Feature: Fintech and financial planning

30-Jun-2016

By Daniel Paperny

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As technology continues to disrupt industries from tourism to transport, much has been made of the promise of new entrants and fintech start-ups within the realm of financial advice.

With more and more new-age fintechs emerging in financial planning, a greater burden rests on ASIC’s shoulders to ensure an adequate regulatory framework exists to keep up with the rapid pace of innovation and ensure fintechs can work alongside advisers to lift the category of financial planning as a whole.

But what are these new fintech start-ups and what will financial advice look like in 2020? Frequent innovations in robo-advice, cash-flow management and business efficiency have forced ASIC to stand up and listen.

The corporate regulator’s commitment to fintech innovation reached new heights earlier this month with the introduction of a proposed six-month licensing exemption for new fintech start-ups in Australia to test their financial services offerings in a controlled manner before launching in the market.

Known as a regulatory sandbox, the proposed initiative is aimed at lowering barriers to entry faced by fintech start-ups by providing cost reductions and promoting efficiency in the provision of financial services, while enforcing compliance with ASIC regulation.

With ASIC tabling together submissions and the proposal still under review, the wider implications of the licensing exemption remain to be seen, particularly in terms of how it will shape the future of innovation in financial planning.

An increasing number of Australian fintechs are now building combined robo-advice and financial planning solutions or helping individuals become more literate in managing their finances.

One such solution is MapMyPlan, spearheaded by former financial adviser and Meridian Equity Partners director Paul Feeney.

Launched in November last year, the online virtual planner guides individuals through the process of building their own financial plan and creating their own advice.

“The majority of [unadvised] Australians out there do not have a lot of money to invest outside of super, so how do you actually help them navigate all the dynamic changing rules of [financial planning] to make the right investment decisions,” Feeney says.

“People get confused and intimidated by financial planning and the language [used], so we’re trying to humanise advice and take out all the jargon. We need that to get the people engaged.”

Fintech Moneysoft was built on the belief that cash-flow management is the foundation of saving and investing and “forms the backbone” of any good advice plan.

Its managing director, Peter Malekas, says the fintech’s personal financial management platform is focused on complementing the traditional advice process by enabling financial professionals to provide cash-flow, budgeting and goal-tracking services to their clients.

“The challenge and opportunity for the advice industry is to develop a scalable and economically viable proposition for the mass affluent. Many advisers struggle with the cost of delivering advice due to time-consuming administrative, repetitive and inefficient methods of basic financial data collection,” Malekas says.

He points out Moneysoft’s “highly automated” service offering allows advisers to develop and change the traditional client conversation and focus from investable assets to investable cash-flow to make advice relevant and more affordable to a larger audience.

Accessibility is a core focus for Melbourne robo-adviser Six Park, which was launched at the end of May.

Its co-founder, Patrick Garrett, explains that fintechs have been instrumental in shaping the relevance of advice, particularly given historically advisers were incentivised to sell as a result of fee structures and product commissions put in place by financial institutions.

Despite being in its relative infancy in Australia, Garrett believes robo-advice will continue to break down the barriers of an industry tarnished by a “few bad apples” and make advice more accessible for Australians.

“Like any highly technology-driven and highly disruptive business model, robo-advice is going to morph and change. It’s probably not going to look the same in five or 10 years,” he says.

“What feature sets resonate with users and how it will get integrated in the overall wealth management industry remains to be seen. The question of [relevance and] whether there will be stand-alone advisers is how it’s all going to play out.”

Small business lending fintech Valiant Finance co-founder Alex Molloy says he anticipates over the next few years that the roles and responsibilities of advisers, accountants and brokers will increasingly be consolidated into one holistic relationship with clients.

“A wealth of new options is opening up in the fintech space and that’s going to mean the advice industry needs to be more aware in terms of their risk structures or risk being behind as clients start to engage with those services outside of their [traditional] relationship,” Molloy says.

“There’ll be pressure to stay on top of these new fintech services with the product sets that traditional planners have as well.”

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