Shifting demographics and new technologies are transforming the financial advice and accounting sectors, but CAs are well placed to maintain their status as trusted advisers in a period of unprecedented change.

This is one of the key messages to come out of a new report by Chartered Accountants Australia and New Zealand and Deloitte Access Economics, based on interviews with more than 1700 consumers and 280 CA ANZ members.

The Future of Advice report focuses on financial advice and taxation-accounting advice as it relates to investment, tax, superannuation, retirement planning and accounting. It reveals how the changing preferences of an ageing and affluent population are driving different financial needs.

CA ANZ and Deloitte found that despite recent negative media reports about financial advice, including alarming evidence from Australia’s banking royal commission, most consumers are happy with the financial advice they are receiving.

A resounding 81% of respondents felt they were more informed after seeing an adviser, while 69% said they had greater peace of mind and 68% said they were more prepared for the future.

Trusted advisers

Consumers rank accountants as the most competent source of financial advice. Accountants are also highly trusted, with respondents ranking accountants just below family and friends – the most trusted group.

At the bottom of the rankings in both trust and competence were investment apps and advice created by artificial intelligence.

However, despite accountants ranking highly for competency and trust, only a small percentage of consumers use accountants for advice.

Less than 10% of the 18-24 year olds surveyed use accountants for advice. That compares with just over 20% of 65-74 year olds, the group most likely to consult accountants for advice.

Tax is the most common issue to seek advice on, but just 16% of 18-24 year olds use professional help on their tax returns, compared with 39% of 55-64 year olds. This is most likely because the tax returns of older individuals are more complicated than those of younger people.

Engagement with financial advice across the board is also low. Just 25% of those with annual household income less than A$20,000 use advice, while about half (52%) of those with a household income above A$300,000 use advice.

“The report shows people have concerns about giving up control, so it is up to accountants to understand and respond,” says Geraldine Magarey FCA, CA ANZ thought leadership and research leader. “It’s about helping clients with their decision-making, being there alongside them to explain data to and guide them along the way.”

Helpless consumers

Certainly the research finds many consumers feel “helpless”, “anxious” and “overwhelmed” about their finances, and are looking to financial advisers because they “don’t know enough about finances” and they “want someone else to provide guidance”.

Among small business owners, 35% say they need an adviser to “navigate the administrative and legal requirements” and 25% because they are concerned about making mistakes and don’t want the business to suffer if they make a mistake, the report finds.

Consumers are also struggling with financial literacy. The report quotes the Australian Financial Attitudes and Behaviour Tracker that found that only one in three Australians understand the concept of the risk/return trade-off and the idea of diversification. Standard & Poor’s Global Financial Literacy survey found that 64% of Australian and 61% of New Zealand adults are considered ‘financially literate’.

Confusion about robo advice

The advice industry is being transformed by new technologies such as ‘robo advice’, which uses computing programs to generate individualised advice based on information about a person’s financial circumstances. Research shows that Australasian consumers are still largely unaware of this trend and 64% of survey respondents said they would not use robo advice and preferred face-to-face contact with advisers.

Only 12% of those interviewed said they had heard of ‘robo advice’, and even after being told what it was, only one-quarter said they would be comfortable using it. Only 1% of Australians have ever used ‘robo advice’.

In 2020, between US$2.2 trillion and US$3.7 trillion in assets globally will be managed with the support of robo advisers, according to Deloitte.

What are the opportunities for accountants?

Picture: Geraldine Magarey FCA.

For accountants, robo advice means some of the routine work can be outsourced to computers, freeing time for accountants to help clients interpret and apply the advice. It opens the door for a blended model of delivery where advisers combine face-to-face contact with ‘robo’ strategies.

Many advisers see this as a way forward, with the survey showing 72% agree that ‘robo advice’ could be useful as a supplement to human contact.

A blended model is likely to involve advisers helping clients to set their financial goals, overcome gaps in their financial literacy and address their behavioural biases.

Magarey sees a lot of upside in this model, which gives clients the contact they need.

“The regulatory regime imposes a lot of costs on accountants, so technology will help reduce that, but with a human interface,” she says.

“Accountants have the advantage of being seen as independent and trusted; combine that with technology, and that will be the future.”

“Accountants have the advantage of being seen as independent and trusted; combine that with technology, and that will be the future.”

Reasons for seeking advice, by feeling about their financial situation

Reasons for seeking advice, by feeling about their financial situation. Source: Deloitte Access Economics based on Dynata data, n=698 (multiple responses). Click image to enlarge.