This is one of the big trends that are changing, because pension funds and other wealth-management businesses are realizing the power of data and relying on predictive analytics and AI. Moreover, the wealth management and pension industry in Australia is characterized by outsourced administration; often, the pension fund itself does not have a direct relationship with the consumer but has a third party carrying out the administration and holding all the data. And getting data out of the third party is always a very difficult part of the equation.
Things like APIs, which we’re seeing being offered by tech startups, is developing this area. Some of third-party administrators and software providers are developing APIs, but it’s in the very early stages at the moment, whilst the wealth-management companies and pension funds are now developing data analytics and BI teams and bringing on board data scientists.
Stephen mainly focuses on the pension and wealth-management industry in Australia. Prior to going solo, Stephen worked in financial services for about 30 years, where he spent 10 years as an actuary at a life insurance company and the rest in consulting. He started off in a boutique consulting firm and more recently was a partner at Deloitte in Australia, providing consulting services to the big pension funds across the country.
Recently he spent 12 months in a FinTech helping with regulatory matters and infrastructure for emerging pension and wealth-management companies. As part of that, a number of innovative pension funds were launched that focus on amongst other things, millennials.
Nowadays, Stephen utilizes his years of domain expertise to help firms look into the future and understand the different influences and current trends both in the industry and beyond it.
Industry shift
The trend in wealth management in Australia is dominated by the pension industry, since the country has a compulsory contribution system. Every Australian worker is automatically enrolled in a pension fund, usually by their employer. This means many Australians struggle to even the pension fund that they are a member of. Many are members of more than one!
Pension funds and wealth-management companies are trying to work out how to better engage with and connect to their client base. For the last four or five years, an incredible amount of money has been spent on their websites and member portals to enable members to get much more access to information about their pension fund, what their choices are, and how they can improve their outcomes in retirement. This can include digital robo-advice-type tools being adopted by pension funds or general education materials to help members become informed about their pension fund and what actions they can take.
“We’re seeing a lot of emerging pension funds that see the communication gap between the end users and service provider, so they try to tap into that space and start focusing on niches such as investing in technology or fossil-fuel-free investing; they create gender-specific offerings with a focus on women or a particular group; for example, millennials.”
Historically, the barriers to entry in the pension and wealth-management industry have been very high. However, technology, and especially its digital component, is greatly lowering these barriers. Thus, more and more startup businesses are emerging, and are connecting with their target segments much more easily.
Difference between robo-advice and digital advice
Stephen believes that robo-advice is not a great term to use.
“It brings to mind things like Robocop. I prefer more algo-advice, because it’s actually algorithms giving the advice, not robots.”