The 20% cost saving driving digital advice adoption

Barely a fortnight out from the Quality of Advice Review releasing its preliminary proposals one of Australia’s largest financial planning licensees, Insignia Financial, has announced a major investment in what amounts to a digital advice approach.

The investment in digital advice offerings is coming off the back of new research suggesting that licensees can reduce costs by embracing a digital approach for clients regarded to being a notch below high net worth.

Insignia has announced it has entered into a partnership with a firm, Personetics, which specialises in using data to better personalise the delivery of digital financial advice.

The Insignia move is important because it aligns with one of the underlying premises of the Quality of Advice Review that digital advice will represent a cornerstone of making financial advice both more accessible and more affordable.

AMP Limited has similarly flagged a strategy based on digital advice in circumstances where its traditional advice model has continued to be unprofitable but with the company telling shareholders the objective is to get advice back to break-even by the 2024 financial year.

What is more, a mid-size financial planning group is understood to be within days of announcing it has laid the groundwork for the delivery of a digital offering.

At the same time, superannuation funds have been calling for an extension of the intra-fund advice regime at the same time as increasing their investment in digital advice capability.

At the same time, a report developed by Oliver Wyman and Morgan Stanley has pointed to technology-central operating models as being the way forward in terms of moving advice firms back towards profitability.

The research is aimed at asset managers in the context of the US environment but can equally be applied to the situation facing major licensees and institutions in Australia.

“In the new Wealth Management 3.0 world, where technology-centric operating models allow for the delivery of personalised solutions and experiences to a wider array of clients all at lower costs, asset managers will have to transform their own operating models to deliver their services at lower costs as well,” the Oliver Wyman Morgan Stanley analysis said.

“Our research suggests that asset managers who aggressively and strategically adopt technology-driven solutions across their business are far more cost efficient, reducing cost-income ratios (CIR) by up to 20% versus industry averages,” it said.

As part of Insignia Financial’s announcement its chief executive, Renato Mota said the firm believed innovation and technology would help it “deliver advice across the continuum using various digital solutions and other channels”.

He pointed out that Insignia’s approach already included both human and digital experiences, including digital statements of advice.