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Younger Australians looking for simple investment advice are eschewing high-cost traditional providers in favour of newer, robo-advice and digital platforms, as the number of financial advisers continues to fall.<\/p>\n
Gautam Paalep, who works in finance, is one such investor who uses a micro-investing service to help him select which investments to make. The 38-year-old likes to invest a portion of the money in his and his wife\u2019s self-managed super fund in higher risk, and potentially higher returning, investments.<\/p>\n
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Gautam Paalep and his wife, Dinushi, value financial advice as they seek a secure financial future for themselves and their children Jacob and Mikayla.<\/span>Credit: <\/span>Joe Armao<\/cite><\/p>\n \u201cI want information and ideas on where to invest the money and to be able to make the investments easily, but don\u2019t need comprehensive personal financial advice,\u201d says the Melburnian.<\/p>\n Paalep uses Collins House\u2019s online investment service, which offers six pre-mixed diversified investment options with differing risk-versus-reward trade-offs. The underlying investments are combinations of index-tracking exchange-traded funds (ETFs) and managed funds.<\/p>\n \u201cI like the convenience of being able to do everything online, at a time that suits me, though the associated app, which provides regular updates on markets and investments from the Collins House and other sources,\u201d Paalep says.<\/p>\n The dwindling number of financial advisers has seen fees for advice rise and advisers become choosier about whom they service, favouring those with higher levels of investible assets, says Irene Guiamatsia, the head of research at Investment Trends.<\/p>\n Advisers are taking on new clients who have investible assets \u2013 most of which will be superannuation \u2013 of about $740,000, on average. These clients are being charged about $4000 upfront and about $4700 each year in ongoing fees for comprehensive personal financial advice, Investment Trend\u2019s research finds.<\/p>\n Many advisers offer \u201cscaled\u201d or limited personal advice on particular topics for lower fees. Moves are afoot by the federal government to allow superannuation funds to be able to give personal advice on matters related to super and retirement.<\/p>\n That was a recommendation of the Quality of Advice Review, released earlier this year. About 3 million super fund members will become eligible to draw from their super in the next 10 years and will be looking, quite naturally, to their funds for advice.<\/p>\n \u201cThe Quality of Advice Review has strongly backed super funds providing advice and there is nothing like government policy to enact change,\u201d Guiamatsia says.<\/p>\n Nevertheless, until these plans come to fruition, many of those who would like personal advice will continue to be left out in the cold.<\/p>\n While digital advice is developing rapidly and despite the popularity of \u201crobo-advice\u201d, it is still limited in what it can do, Guiamatsia says.<\/p>\n Most robo-advisers simply match up the investors with one of several pre-set mixes of ETFs and others tailor the advice a bit more, but are still using only ETFs.<\/p>\n Surveys by the researcher of people\u2019s attitudes to advice show human advisers are still regarded as essential for most people, even if the adviser is there behind the digital advice, in case the person\u2019s situation is too complex for the algorithm.<\/p>\n It is likely that \u201chybrid\u201d models will be employed by financial planning firms and super funds, where much of the routine work, such as fact-finding about the person who is seeking advice, is performed by an algorithm, Guiamatsia says.<\/p>\n Josh Grace, the chief customer officer with Colonial First State (CFS), a retail superannuation fund and investments provider, says people need to have advice options that meet their needs.<\/p>\n CFS commissioned a survey that found significant pent-up demand for accessible advice among younger Australians. It found that two out of three under 40- year-olds are open to digital advice.<\/p>\n Grace says that financial advisers need to be able to service greater numbers of people in a more affordable way and digital advice can help with that.<\/p>\n