As the FSC gears up for the launch of the Future of Advice Report later in the year, industry leader Allison Dummett from Matrix Planning shared her thoughts on the current market conditions in the wake of COVID-19. Here in Part One, Allison discusses the role of financial advice for everyday Australians.
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What do you think the role of financial advice will be in Australia's economic recovery?
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I think the role of advice in the Australia’s economic recovery is going to be huge. I think generally the role of financial advice sits under the radar for a lot of people. It’s kind of there and they don’t think about it very much. But we know that there are nearly 15 million Australians who have money invested in some way, mostly in super, and they were all needing advice before COVID-19 happened and before the economy got hit the way it’s been hit and we expect that will just increase.
You only have to think about some of the Government stimulus measures, for example, the early release of super. People still have questions about how they ought to take that money, which assets they should redeem it from, what is it going to mean for their future retirement if they dip into that now and that’s all advice. So, I think advice will play a very big role and my hope is that more Australians will embrace it.
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Do you have some examples of how financial advice has helped Australians in recent times?
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When I have talked to advisers in the last few weeks, I can see a real difference. For example, when lock-down started in Queensland I was talking to a particular adviser and he had numerous small business clients, many of whom had come in really quite concerned about being able to afford, for example, insurance premiums, some of that was general insurance, some of that was life insurance. I was speaking to the same adviser practice recently and clients are calming down now. They’ve got a sense of what it’s going to take to trade through and I think it helps that we’ve got a better sense, fingers crossed, that we will be coming out of lock-down and start seeing those restrictions lifted, people being able to trade. I think just the fact that there was someone there that those clients could talk to has made a big difference.
I’ve also found that more and more clients have sought reassurance. Let’s not forget that before COVID-19 became the buzzword, we were already experiencing a lot of market turbulence and there were things happening in markets that were spooking clients anyway. To some extent, those clients who are advised or who have been advised over the years knew what to expect. This is part of the financial advice conversation that you have when you have a financial adviser.
So many of us are in superannuation funds – not everybody gets advice. Many, many clients would have looked at their superannuation accounts and thought, if they didn’t have an adviser, ‘what does this mean for me?'. This is quite frightening. And I think the fact that one of the first responses we’ve gotten from Government is around that early release of super tells us that our Governments put in place a really strong savings scheme that is there for people in times of need, most notably for retirement, but in exceptional circumstances – it’s a blessing that we have that many, many other countries simply don’t.
For those people that don’t have an adviser, they must have so many unanswered questions: Should I get out of my shares and be in cash? Should I look to contribute more while share prices are low? Is this going to impact my retirement? Should I give up my insurance because it is an expense? These are some of many, many questions that people without an adviser would have – and my question is: who do they call?
Artificial intelligence (AI), robo advice – maybe in the future can help people through some fundamental questions, but it will be quite a long time until they can actually be configured in such a way that they can give any kind of personal response and advice by nature is very personal. So, I think we will see changes over the course of time to things like robo advice and AI to help those people, particularly in superannuation funds who may not have an adviser. But I think in some ways that will then drive them to talk to somebody else who will then look at their personal situation and comment specifically on it.
And for other people they just need to know that getting back on their feet financially is possible. They need that comfort and that road map. It’s not just reassurance. It’s actually a set of steps that they are going to need to take to make that happen.
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As an advice business leader, what do think is the true value of advice? What do you see the future of advice to be?
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The true value of advice is really helping people make better informed decisions. It’s not doing it for them. It’s not pushing them towards a solution. It’s really opening their eyes to the impact of financial decisions in their lives and getting engagement from them. What I would like to see – the role that I would like to see advice play in the future – is really that.
I’d like to see a greater incidence of strategic advice. For example, where the service to the client is ‘So would you like to understand when you might be able to retire? Or maybe go part-time? What’s it going to mean now that you have a baby on the way?’ All these things that people encounter in 'normal life', financial advisers can help with that and advice can help with that.
But typically, we’ve pinned advice alongside a product recommendation and it’s not absolutely necessary, nor is it needed. So, I think strategic advice will play a very important part in the role of many people’s lives moving forward. But how do we let people know that a financial adviser does those things? That’s our big challenge. And then the other challenge would be making if affordable and accessible.
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To read Part Two of Allison's insights, see here.
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To stay updated on the Future of Advice Report, see more here.