Wealth management has never looked better: Knox

Appearing at the Stockbrokers and Investment Advisers Association's (SIAA) conference this week, Otivo chair Ian Knox discussed the shifting nature of Australia's wealth management industry, saying he's never seen it look so good - but it could still be better.

While there are some sectors that are struggling, the broader wealth management industry is thriving, he said.

"If you think 10 years ago, five years ago and today, you can see a big shift... What we're beginning to see is private equity coming into Australia and starting to buy into businesses that give advice. That's a very big shift if you think about it. It used to be about buying businesses that are out of money, it used to be fund managers," he said.

"On the global scene, it's really tough to be a fund manager; you're getting scalability problems and active managers are dying a death domestically because of all the in-housing of assets under management by industry super funds. So, asset management is tough, and ETFs are doing well."

He said, when you then look at the advice sector, advisers are making more money than ever before. But there is a challenge in this.

"Typically, financial planners are charging a minimum of $3000, more likely starting at $5000 and often $20,000 per client. The consequence and conundrum of that is you can only handle so many clients... and that particular side of the industry is heavily reliant on technology from platforms. They talk about transforming advice and being able to boost client numbers from 90 to 120 in a few years - that isn't transformational," Knox said.

"We have nearly 14 million people in this country seeking guidance and advice, and we've got 14,000 people doing it and it's not scalable - so how do we get the scale?"

While admitting he has a natural bias as chair of a digital advice firm, Knox said digital advice is the obvious answer.

"If you think about digital advice, everyone pictures a robot. Nobody wants to deal with a robot, everybody wants to deal face-to-face. Well, the wakeup call is that it's not a robot and client engagement comes from all different profiles and age groups," he said.

And while some may doubt the viability of digital advice based on its penetration to date, Knox says it's not what it used to be.

"In the early stages of digital advice, we had what we called robo-advice, and robo-advice was whatever the question was there was an investment portfolio behind it. It was selling investment portfolios with algorithms, and they haven't worked in Australia," he said.

"We understand personal advice requires a Statement of Advice, it requires you look at a person's debt, at their personal circumstances and then you give them advice. I didn't say anything about product or about investments, I said advice."

In contrast, he said, what we're seeing now in the first iteration of pure digital advice is that it helps people identify their goals, "it doesn't tell them the product that solves it."

"But it does have algorithmic content such as 30 years of asset class movement, it does construct portfolios, it does help people work out whether they prioritise super or whether they pay their mortgage off," he explained.

"Everybody will look at that and think it's going to replace them. I'm here to tell you that it's not; it's there for you to use. How you harness that gives you scale, gives you efficiency, it takes you away from doing the mundane task of collecting data.

"It's all digitised by the person who puts the information in and gives you better quality of time with them. Digital advice can make millions and millions of people who can't afford you become your clients."

Financial Standard was the official media partner of the SIAA Conference 2025.