In less than six months, we’ll welcome 2020 with open arms. It feels like only yesterday we were getting our heads around the new millennium and yet a new decade dawns us. Over the past 10 years, we’ve witnessed huge technological advancements, which have completely upturned the way we communicate, socialise, shop, eat and play. We’ve invited tech giants Google, Apple and Amazon quite literally into our homes with smartphones, smart TVs and artificial intelligence (AI) voice technology. We’ve normalised social media and through sheer daily habit, and disruptors like Uber and Airbnb have transformed how we holiday and travel. Today, almost everything in our lives can be transacted online.
But what about our finances? When it comes to banking, everything is going digital – we rely on internet banking, chatbots and phone apps and, as a result, we’ve seen many physical bank branches close down. When it comes to making purchases, we’re slowly saying goodbye to cash. It’s second nature to ‘tap and go’, making daily payments a breeze. Even the way we shop has changed, with cryptocurrencies and payment solutions such as ZipMoney and AfterPay being available options.
This got me thinking about the financial advisory industry and where it could all be heading into the next decade. What does the future hold? Are there going to be any major disruptions to the sector? And how will this impact our clients? There are some trends that are emerging now and starting to gain traction in the financial advisory industry. We are wondering which of these will become the norm in 2020 and beyond?
Meet your adviser 2.0
Would you trust your stocks with a robot? Over the next decade, most large financial advisory firms will instate a ‘robo-adviser’ in their office – which may offer an affordable and accessible way for Australians to access financial advice. And if you’re picturing a Dalek walking around the office with a suit and tie, you might be getting the wrong idea. According to Investopedia, these robo-advisers are “digital platforms (or software) that provide automated, algorithm-driven financial planning services with little to no human supervision”. Right now, they can collect and analyse client data to understand their financial situation and automatically invest clients assets on their behalf. And, they’re not going anywhere – Ernst & Young notes that the top four robo-advisers managed $128 billion in assets as of November 2017, an increase of $88 billion from 2015. From 2020, their capacity to manage tax-loss harvesting, select investments and even advise on retirement planning will become highly sophisticated.
A focus on the customer experience
Let’s face it, the Australian banking and financial sectors have gone through the reputational wars recently. After the Banking Royal Commission, there’s been a furore of activity to get financial institutions back in the good books of Aussie customers. As a result, major banks are choosing to back out of the financial advisory space– this will inevitably have huge implications for customers as it becomes harder to access quality, affordable advice. Over the next decade, there’s going to be a lot of work building back trust between large financial institutions and their customers. A 2018 study by Deloitte found that just 21 per cent of Australians believe that banks have their customers’ best interests at heart and, just 20 per cent believe that banks are ethical. I can imagine over the next decade there’s going to be a significant shift in the way baking institutions connect with their clients with loyalty, honesty and transparency at the core of everything they do.
Generational changes to client bases
Over the next decade, the cost of smashed avo, boutique beers and cold drip coffee are only going to increase. All jokes aside, according to The Australian, by 2020 (and for the first time in history) there will be more millennials in the workforce than any other generation. As a financial adviser, I’ve already started to notice a wave of younger clients that are seeking financial advice, particularly the subset dubbed ‘HENRYs’. Their financial goals and wants are unique. How they view money and measure wealth is completely different from their baby boomer counterparts. For any financial adviser to stay relevant over the next decade, they’re going to need to be millennial ready.
We’re sticking around for a lot longer – can you believe that by 2030, the average life expectancy for an Australian will be 84? If we’re going to live longer, then retirement needs to be looked at differently. In fact, could the concept of ‘retirement’ become redundant? According to Paul Benson of the Sydney Morning Herald, “the changing face of the way we work, including many more desk jobs, means that nowadays, there are plenty of people aged 65 who are fit, healthy, and perfectly capable of working for far longer”. Encouraging Australians to simply stop working in their sixties may not be ideal for those employed over the next decade – we’re working for longer, working with more flexibility, jumping between different career paths and choosing to do different things with our income. The retirement landscape is inevitably going to have to adapt to keep up with the changes to the way we work. Not everybody wants to retire at 65 and purchase an RV. In the future, it’ll be about retiring on your own terms, in your own way.
Are you ready?
We’re bracing for some serious changes when it comes to the financial advice sector, which excites me. As a nation, we’re demanding that our financial institutions become more transparent with us, as we start the long-term healing process. The industry is faced with a digital upheaval – artificial intelligence, sophisticated software and technology and real-time financial management. And, the workforce is changing too, with new generations paving the way for how we work, what we do with our income and, ultimately, how we choose to retire. Change is inevitable and a natural part of evolution – as they say, it’s better to embrace it rather than be left behind. So see you soon, 2020.