FEATURE | Digital advice | Interlocking the pieces

However, digital advice isn't as simple as implementing artificial intelligence (AI) into an adviser's daily operations, and this misconception continues to play out over the years.

AZ NGA group chief executive Paul Barrett says although digital advice has been available for a little over a decade, it is still in its "infancy" in terms of how engagement is going to play a role in the future, highlighting that there's still a long way to go to extrapolate the full potential of digital advice.

Currently, providers are trying to build better apps to engage clients directly so as to prompt people at the right time in their financial life cycle and therefore seek advice.

Then and there is the "old school concept of "robo-advice" that he explains as just a "dressed-up managed funds implementation business."

"There's a huge opportunity for advice businesses to spend more money engaging their clients using AI and other digital means, but to do that, you firstly need scale," he says.

"You need a big advice platform so you can get true operating leverage."

He asserts that to truly scale the digital offering, practices will need to spend "real money" on it and take time to understand the initiatives and what they're trying to achieve with their deployment.

Barrett's version of digital advice also includes placing an adviser to appear in a client's life at exactly the right moment, specifically, in scenarios involving significant decision-making, like a home purchase, the loss of loved ones and other major life events.

However, he says it is simply impossible to do that right now because advisers lack access to clients' data.

To address the issue, AZ NGA is investing in the middle and back office, using its AI-enabled partners to drive that level of process transformation.

"How you use data and how you use client engagement technology to turn up at the right time; I've always thought that to be a key opportunity when it comes to digital advice," he says.

"But I don't think we're anywhere near it because we don't have the data but we're getting better at that.

"Once you've done the foundational work, you've got a chance to deploy digital solutions accordingly using AI and turn up in the client's life at the right time."

He explains digital advice can also generate some "huge margin opportunities", including improving efficiency for individual advisers.

Elemnta chief executive Shaun Green and chief product officer Dane Baldwin share the same sentiment, saying digital advice has been fragmented since it was introduced.

Baldwin believes digital advice revolves around a whole, or at least a predominant performance of advice delivered by some form of "advice engine".

"We see different iterations of that across the industry. If you look at the Ignition product, it's predominantly delivered by a digital advice engine with some human advisers in the loop," Baldwin says.

"To the other end of the spectrum, which is what DASH has in the market - a human out of the loop - fully digital advice engine that's deterministic and provides advice based on parameters that a customer has given.

"From my point of view, digital advice is either wholly or predominantly delivered by a digital engine."

He also thinks AI has a role to play but isn't broadly adopted at the moment.

"I think that [digital advice] has been focused on some of the wrong areas. It has huge potential to serve Australians who need advice but don't necessarily meet the thresholds financial advisers require to be profitable and fit their practice profile," Baldwin continues.

"One of the first iterations of digital advice that came out - the robo-advice provider - ASIC took a look at them and gave them the 'ban hammer', and the whole thing got shut down."

Baldwin also says advice practices and licensees will need to revise their view that "computers can't give advice" to tame the current competitive dynamic between the advisers and innovation.

Another reason is that the technology can give Australians who don't meet a certain adviser threshold, or cannot afford advice, a little more access.

"From that standpoint, and from how it's been implemented, in the industry at the moment, I think it's still very much in its infancy," Baldwin says.

Green says digital advice spans such a broad spectrum that it involves many different aspects.

Green questions whether the invented tools were directed at consumers or designed to support an adviser, or whether there is some hybrid in the middle.

Depending on that determination, an adviser may or may not be able to use them.

"This is why the labelling of digital advice is a challenging one, and maybe one that is confusing to people," Green adds.

"There's been a huge evolution in this space over time, which raised a lot of opportunities, but in our experience advisers adopting new technologies has always been a challenge."

He laments that the implementation is a challenge for a few reasons, including the volume of technology already being used in practices.

"But also, partly due to the nature of the industry - being a very fragmented and varied industry," Green says.

"There's a huge amount of variance in almost everything in advice; you've got a large portion of the industry that is comprised of small businesses, and for them to adopt any new technology, there needs to be really clear value, and often there needs to be support around how to manage that."

He also believes the "practical reality" of any technology adoption is a barrier to advisers adopting it more broadly.

"But when you look at the big super funds, for example, it's the ones that are investing the big dollars in trying to go down this path because they've got pressure to do so with such huge volumes of clients," Green says.

"They've got the capital to break through those barriers. I think we're going to see it continue to move in different directions that spread digital advice."

The $430 billion AustralianSuper's recent announcement it partnered with Ignition Advice to provide a new digital advice platform signalled a broader shift for super funds to deliver financial advice.

Members will then have the option to obtain comprehensive guidance by speaking with a qualified adviser virtually or on the phone.

UniSuper chief advice officer Andrew Gregory says digital advice forms a key part of the advice ecosystem at the super fund.

The fund's digital adviser currently covers contributions and investment options, with more features expected in the coming months. Compared to other super funds, such as AustralianSuper for example, UniSuper has been on the front foot and maintains a bullish stance on the offering.

Gregory says UniSuper's service provides members with "simple, accessible" genuine personal advice that lowers persistent barriers to the advice gap.

According to UniSuper's data, most members complete the advice in around seven to 14 minutes, underscoring a low barrier to access affordable advice and beneficial for those with relatively straightforward needs.

"It also gives them the flexibility to engage with us at a time and place that suits them. More than 60% of members who have received an SoA have done so after 5pm or on the weekend," he says.

"This shows that by removing these barriers, we are making it easier for our members to engage with the fund and get the support they need to make informed decisions about their retirement."

Enhancements

When focusing on what it can offer, InvestStream chief executive Jason Hoang says the real capability of digital advice among super funds is to provide instant access to the right information.

Hoang believes the firm's current partnerships with MUFG Retirement Solutions and Australian Food Super will genuinely encourage more Australians to seek financial advice.

"We want to close the advice gap by getting people so engaged that their super app sits next to their banking apps. They're already going to Google and ChatGPT; the app they won't open is the super app. That's what we want to get right," Hoang says.

In the MUFG partnership, Hoang says he aims to leverage the group's extensive network of local super funds to expand its offering progressively.

"Because MUFG powers around 40% of Australia's retirement accounts. If you're a member of a super fund that MUFG administers, the data needed to make guidance genuinely personal already exists. It's just never been connected to the conversation," he enthuses.

The partnership also provides "comfort" to regulators and industry funds that InvestStream is adhering to the standards placed on the domestic retirement sector.

However, he describes implementing innovation in the retirement sector as "extremely difficult" but commends the scrutiny and security in place to protect members' retirement funds.

"Super is a highly regulated industry. The boundaries between general advice, intra-fund advice and full advice matter, and the technology has to understand and operate within those boundaries," Hoang says.

He also highlights that anything involving AI will need to be communicated and analysed across all personnel in a super fund, including the trustee and C-suite executives, to ensure they understand the technology being implemented from top to bottom.

This article is featured in Financial Standard's fortnightly newspaper Volume 24 Number 17. To keep reading click here. To subscribe, sign up here.