Across the globe, there is an advice gap where a significant proportion of the population does not have access to or feels that they can afford financial advice.
Three main reasons for this include perceived high cost, the method used to deliver advice, and consumer perceptions.
- In the US, various industry surveys have concluded that many Americans do not receive financial advice1.
- In Australia, ASIC states 27% of Australians have received financial advice, of which 12% received advice in the past 12 months.
- In the UK, 35 million people access online bank accounts; however, only 4 to 6 million people have received financial advice. Financial advice businesses are actually reducing their number of clients and the entry point for advice is £100,000. Anything below that amount is not sustainable due to regulation and the cost of PI insurance. It is estimated 90% of the UK population cannot access an Independent Financial Advisor (IFA), so serving the mass market can be a challenge.
To assist with the advice gap, technology is now empowering members to make financial decisions.
Globally we are seeing more demand for guided solutions and the need to educate the public in financial wellness matters.
- Guided solutions in the UK come from platforms that operate on a D2C basis. Examples of these are Nutmeg, Moneyfarm and Pension Bee, which all offer simple advice solutions for independent savings accounts, Self-Invested Personal Pension Schemes (SIPPS), and pension pot consolidation.
- Wellness programs are now incorporating physical, emotional and financial matters to promote healthier lifestyles.
- Financial stress in the UK costs employers £121 billion and 18 months of lost hours annually.
- The mental wellbeing of their workforce is of vital importance to all employers; however, they may struggle to reach every single person.
- For life insurance, healthier people mean fewer claims. For Superfunds, if a member lives a longer, healthier life, they will be more engaged and remain as part of the fund for longer and with bigger balances.
Technology best practices in this area are to provide the wellness content via an education hub integrated with the guided solutions in a single place to access the information. This needs to be available via multiple channels, including mobile phones.
Since the beginning of the COVID-19 pandemic, there has been a rapid rise in the use of mobile phones to interact with financial institutions. More advanced features are now being offered, including personalized, Facebook-like push messages to news feeds directly to a mobile device. We are also seeing a rise in the use of video technology via mobile devices, making advice more accessible to the mass market.
The advancements in technology and the focus on financial well-being is likely to augment the financial planner, not replace them, and can assist to fill the advice gap that exists within the mass market for those that want simple, digital tools to engage with.
To learn more about how to overcome the global financial advice gap, watch our recent webinar, Digital Advice and Financial Wellbeing for the Mass Market.
APAC, Retirement, Wealth Management