Artificial Intelligence has been a key theme at the Stockbrokers and Investment Advisers conference in Melbourne. Among these topics are the integration of AI into the financial services sector with external assistance from notable entities such as Morgan Stanley.

Chief Executive of the SIAA, Judith Fox, emphasises the ongoing, evolving issue of regulatory reform within the industry, appealing for a sense of certainty to facilitate an increase in advice provision to Australians and a clearer understanding of digital advice.

She's concerned over the slow progress of the government to rectify legislation, specifically that which is leading to more expensive and less accessible advice. She mentions several challenges that the industry is facing, including 'quality of advice review', confusion around new classifications of advisors, and unnecessary paperwork. As the industry awaits further legislative changes, there are concerns about an increase in red tape, making the job of super fund trustees more complicated.

Judith provides insights on the trend of Australians accessing financial advice, suggesting the majority are inclined to seek advice but are unsure where to go. Moreover, a disconnect has been identified between the cost of advice and what Australians are willing to pay. An issue is how to provide advice to more Australians, including the younger generation keen to invest but unsure how to go about it.

Find the full unedited transcript of this interview below:

Judith, welcome back to ausbiz. Tell us, what can we look forward to? What themes are you exploring there at the SIAA conference?

0:09

I think there are a few themes that are coming out very clearly. Artificial intelligence absolutely, clearly is one. Um, and we've been hearing from players in the US like Morgan Stanley, US, um, and sage, who are helping financial services firms integrate AI into financial advice. The other issue, obviously, it's the never ending issue, the gift that keeps giving regulatory reform, the regulatory framework, uh, the industry has been subject to regulatory change over decades. Um, it hasn't really abated, but everyone's now hoping there can be a bit more certainty so we can actually get more advice to more Australians so we can be clear around digital advice. There's a lot of talk around a hybrid model where investors can both dip in and out of being self-directed and also, uh, seeking advice at different times of their life or when they need it. So that's one of the really key themes. And the other big one is financial literacy and education. Uh, there the other big themes that are coming through at the conference.

1:08

I do notice you have been on the record there, calling the government to move more swiftly to fix legislation, um, that has been introduced into Parliament to so it doesn't make advice more affordable and less accessible. What what's been done on that front?

1:24

Well, we've had tranche one of what was quality of advice review and is now called delivering better financial outcomes. And that's the what was called the quick wins. Uh, it's meant to be red tape reduction. And that's looking at um, wins, which really are very helpful for our industry where we can sort of sort out a standard consent instead of the multiple sort of hundreds of consent forms we've got going now between, uh, advisory firms and platforms and providers. Um, it's talking about being able to, you know, have your financial services guide on the web instead of having to send it out to everybody. Um, but there are some challenges, even in that first tranche of draft legislation, uh, there are some concerns that it's going to actually increase red tape rather than reduce red tape in terms of super fund trustees having to check every single piece of advice and therefore perhaps not allowing any advice fees to be deducted from the fund. So then we're waiting on tranche two, which is draft legislation dealing with even trickier issues, such as a modernised

2:24

best interest duty and a new class of advisor, and the removal of the safe harbour. So we don't really know when that second draft legislation is going to land and we're still here. We are sort of worrying about some of the detail in the first tranche. Uh, so that's where the process is up to at the moment.

2:41

How do you see that that personal advice model being structured at the moment in terms of who's allowed to give advice, be it from super funds to the banks or even insurers?

2:53

Uh, that will really become clearer in the second tranche of draft legislation. What we're hearing today is that there's in our industry support for being able to bring super funds and banks into the mix, uh, because there's a lot of people who would never go and seek financial advice and wouldn't be talking to an advisor, couldn't afford it. Um, and how do we get advice to that cohort? Um, but we don't have clarity yet around this new class of advisor.

3:19

What sort of education will they receive? Would they become a training pool to actually move into being full advisors later on? Or, um, are they, as Michelle Levy originally envisaged them, more like call centre staff? Uh, but there's certainly a move to, to we need to embrace the, the ecosystem. We need to broaden it. We need to bring more people in. Because if we don't, we're simply going to be in a situation where the number of new entrants coming into the advice ecosystem doesn't even replenish those who are retiring or about to retire. We only had 381 new entrants across the entire financial advice ecosystem last year, so we definitely are keen to see how super funds and banks and insurers can come into this mix. But at the moment, what no one has really is certainty about exactly how that's going to work.

4:07

Judith, what trends are we seeing there in terms of the average Australian, um, accessing or choosing to access financial advice given perhaps some of the barriers, uh, particularly as far as affordability is concerned.

4:22

There's been quite interesting research come out that shows, um, that more and more Australians are wanting advice and they would like to seek advice. Um, and a they don't quite know often where to go. And often they do think in the first instance of their bank because they've got a relationship already in place with the bank or with this super fund, they've got a relationship in place with that. Um, the other thing that comes out in the research is that what people are prepared to pay for advice is actually very different from what advice costs. So they pay 3 to $500 and it costs $4,000. So, um, there's some disconnects in terms of what Australians think advice is worth, but certainly there's a very, um, strong urge to seek advice. We've got millions of people coming into or at retirement at the moment, and that's certainly on the government's mind, but it's certainly on the advice community's mind. But we've also got all the young generation who can't afford a house, want to get into investing to generate wealth so that

5:22

they can buy a house. Uh, so there's an awful lot of people who are wanting advice, and we've only got 15,600 advisors in the country. As I said before, we don't have enough new entrants coming in to replenish those who are leaving. So, uh, the big question is, how do we get more and more Australians who are wanting advice to get the advice they need? The other really big issue is it's got to be episodic. It's got to be scaled. Uh, people want different advice at different times of their life. They want to be able to dip in and out of getting advice. They might want to use it on a self-directed online investing platform, then turn speak to an advisor, a human, um, use a digital advice, uh, approach at times, but certainly people are looking at, um, it being applied to what they need at the time, and that's going to change throughout their life cycle.

6:12

Due to the past few years, has certainly been concerned about the rise of the so-called influencer. Interested to note you spoke about AI there at the beginning. That's one of the themes of the conference, and there are some concerns about how that can be used. People easily turn to some of those AI, particularly those chat models, to seek advice, such as in finance. Are you seeing AI as a potential threat or an opportunity?

6:40

I think another theme that's been quite strong is if you're going to use AI. First of all, you've got to think about your data cleansing and data governance and make sure that what goes in is actually going to provide good AI output. And then everyone's extraordinarily concerned around the risks attached to as well. Um, so obviously no one wants to be in a situation of thinking about market manipulation or insider trading. So what we see is, um, uh, people are coming at it incrementally. Uh, they're keen to utilize it, but they see it as enhancing the relationship with the advisor, not replacing it. It's more about being able to automate some of the the sort of back office tasks that currently exist where an advisor might spend an enormous amount of time, uh, after the client meeting, you know, entering the notes into the CRM and writing up the strategy. And that could be done very quickly by AI. Um, it's also about being able to personalize more information to clients so that

7:40

you could very quickly go, oh, I know that, you know, Judith Fox is interested in this, but so 900 other clients so you can send something out to them at the same time very quickly instead of having to sit there with, you know, six monitors and, and quickly sort of try yourself to pull all that information together. I can pull that together very quickly. So AI is seen as an incredible opportunity, but people are very conscious to make sure that it's being done safely. Um, but it brings us back to that first point. You've got to have really good data, and you've got to do your data cleansing and have really good data governance around it, because if you're just pulling whatever's out there, you've also got to be careful around privacy. You can't be putting clients personal information into your AI system because that could go public. So there's a lot of, um, sort of guardrails that you've got to put in place to make sure you're using it safely.

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