Admin and compliance taking up 56% of advice practice costs

Fintech firm elemnta has released new research looking at data-related challenges impacting Australia's wealth management sector.

The research highlights data fragmentation and lack of standardisation as the primary hurdles preventing scalable, efficient financial advice delivery in the Australian wealth management landscape.

Participants revealed 56.5% of the average advice practice costs are spent on product administration, reporting and compliance.

The findings identified three core challenges including a lack of integration between a large volume of different systems and non-standardised data formats driving inefficiencies; the significant time required for administrative tasks and product implementation strains profitability and limits service capacity; and balancing data collection for regulatory compliance with data minimisation required by privacy laws remains difficult.

The analysis identified a disconnect between the challenges and solutions described in existing literature and provider offerings, compared to the operational realities faced by advisers, driven by fundamental data issues.

This contrast has led to a misalignment between proposed technology solutions and the needs of practitioners, the research found.

Newly appointed elemnta chair Dave Curran - former Westpac chief information officer - said the wealth and financial advice sector is at a crossroads.

"Our industry has been grappling with the fragmentation and inefficiencies that arose after the 2018 Financial Services Royal Commission, which led to the exit of major banks from providing advice. The industry is simply not equipped to meet the growing need for affordable, accessible advice," Curran said.

"The research released today validates the challenges we foresaw, and the work elemnta has been doing for the past five years in putting advanced technology and seamless connectivity at the forefront.

"Ultimately, we need to ease the burden on wealth managers and financial advisers by providing them with integrated, scalable tools that improve efficiency and reduce the cost of delivering quality advice. This is a crucial part of solving the 'access, affordability, quality' challenge."

Chief executive of elemnta Shaun Green said the industry's future depends on a strong data infrastructure foundation.

"The research makes evident a severe disconnect between the top-down technology solutions and bottom-up practitioner challenges. The 'fracture' stems from a lack of standard data and system integration at the base of our industry," Green said.

"We recognise the challenge lies not with the incumbent industry participants, but in between them. The solution, therefore, also exists in this space, and this is our focus."

Green said investment in quality data infrastructure is of major importance and he hopes the research will spark more conversation in the industry.

"Given the scale of pain points experienced by practitioners, power will lie with the product providers who place technology at the centre of operations and customer engagements," he said.

"We're already seeing the potential of this approach to grow and transform the industry."