Finding the alpha in Australian financial advice

Vanguard | 27 February 2018


Financial advisers attending Vanguard's Annual Roadshow in Sydney this morning were optimistic about the changing landscape of financial advice.

Attending advisers heard from Vanguard's Global Head of Portfolio Construction, Francis Kinniry, Asia Pacific Chief Economist, Qian Wang, and Australian Head of Intermediary, Rebecca Pope, who revealed results of a Vanguard survey showing more than 90 per cent of advisers saw the evolution of advice technology as an opportunity for their business, and were either using or intending to use some form of robo advice.

We were pleased to see the advisers that we work with are optimistic in the face of a changing landscape for their practices, and embracing the opportunities that new technology can bring,” Ms Pope said.

In almost every jurisdiction that Vanguard operates in across the globe, sweeping changes to the advice industry, including tougher compliance rules, vast advances in technology and changing client expectations, have left many practitioners considering the future direction of their practices.

Vanguard's most recent update to its Adviser's Alpha framework demonstrates how todays advisers can maximise the value-add provided by their practice in a landscape of tighter regulation, digitisation and a downward pressure on fees.

Vanguard believes that to differentiate themselves from their competitors–both robo and human–advisers should embrace the fact that relationship management is not just customer service, but rather a crucial element of best-in-class financial advice and critical to the continued viability of their practices.

Vanguard's Head of Portfolio Construction, Francis Kinniry, demonstrated that while digital advice options are breaking new ground in Australia, technology will never replace the crucial aspects of human interactions.

“For today's financial adviser, trust and communication outrank performance and fees, but practitioners can deliver all of the above if they concentrate their efforts on the aspects in which they have a competitive edge” Mr Kinniry said.

“There are three main elements advisers can consider to drive positive change and adapt to this new world – broadening out the service offer, deepening client relationships and embracing new technologies.

“Deepening relationships takes time. To make time, embracing technology and outsourcing investment solutions are key as these aspects have become largely commoditised” he said.

Sharing Vanguard's outlook for the economy and markets in Australia and globally, Qian Wang told advisers to get ready for the return of inflation and market volatility in 2018, as cyclical forces gain the upper hand in the battle with structural trend, such as the weak demographics and slower productivity growth.

In the long term, structural forces will dominate and investors may find themselves in a world of low growth, low inflation, low interest rates and low expected returns,” Ms. Wang said.

The ultimate solution is not some radically new investment strategy, in our view, but controlling what is controllable, especially the cost, and staying diversified, disciplined and focused on the long term” she said.

You can access The evolution of Vanguard Adviser's Alpha®: From portfolios to people on Vanguard's website.