regular feed of financial literacy and educational content
"The industry needs to also use robust and compliant new technologies to help address the growing 'advice gap'", Ardino added.
"Our advisers are now able to offer an alternative digital solution for those whose circumstances are such that they do not need to go through the more expensive personal advice process."
Chief executive officer of OpenInvest, Andrew Varlamos, said the current advice gap would only be solved via a combination of technology and progressive financial advice firms.
"The team at Lifespan understand that everyone is better off when they can access expert and professional help and are now - via OpenInvest technology - able to reach a much larger audience with their expertise," he said.
And at least one of the major banks is reconsidering their approach to wealth and financial advice after exiting the sector following the banking royal commission. At the recent AFR Banking Summit held in conjunction with Deloitte, CBA chief executive officer Matt Comyn fresh from a trip to the US, suggested that the industry may end up regretting its complete exit of the sector and that the bank could be interested in "a low-cost simple digital proposition".
Meanwhile, at the Morningstar Investment Conference, Morningstar's director of financial planning products, Ivon Gower, released research done in conjunction with XY adviser that found 38 per cent of potential clients would be interested in 'piecemeal' or scaled advice, which was double the number of those who preferred comprehensive advice.
And there is a significant percentage of potential clients who say they would be happy to use an adviser to validate their own thoughts. If regulation allows it, there could also be room for an advice model which provides 'validation' advice around certain significant life events.
"Regulation has got to adapt to accommodate that," Gower said.
"There is this obligation to understand the full client situation, and I think there's got to be a bit of a compromise in there for clients to scope themselves out of broader advice. But I think if that can take place, then what you would find is advisors being able to then just sort of validate a view for a client."
That could be in the context of whether or not a particular investment suits an investor's risk profile or time frame, or aligns with other investments in their portfolio, or whether a particular strategy won't put someone in breach of something like a contributions cap.
"I think that advisors can sort of play that part of providing specific advice direct to a consumer's questions," Gower said.