The shifting nature of advisory

Financial advice is critical. If would be investors are deprived of unbiased advice, their ability to save for the future and make sustainable returns is called into question. But how will the Asian market evolve in terms of advice delivery?

The European Union (EU) took the lead on limiting inducements through its Markets in Financial Instruments Directive II (MiFID II), which in effect has banned advisers from collecting commissions from product providers. The regulatory fear was that advisors were plugging products that netted them decent commissions but were not always synchronised with clients’ needs or risk profiles.

The ban, however, means EU customers have to pay for advice, and some have warned this could lead to a drop off in investments. Nonetheless, it is unlikely the EU will roll back its provisions, and there is a strong possibility – according to delegates at FundForum Asia 2017 in Hong Kong – that Asia may follow a similar approach.

Marc Lansonneur, managing director and head of managed solutions and investment governance at DBS, said such change could be visible in Asia within three to four years. This presents a huge challenge for advisors, particularly as they look to appeal to younger investors, or millennials who appear to be the financial services’ industry’s flavour of the day.

The problem is that many millennials cannot be bothered to register to vote let-alone see a financial advisor at their own cost and time. To add to the problem, millennials have limited disposable income.

Fortunately, advisors have realised that digital engagement about financial matters with millennials may be the answer. It is here where robo-advice could play a useful role.

Richard Lepere, CEO at Fund Channel, highlighted those robo platforms that combined technology with human intervention had seen the most success. Even so, simply setting up a robo-advisor was not sufficient, he added.

“Putting a fresh coat of paint on the wall by giving clients online access to fund products is not enough. The entire process has to be reinvented using technology including account opening, compliance checks and AML,” said Lepere.