Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 23

Technology advances key to improving delivery of intra-fund advice

Intensive regulatory reform has been a fact of life for providers of personal financial advice for more than a decade, since the introduction of Financial Services Reform (FSR) in 2002. So what do we have to show for it? If the results of ASIC’s shadow shopping exercises are anything to go by, the quality of financial advice certainly hasn’t improved during this time and the proportion of people accessing personal financial advice remains low.

Paying for financial advice

The introduction of the Future of Financial Advice (FOFA) reforms should go some way towards lifting the overall quality of financial advice, but only if licensees make considerable additional investment in the training, accreditation, supervision and monitoring of their financial advisers to ensure that ‘best interests’ are implemented accurately and consistently. Unfortunately, this investment is likely to push up the cost of financial advice, which already represents a significant barrier to access. The average holistic advice fee of $2,550 represents nearly 6% of an Australian’s average annual earnings after tax. Funding an expense of this magnitude out of an already tight household budget is a difficult decision, further complicated by behavioural biases that tend to undervalue the future benefits.

Much has been made of recent experience in the United Kingdom following the introduction of similar reforms, where banks replaced their low-end financial planning networks with information, education and execution-only services. High-end independent and boutique advisers have flourished, serving clients who are willing and able to pay for the best possible advice.

This is not to say that the industry hasn’t attempted to make financial advice more accessible to their broader client group. Paraplanning, better use of technology and new delivery channels, including telephone, video and email, have all contributed to improvements in financial adviser productivity. Industry funds, in particular, have made impressive inroads with the delivery of financial advice to their members. While specific regulatory provisions for intra-fund advice may have been the catalyst, industry funds see financial advice as a way to improve member engagement and fill the increasing void left by upscale advisers.

Of course, intra-fund advice has its limits. It doesn’t address the consolidation of multiple super accounts or consider whether the member might be better off with another super fund. However the alternative of spending thousands of dollars on comprehensive financial advice, the quality of which will be highly dependent on the individual adviser, simply does not make sense for the vast majority of Australians.

Many advisers would argue that there isn’t much more they can do in the absence of specific regulatory provisions that delineate between the different ‘flavours’ of personal financial advice – intra-fund, specific and holistic. Their reticence is probably somewhat justified given the wooden stick ASIC has generally applied to past efforts by the industry to move beyond comprehensive advice. However, the introduction of FOFA does provide a limited window of opportunity for the industry to work collaboratively with ASIC to deliver the next generation of personal financial advice tools.

Many of the innovative technology concepts successfully applied in other industries could potentially be leveraged to deliver guided financial advice journeys that engage clients as their financial needs evolve. Importantly, such technology could also underpin the delivery of a more consistent and compliant financial advice experience.

Next generation of advice tools

To be successful, the next generation of personal advice tools will need to be seamlessly embedded within existing client-facing applications, including online banking, online broking, superannuation and SMSF administration. This integration offers several benefits, including a reduction in data entry (your bank already knows your income and home loan balance) and seamless online support for recommended financial products. Clients could choose to access these tools either directly (online or through a mobile device), with guidance or support from front-line staff (face to face or over the telephone), or in a more traditional advice context.

Filling in lengthy questionnaires is a daunting prospect and is likely to elicit high rates of non-completion or drop-out from clients. This problem can be managed in two ways. The first is to limit the extent of data entry to only essential areas and pre-populate fields with existing data where possible. The second approach involves the use of Census data and other survey information to build a composite picture of the user based on information such as their income, age and where they live. This composite picture can then be used to populate remaining questionnaire fields, providing the user with a starting point from which they can refine their responses as required. The next generation of financial advice technologies will also frame user choices in a way that guides them to outcomes consistent with their best interests. This form of nudge theory is based on behavioural economics and has been successfully employed in the United Kingdom to deliver a 15% uplift in the timely tax lodgement response rate following communications from the tax office.

Existing technologies do not readily support the structured and systematic capture of financial advice data – such as client circumstances, needs and recommendations – in a useable manner. As a result, the systems cannot currently apply a series of business rules that allow funds to evaluate the advice, understand which strategies have proven most successful with client groups, or identify trends or potential biases in the advice being provided. The next generation of advice tools will need to make better use of all client data to help drive improved financial advice strategies, monitor compliance, evaluate risks and support the continuous evolution of business and decision support rules.

Revolution in the application of technology to the delivery of financial advice, in all its different forms, is critical if the issues around quality and access are to be meaningfully addressed. A generation of consumers has grown up accustomed to sophisticated and integrated online experiences enabled by the likes of Facebook, Google and Apple. Why should they have to settle for an abacus when it comes to financial advice?


Jeroen Buwalda is a financial services partner for Ernst & Young Australia. Maree Pallisco is the national superannuation leader for Ernst & Young Australia.

The views expressed in this article are the views of the authors, not Ernst & Young. The article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.



Leave a Comment:



Painful transition to FOFA will pay off in the long term


Most viewed in recent weeks

Three steps to planning your spending in retirement

What happens when a superannuation expert sets up his own retirement portfolio using decades of knowledge? He finds he can afford much more investment risk in his portfolio than conventional thinking suggests.

Finding sustainable dividend stocks on the ASX

There is a small universe of companies on the ASX which are reliable dividend payers over five years, are fairly valued and are classified as ‘negligible’ or ‘low’ on both ESG risk and carbon risk.

Among key trends in Australian banks, one factor stands out

The Big Four banks look similar but they are at fundamentally different stages as they move to simpler business models. Amid challenges from operating systems, loan growth and neobank threats, one factor stands tall.

Why mega-tech growth are the best ‘value’ stocks in the market

They are six of the greatest businesses ever and should form part of the global portfolios of all investors. The market sees risk in inflation and valuations but the companies are positioned for outstanding growth.

How inflation impacts different types of investments

A comprehensive study of the impact of inflation on returns from different assets over the past 120 years. The high returns in recent years are due to low inflation and falling rates but this ‘sweet spot’ is ending.

How to manage the run down in your income in retirement

The first of five articles on modern retirement income products that aim for an increasing pension that lasts for life and on average should not decline in real terms. They are not silver bullets but worth a look.

Latest Updates


Retirement income promise relies on spending capital

The Government has taken the next step towards encouraging retirees to live off their capital, and from 1 July 2022 will require super funds - even SMSFs - to address retirement income and protect longevity risk.


How retirees might find a retirement solution in future

Superannuation funds need to establish a framework that offers retirees a retirement income solution that lasts a lifetime. It will challenge trustees to find a way to engage that their members understand and trust.

Investment strategies

Dividend investors, your turn is coming

Dividend payments from listed companies, depended on by many in retirement, have lagged the rebound in share prices over the past year. Better times are ahead but sources of dividends will differ from previous years.

Investment strategies

Four tips to catch the next 10-bagger in early-stage growth

Small cap investors face less mature companies with zero profit that need significant capital for growth. Without years of financial data to rely on, investors must employ creative ways to value companies.

Investment strategies

Investing in Japan: ready for an Olympic revival?

All eyes are on Japan and the opportunity to win for competing athletes. After disappointing investors for many years, Japan is also in focus for its value, diversification and the safe haven status of its currency.

Fixed interest

Five lessons for bond investors from the Virgin collapse

The collapse of Virgin Australia not only hit shareholders, but their bond investors received between 9 and 13 cents in the $1. A widely-diversified portfolio can tolerate losses better than a concentrated one.

Investment strategies

The 60:40 portfolio ... if no longer appropriate, then what is?

The traditional 60/40 portfolio might deliver only 1.5% above inflation in future without diversification benefits. Knowing an asset’s attributes rather than arbitrary definitions is better for investors.


Two factors that can transform retirement investing

Retirees want better returns but they have limited appetite to dial up their risk exposure in order to achieve it. Financial advice and protection strategies in portfolios can enhance investment outcomes.



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.