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Young people want tomorrow's advice proposition

Young people want tomorrow's advice proposition

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By mark ·
July 31 2015

Young people want tomorrow's advice proposition

Advisers need to be bold, creative and embrace new technology if they want to reach younger people with a compelling proposition.

This could lead to a rapid increase in bequests from $22 billion in 2010 to $85 billion in 2030, based on a report by SGS Economics and Planning.

Further, the Australian Bureau of Statistics estimates 2.4 trillion will be passed down over the next three decades.

This enormous intergenerational wealth transfer will have a major impact on the wealth of younger Australians. They'll need professional advice to properly invest and manage this bounty.

However, the majority of people under age 40 don't take up professional advice.

Perhaps they've never been offered it. The advice industry has traditionally targeted older, more established people such as pre-retirees, high income earners and wealthy families but that must change.

Advisers must expand their focus to capture younger people if they hope to replenish their ageing client bases and continue growing.


Consumers increasingly want choice beyond the traditional one-size-fits-all personal face-to-face, comprehensive and ongoing advice model which is relatively expensive.

Automated robo advice may be a relatively easy way for advisers to spark the attention of a younger audience.

In the United States, robo advice has experienced explosive growth over the past five years due partly to the use of social media to engage and recruit younger clients.

One of the largest players, Wealthfront, which had 18,868 clients as at December 2014, has over 36,000 'likes' on Facebook, 13,400 Twitter followers and over 4,800 LinkedIn followers, according to the 2015 Automated Investment Advisers Global Market Review.

With robo advice, advisers and accountants can offer a scalable solution with differentiated pricing and greater user control over the advice process.

Technology enables the delivery of a more convenient, transparent, flexible, and low cost service. Clients can more easily ramp up, or pull back on, the level of service they want when it suits them.

In other parts of the industry, fund managers, stockbrokers and super administrators are using robo-advice to tap into new market segments.

SMSF administrator BGL Corporate Solutions has integrated social networking robo-adviser, SelfWealth into its Simple Fund 360 service.

In April, online stockbroker OpenMarkets integrated Ignition Wealth's robo advice platform into its broking technology and last month Vanguard launched a new hybrid robo-human investment service which charges a fraction of current advice fees.

For 0.3 per cent, investors receive computerised asset allocation and rebalancing with access to human advisers through the telephone or video conferencing. Clients discuss their current situation, goals and risk tolerance with a human.

They can stipulate key dates, such as when they would like to buy a home or retire. If they need encouragement to stay on course during periods of market volatility, they can call for emotional support.

The need for a human adviser was reinforced by Vanguard's research which found that advisers are crucial because they act as an emotional circuit breaker during periods of market volatility and they add significant value by adjusting strategic advice when a client's situation changes.

Robo-advice should not be seen as a threat to financial advisers.

Financial planners can partner with robo advice engines to deliver a fresh and compelling proposition in the same way other financial services companies are.

For mortgage brokers, stockbrokers and accountants who have been dabbling in advice on the fringes for some time, robo advice may be a strategic way to fast track and secure their entry into advice.

Mortgage brokers have early contact with young people looking to buy their first home or investment property. To many, mortgage protection cover, risk insurance and strategic advice is a natural extension of the service they offer.

In order to capitalise on the enormous opportunity to reach the unadvised masses, advisers will need to think out of the box to make their skills and expertise available in a number of different forms.

 Mark Woolnough, head of third party distribution,

 ING DIRECT Australia


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