CPD: Implementing a hybrid digital advice strategy – an adviser guide


Digital and human advice may form new a ‘hybrid advice’ offerings.

While, at the time of writing, the Federal Government was yet to respond to Michelle Levy’s QAR recommendations, there is little doubt about the growing role for digital advice in bridging the advice gap.

“And so I am satisfied that the recommendations in this Report will assist existing providers – financial institutions and financial advisers – to provide more digital advice tools to their customers and clients. In many cases they will do so at no additional cost. I am also satisfied that they will help existing and new providers of digital advice tools to offer new digital advice services to consumers. To quote the Terms of Reference, they promise to ‘enable mass market adoption of low-cost advice”.
Michelle Levy[1]

Driven by three underlying macro trends – the increasing cost of advice, the increasing digitisation of our lives, and the consumer preference for ad hoc, piece by piece advice – digital advice is likely to prove critical in allowing advisers and licensees to provide advice more efficiently, at lower cost, and in a more engaging way. Whilst the foreshadowed legislative streamlining of advice that could result from QAR would undoubtedly accelerate the adoption of digital advice technologies, the train has, in reality, already left the station, and the question is more when, not if, digital advice will be normalised.

But just as the advice landscape has been rapidly evolving, so too has our understanding and concept of what digital advice actually means.

Not many years ago, most of us interpreted the term ‘digital advice’ to mean ‘robo-advice’, which, in the absence of any precedent, was viewed by advisers as an existential threat, a faceless competitor that could eventually put them out of business by providing a cheap, algorithm-based, 24/7 service.

But times have changed. With the benefit of actual market experience, and countless research studies, it has become clear that consumers – even younger ones – still demand a degree of expert human interaction as part of their financial experience. Advisers too have changed their perceptions, realising the potential for technology to drive both efficiency and a superior client experience.

Increasingly, it is being recognised that the future of digital advice is a hybrid one, where consumers can – depending on their needs and where in the advice journey they are – access a combination of digital self-serve, algorithm driven information, education, and even advice, along with the human touch of a licensed financial adviser. The approach therefore becomes one of ‘do it together’ (with an adviser), rather than ‘do it yourself’ (with a bot).

In this article, we will explore this new context for digital advice. We will revisit the underlying macro trends powering its growth, and examine the technology solutions advisers are using. A practical framework for advisers looking to build their own digital hybrid advice offering will also be provided.

The ubiquity of technology, especially for younger clients

Technology is now a ubiquitous part of our daily lives. Consumers research and purchase everything from fashion to travel to cars online. They are also increasingly comfortable conducting financial transactions online, from simple payments and everyday banking to trading shares and making insurance claims. Decisions to engage, and stay with, a financial adviser, are also increasingly being based on the quality of the adviser’s digital experience.

Crucially, the usage and confidence with technology is higher among younger ages. But by ‘younger’ we aren’t talking about the teenage Tik Tok generation, we are talking about Generations X and Y, very much the advice consumers of the present. This is demonstrated in Table 1, below.

US research by Refinitiv3 suggests that around one third of Gen X (who are now aged 43 – 58) and a similar proportion of Gen Y (now aged 29 – 42) consider a wealth manager’s digital capabilities before choosing an adviser.

Similarly, research by Netwealth into the aspects of advice most valued by consumers found digital capabilities and innovation were both important4.

The rising cost of advice

Studies have shown cost has long been one of the biggest barriers to consumer uptake of financial advice. And that barrier has only become bigger. Thanks to an onerous regulatory burden and dwindling adviser numbers, advice fees have continued to climb, well in excess of inflation.

Data compiled into the ‘Padua Advice Fee Data Report’ for FY22 shows initial advice fees charged by advisers on a per-advice-document basis increased 16 per cent, from $2,859 in FY21 to $3,315 in the past financial year5. Ongoing advice fees saw an even larger increase of 33 per cent from $3,656 in FY21 to $4,865 in FY22.

Adviser Ratings research6 suggests that while many consumers are willing to pay for advice, there is a large differential between the amount they are prepared to pay, and the cost of providing that advice. In contrast with the $3 – $4k costs mentioned above, a massive 61% of consumers said they would expect to pay less than $500 for advice. An additional 22% said they would pay between $500 and $1,000, and only 5% would be prepared to pay between $2,500 and $5,000.

In this context, the heightened focus on a technology driven path to lowering the cost of advice is understandable.

Consumers prefer ad hoc, ‘piece-by-piece’ advice

Another theme identified by Michelle Levy in the QAR Final Report was the importance of limited advice.

The consumer preference for limited advice has been well documented for many years.
In 2010, ASIC Report 224 ‘Access to Financial Advice in Australia’7 found that, in aggregate, more consumers prefer limited (piece-by-piece) advice over comprehensive ongoing advice, a preference which was highest among millennials.

Fast forward to 2021, research by Investment Trends found that 38% of consumers wanted limited advice, compared to only 11% who wanted comprehensive advice8.

Despite the obvious consumer demand for limited advice, there is a longstanding supply-side reluctance to meet this demand, amplified in recent years by the rising cost to produce advice and perceived regulatory uncertainty around the legality of limited advice.

According to a study by KPMG9, the prevailing view among most licensees is that, in order to be compliant, the same amount of work needs to go into producing limited advice as comprehensive. To the extent that limited advice would likely involve less opportunities to recoup the loss made on the initial advice, the economic challenges of limited advice become clear.

The opportunity for technology is clear, but people still want human interaction

The role for technology, to drive efficiencies through automation, and provide the digital experience sought by modern consumers, is clear. But in contrast to those initial fears that consumers would prefer to deal exclusively with ‘robo-advisers’, the preference for a degree of human interaction remains strong10, even among millennials.

In a US study of advice clients released in 2022, more than 90% of investors who worked with a human adviser said they wouldn’t consider switching to a robo-adviser, while at the same time, 88% of robo-adviser users said they would consider switching to a human adviser in the future11.

In Australia, research12 by Investment Trends found that two in three Australians were open to using a digital advice tool to plug advice gaps, but ‘most would prefer to use in conjunction with some form of human interaction’, while a study by Griffith University researchers, ‘Man and Machine’, found that consumers had little faith in investment advice involving amounts over $1,00013.

The new world of hybrid digital advice

Having understood the key trends creating the conditions for digital advice to thrive, but also recognising the continuing consumer preference for some degree of human interaction, many existing and newer players in the space have declared hybrid digital advice to be the way of the future.

In late 2022, global banking giant, JPMorgan, for example, noted that pure digital financial advice was starting to lose traction in the United States as consumers warm to a hybrid advice model coupling human advisers with digital capabilities14.

A few months later, Nick Eatock, CEO of UK digital advice platform, Intelliflo, told the Australian Financial Review that global momentum was shifting behind a hybrid format.

“That hybrid-type approach is the winner, we think, of the investments that have been made in robo-advice. That’s the next step forward, and we’re seeing that certainly in the UK and US already.”1

Digital solutions to support a hybrid approach

Advisers may be surprised that there are already many established solutions in the local market that can support them in to develop their own hybrid offering. Indeed, a recent industry wide benchmarking report16 identified 16 solutions, with more likely to enter the market as it becomes more established. (Some providers are awaiting the government’s response to the QAR report).

The capabilities of these solutions vary, with some capable of offering client engagement support only, some limited to general advice, and others can offer comprehensive personal advice.

Solutions that are comprehensive advice capable include, but are not limited to, Intelliflo, Dash, Capital Preferences, Ignition and Money GPS.

What does hybrid advice look like?

In a schematic sense, clients working with an advice firm would be able to access services along a spectrum, from purely self-serve ‘guidance’, through digital advice, through hybrid advice (digital with human interaction) to full service, traditional advice. Figure 2 below depicts this visually:

Fundamental to digital advice, and hybrid advice approaches, is that a lot of heavy lifting is done by the client themselves and the algorithm. This means initial information gathering and calculations and scenario modelling – the low value add administrative work and number crunching – is essentially done before the adviser needs to get involved. This means the adviser can focus on those parts of the process where they add the most value.

(And yes, digital self-serve models are capable of creating a fully digital Statement of Advice.)

Midwinter’s Steve Davison explains this in practical terms:

‘It can be relatively simple, such as insurance calculators that allow prospective clients to assess their needs before talking to an adviser, or scaled digital advice that delivers a more affordable service for specific areas of advice. In the future, they might see an investment property they would like to buy; they could crunch the numbers through an app on their phone, then talk to their adviser, who sees the same data. The adviser reviews against the client’s other financial priorities, gives their tick of approval and sends the Statement of Advice (or other advice asset) online.’18

As well as the hybrid approach offering a more engaging, flexible and convenient client experience, there are significant efficiency gains, which can translate into hybrid advice becoming more affordable.

UK digital advice provider, EV, estimates the hybrid approach could be up to 50 per cent less costly to provide versus most of the current traditional advice services19.

Steps to developing a hybrid advice offering

The first step in creating a hybrid offering is to understand that digital advice and human advice are not binary. Rather than hybrid advice being about managing two different advice channels, a hybrid offering is a seamlessly integrated spectrum of advice

Simplistically, success in this space will require advisers to:

  • work with digital advice providers on designing the advice journey and creating the integration,
  • ensure referrals are handled well, and
  • continue focusing on digitising as much of their high touch comprehensive advice offering as possible.

Noting that an approach of evolution, rather than revolution, is likely to be more realistically achievable, a framework for implementing a hybrid model might include the following areas of focus:

  • The importance of good data, data management and protection:
    • digitisation of files
    • cloud technology
    • cyber protection.
  • Automating workflow:
    • process design.
  • Digital client engagement:
    • video conferencing
    • client portals
    • digital signatures.
  • Compliance:
    • Regtech.

Bringing this all together involves creating your digital roadmap, the first step of which will be to do your research.

As with many aspects of running your practice, the most helpful source of wisdom is likely to be your professional peers and other practice owners. Get a feel for the software and apps used by practices that have already commenced their digital advice journey.

With any tech implementation, it is important to have clear short-, medium- and long-term objectives and priorities.

It’s important to evaluate the technology you are already using in your practice – such as platforms – and the flexibility for it to be integrated with any new software.

Also think about the future. ChatGPT has burst onto the scene, and there is no doubt AI will become a big part of the advice tech landscape. So, explore how this innovation is likely to change the way you work in the future to prepare your practice for it.

Digital advice vendors can be a helpful source of guidance and advice around systems design and implementation.

The opportunity to rethink your target clients and redesign your advice offering

While the focus of this article has been on ways to digitise your offering to your current target audience, successfully implementing a hybrid approach can make your advice more accessible and affordable to a wider audience, creating the opportunity to reconsider your target audience and redesign your advice offering.


Digital advice can be a powerful enabler of more affordable, accessible financial advice. But whilst once considered a threat or alternative to human delivered advice, there is an increasing recognition that a hybrid approach is more effective. By incorporating digital advice tools into their offering, licensed advisers can offer a more contemporary, convenient client experience and drive down their cost to serve, while still being able to meet their client’s need for human interaction at key stages in their advice journey. With more than a dozen digital advice vendors already established in the market, and more primed to enter in the future, advisers wishing to commence their digital advice journey can draw on a deep pool of expertise, guidance, and technology solutions.

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[1] https://treasury.gov.au/sites/default/files/2023-01/p2023-358632.pdf
[2] https://www.netwealth.com.au/web/insights/the-advisable-australian/the-advisable-australian-2021_six-dimensions-guide/
[3] https://www.refinitiv.com/perspectives/future-of-investing-trading/are-wealth-advisors-still-relevant-in-the-digital-age/
[4] https://www.adviceintelligence.com/blog/quality-of-advice-review-modern-adviser
[5] https://www.professionalplanner.com.au/2022/10/unsurprisingly-advice-fees-are-still-rising/
[6] https://www.adviserratings.com.au/news/what-everyday-aussies-would-pay-for-financial-advice/
[7] https://download.asic.gov.au/media/1343546/rep224.pdf
[8] https://www.moneyandlife.com.au/professionals/grow/improving-access-to-advice/
[9] https://fsc.org.au/resources/2299-kpmg-the-cost-profile-of-australia-s-financial-advice-industry-final-research/file
[10] https://lendedu.com/blog/robo-advisors-vs-financial-advisors/
[11] https://smartasset.com/financial-adviser/human-advisors-vs-robo-advisors
[12] https://www.professionalplanner.com.au/2022/11/research-finds-advice-gap-for-over-12-million-australians/
[13] https://news.griffith.edu.au/2022/10/11/artificial-intelligence-not-trusted-for-financial-advice/
[14] https://www.afr.com/companies/financial-services/robo-advice-declines-as-investors-warm-to-hybrid-model-20221108-p5bwi3
[15] https://www.afr.com/companies/financial-services/1trn-fintech-to-unleash-hybrid-financial-advice-on-australia-20230305-p5cphs
[16] https://corporate.amp.com.au/content/dam/corporate/newsroom/files/CCM-1182_KPMG%20Digital%20Advice%20Report_RND2.pdf
[17] https://info.ev.uk/digital-financial-advice-whitepaper
[18] https://www.midwinter.com.au/whitepaper-digital-transformation-guide/
[19] https://www.ftadviser.com/opinion/2023/03/01/firms-must-adopt-hybrid-advice-if-they-want-to-attract-the-next-generation/

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