The value of tailored retirement income strategies is how advisers can best articulate that value to clients.

More than one hundred thousand Australians retire each year^[1], creating an array of scenarios to which financial advisers must match retirement income strategies (RIS). Effectively catering to each of these clients cannot be achieved using one or two generic RIS, as these could never represent the complexity of each individual. Instead, advisers must consider tailoring each RIS, leveraging data insights and regulatory shifts to deliver a service worthy of each client.

One such pending regulation may include the ability of retirees to spend their super on advice, giving advisers the opportunity to offer a premium service with less concern for cost. This service would avoid the common issues with generic RIS which often misinterpret post-retirement expenses and pre-retirement spending habits. Properly interpreting these factors can go a long way to winning new clients, but there are opportunities for advisers to go much further.

The introduction of the Consumer Data Right^[2] and open banking in Australia has given advisers access to the client’s full financial universe. And while these technological terms may spook the retirees of years past, future retirees’ digital literacy will only improve. This means advisers should prepare to impress with their technological prowess – beginning with open banking software.

Demonstrating the value of tailored retirement strategies

Generic RIS can be an effective part of the sales pitch but increasingly worthless in practice. This approach could never reflect the real-life complexities of an individual’s retirement and threatens to reduce the value of the client’s hard-earned superfund.

To illustrate the variety of retirees in Australia, below is a list of very basic retirement scenarios which may face advisers. Even within each of these six scenarios, there is an array of variables and unique financial challenges which can affect their eventual RIS. By having access to a client’s complete financial data via open banking and the CDR, advisers can provide more accurate and personalised advice.

1. Couple retiring together: Double the retirees means double the variables and associated challenges. In this scenario, the client(s) and adviser must balance dual income streams, expenses, and retirement aspirations. In dealing with the expenses of two rather than one retiree, there is an increased consideration towards longevity. Fortunately, all of these considerations can be easily integrated using open banking software, thanks to the CDR. Simultaneous retirements can be further complicated when the couple has a significant age gap or prior families to consider, as estate planning can become a tricky subject. Another consideration may arise if the couple have uneven super balances and must decide how they plan to share the sum. All these variables are incredibly difficult to include in a generic RIS, proving the value of a more tailored solution.
2. Early retirement, planning for a longer retirement period: The average age of Australians who retired in 2022 was 64.8 years old^[1], but there are many reasons to retire earlier than normal. Naturally, some people will have the funds to retire ahead of their peers, while others will retire early due to illness, injury, lack of work, or the need to care for someone else. Whatever the cause of early retirement, these clients must ensure their funds last throughout an extended retirement – whether their balance is desirable or not. Using open banking to analyse early retirees’ typical spending habits, advisers can find opportunities to cut back if necessary and plan out a manageable budget.
3. Single person retiring: Financial security can be of even greater importance to single retirees compared to those in a couple – the latter having a companion to help out financially. While solo living expenses can be easier to calculate and present in a generic RIS, this still won’t capture the details of an individual’s retirement lifestyle. If the retiree has no adult children or anyone to provide care in their old age, then the expense of professional help may be considered. Additionally, solo retirees may spend more to develop their social network through clubs and organisations.
4. Retiring and downsizing: This is where things can become even more complex. Downsizing retirees will require help with managing asset liquidation, relocation costs, and many financial trade-offs. The former is made far easier with a full overview of the retiree’s financial profile, as open banking details aspects such as mortgages and investments. Downsizing can also lead to an increased cash flow, allowing the retiree to invest the proceeds, creating another avenue for advisers to support the client.
5. Retiring and travelling: Jet-setting retirees can require a particularly unique RIS, as travel planning and budgets can be a very personal process. Prioritising travel throughout retirement presents challenges that go beyond finances, including health, logistics, and asset management while abroad. If the retiree seeks long-term travel, what is to be done with their expenses back home? Do they downsize at the same time to minimise the cost of keeping an empty home, or perhaps sell up altogether? Additionally, post-retirement travel can involve a lot of upfront expenses, leaving a smaller balance to invest across the retirement period. These considerations must be discussed in depth and understood on all sides before an RIS is complete. The last thing a retiree wants to worry about while travelling is their finances, so a tailored RIS can put them at ease while they make the most of their retirement.
6. Semi-retirement; reduced income: Perhaps the client is ready to slow down without giving their career away completely. Or maybe they need more time to care for a loved one while still earning a reduced income. Structuring a phased retirement while maintaining cash flow cannot be effectively achieved with a generic RIS. Advisers and their clients must consider how much the income can be reduced while maintaining a certain quality of living. A generic RIS could never predict the exact balance each client will strike between their career and their new-found freedom in semi-retirement. Therefore, tailoring a semi-retirement plan using open banking data will help to map out a phased retirement. This may take intervals of the client’s choosing, such as monthly, yearly or even five- to ten-yearly.

Common issues with generic planning

As described above, it is nearly impossible to predict the details of a given client’s retirement plan, and generic solutions will provide sub-par results. Generic RIS may have been of value to the adviser in years past, when tailoring a strategy took more time than it was worth. Fortunately, tailored plans are now much faster thanks to open banking software and provide a clear value proposition with which to win business from retirees. Therefore, there is little to no value in generic strategies for either party, especially as they provide no competitive advantage over the next adviser.

The first issue with a generic RIS is that they may predict retirement expenses will decrease during retirement which is often not the case. Many retirees embrace their newfound free time and seek new hobbies which increase their spending habits. The spending habits of travelling retirees can be expectedly lavish and must be accounted for in any tailored RIS.

A generic RIS also may not properly analyse the client’s pre-retirement spending habits. This is an issue quickly solved by open banking software which gives a complete picture of spending trends and transaction summaries. By analysing this data, advisers can predict the future needs of retirees and create a budget to suit such a lifestyle.

Most generic RIS also ignore complex scenarios such as age gaps between partners or those who choose to semi-retire. The income and spending habits of these individuals will not be linear from pre- to post-retirement and their strategy must reflect such complexity. By applying a more data-driven, personalised approach, advisers can achieve results that are more relevant to the client, along with concrete recommendations for the future.

 How advisors can position this to the market

Financial advisers must become more than their job title suggests, providing empathy and patience along with clear guidance to retirees during a time of great uncertainty. As technology improves, the service provided by these professionals has the potential to expand significantly and retirees will come to expect more than a generic strategy for the future. It will take in-depth conversation to understand each client’s lifestyle and deliver a suitable RIS.

Accordingly, advisers must show the client how understanding current spending habits leads to more relevant, practical strategies. Naturally, retirees won’t simply give up their entire financial universe to open banking without first understanding how it will benefit them. Presenting the client with a comparison of generic versus tailored RIS may aid in proving the value of the adviser’s service.

A further tactic to convince the client of the value of open banking and a tailored RIS is to explain that expenses don’t always decrease in retirement. Oftentimes, expenses can increase as the retiree embraces their newfound freedoms and their lifestyle choices flourish. By highlighting this fact, clients can understand the importance of more carefully planning their RIS to reduce long-term financial stress.

Advisors must help clients see retirement as a dynamic financial transition, not merely the opening of a new bank account or fund. Positioning superannuation planning as a shift from collection to distribution is an important part of preparing any client for their retirement. This process must be taken seriously. However, many Australians don’t appear to pay much mind to how their own RIS will look.

According to a report by Australia’s largest independent corporate foundation, AMP, on the financial illiteracy of Australians aged 50 and over, 75% of respondents have not sought financial advice for retirement planning.^[3] It’s unclear whether this was due to a lack of concern, or an underestimation of how involved they must become in the process, but it’s clear that advisers must stress the importance of treating the process with appropriate care.

Extending the message to younger demographics

Once an adviser has mastered their messaging and the delivery of tailored RIS towards imminent retirees, their focus should expand to incorporate Australians aged 50 and under.

AMP’s report also found that “3 in 5 wish they’d started planning for retirement earlier in life.” This highlights the importance of retirement planning for younger generations too, where longer timelines mean open banking and tailored RIS will be of even greater importance when mapping out the future.

With a future-focused mindset, these younger people can be proactive about retirement planning and position themselves to potentially retire early or achieve a certain lifestyle sooner. But winning their business has become increasingly complex with the development of digital storefronts and marketing. Where previous generations may have found a financial adviser through word of mouth or proximity to home, future retirees are improving their digital literacy and advisers must develop their business accordingly. For example, if a given business isn’t appearing on Google for certain key phrases, it may experience a decline in new clients. As these younger generations approach retirement, website headlines such as ‘Tailored Retirement Income Strategies’ could be the difference between winning and losing new clients.

Other points of difference used to target younger demographics may include a strong social media presence and greater transparency – the latter being of utmost importance when discussing new technology like open banking software. Just as older generations are wary of new technology, younger Australians are increasingly aware of scams and the need to keep their data secure. In 2023, an Australian Government survey found that Australians aged 18-34 were “most likely to feel in control of their data privacy, but often find it is too much effort to protect the privacy of their data.”^[4] This presents an opportunity for advisers to take the pressure off younger clients, ensuring their data is secure while providing a tailored RIS.

The longer time horizons of younger clients also present a wider array of variables to consider in constructing an RIS. While a 40-year-old may envision a retirement full of travel and socialising, their reality and priorities are likely to shift as retirement approaches. This dictates that their RIS must leave room for change and growth while maximising wealth from the beginning.

Whatever picture the client would like to paint for their retirement, advisers should see younger generations as a big opportunity in retirement planning. Once the service has been polished for older clients, the framework can be molded to suit a younger audience and the adviser’s own future can be secured as well.

Positioning and open banking considerations

This article isn’t to say advisers should base their entire business around open banking and tailored RIS, lest they spook tentative clients who seek a simple toe in the water. Granted, not every retiree will be convinced of the value of tailored RIS and will be content with the generic alternative. Instead, a careful balance should be struck to entice both the financially savvy and the skittish.

By keeping messaging broad yet compelling, advisers can build a reputation for listening to clients’ needs and delivering the exact retirement they envision. This broad framing can help to maximise awareness and allow the business to steadily grow. An over-reliance on either side of the coin – tailored or generic RIS – will cut off any possibility of developing the other.

Summary

A tailored RIS will soon become the expectation rather than the added value of advisers, as awareness of open banking software increases with each generation of retirees. But until such time, advisers have an opportunity to create a competitive advantage to win and retain new clients.

Whether that client comes as a couple, a solo retiree, a travel lover, a downsizer or a unique combination of each scenario, the adviser must provide the most suitable and accurate picture of their retirement.

The generic alternative to a tailored RIS presents several issues which should be explained to prospective clients, all concerning misinformed assumptions about a person’s lifestyle and retirement plans. To avoid the delivery of a misinformed RIS, advisers must develop empathy and understanding of each client’s unique situation and form a strategy which reflects them.

Once the framework for a tailored RIS is in place, advisers would be wise to extend this towards a younger demographic, giving their business the best opportunity to enjoy longevity and security. Younger clients should remain increasingly accommodating towards the security and accuracy of open banking software and the RIS it can deliver, so long as the service is flexible to changes as they age.

This advice is best applied in moderation, as retirees seek control and certainty around the use of their nest eggs. By presenting open banking and tailored RIS as an option rather than the one correct direction, advisers can welcome new clients into a flexible and welcoming partnership. From here, conversations around retirement planning may take any size and shape, such is the unique nature of each retiree.

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Notes:
[1] www.abs.gov.au/statistics/labour/employment-and-unemployment/retirement-and-retirement-intentions-australia/latest-release
[2] www.cdr.gov.au/about
[3] corporate.amp.com.au/newsroom/2023/september/australians-financially-illiterate-when-it-comes-to-retirement-
[4] www.oaic.gov.au/engage-with-us/research-and-training-resources/research/australian-community-attitudes-to-privacy-survey/australian-community-attitudes-to-privacy-survey-2023

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An ageing population and an influx of retirees not only foreshadow more retirement customers in the coming decade, but a need for more comprehensive, accurate, and secure financial planning tools.

It has been almost 40 years since award superannuation was introduced in Australia, and 33 years since the introduction of mandatory occupational superannuation. This means the next decade will see the retirement of the first generation to benefit from an entire career collecting their ‘nest eggs’ for a comfortable retirement.

Australia’s economy is entering a serious period of transformation as the population ages, financial priorities shift, and the number of retirees climbs. This means superannuation and the regulations surrounding it are coming under the microscope, aiming to give retirees more security and flexibility for the future. And while some of the transformation described below may initially concern financial advisers, there are plenty of opportunities arising too.

In 2021-22, the median super balance for 65 to 69-year-olds was $198,715^[1] and 130,000 Australians retired in 2022,^[2] thus equating to roughly $25 billion in super balances being opened.

With these figures only forecast to increase, there is a growing need for more tailored retirement income strategies (RIS). This will require greater regulation, caring advisory services, and the technology to complement them.

The days of biannual financial advice are fading fast and retirees are becoming increasingly invested in how their super is handled and what it means for their retirement. So, it pays for financial advisers to understand how their key value propositions are evolving.

Changes in legislation

Since the retirement income covenant^[3] was introduced to the Superannuation Industry Supervision Act 1993 (SIS Act) in July 2022, any registrable superannuation entity (RSE) must create and offer an RIS to its members. This inherently involves the offering of financial advice, presenting a threat to a key cash flow for independent financial advisers.

Promisingly for those advisers, not all RSEs hold the correct license to offer such advice and are wise to refer members to external advisers. This is where those third parties must present the best value proposition to win referrals and potentially long-term partnerships with RSEs.

The Australian Prudential Regulation Authority (APRA) has even provided a Letter of Recommendation to RSEs on the Implementation of the retirement income covenant^[4] and much of the information contained can be applied to the work of independent financial advisers. These recommendations include:

• “Consider providing factual information to members about retirement income, for example, information about eligibility for the Age Pension or aged care, the concept of drawing down capital as a form of income, or the different types of income streams available.
• Consider making available budgeting tools or expenditure calculators that do not relate to specific financial products.
• Consider providing forecasts, such as superannuation calculators or retirement estimates, to help some members think about how superannuation can be part of their retirement income.”

These three points speak to some alarming statistics released by Australia’s largest independent corporate foundation, AMP, on the financial illiteracy of Australians aged 50 and over:

• “3 in 4 find the retirement system complex;
• 2 in 5 don’t know if they’ll be eligible for age pension benefits;
• 7 in 10 don’t know what an account-based pension is;
• 3 in 4 have not sought financial advice for retirement planning;
• 3 in 5 wish they’d started planning for retirement earlier in life;
• 3 in 5 are ‘extremely concerned’ about the rising cost of living.”^[5]

The statistics highlight the importance of providing more than super distribution services to imminent retirees, but to educate them on how to prepare for retirement. Superannuation regulation is clearly still evolving and the education around it remains a step further behind. Advisers and RSEs must prepare to maximise the opportunity for themselves and for their retiring customers, as this trailblazing generation approaches retirement with an unprecedented super balance.

Advisers should do so with confidence, given the final APRA recommendation:

• “Where an RSE licensee is not licensed to provide general or personal advice, or would be unable to comply with the obligations for giving advice, consider alternatives such as referring members to externally provided financial advice services…”

This affirms the suggestion that RSEs should look to third-parties as a means of providing financial advice, which includes financial advisers and trusted groups such as Retire360 (previously known as Link Advice) that have the required scale and expertise leveraged by funds. As RSEs have “a broad responsibility to act in the best interests of superannuation fund members”^[6] it should be expected that they realise the value of independent advisers to their members.

The Government’s response^[7] to the Quality of Advice Review^[8] – complementary to the covenant in how advice is provided – has also shifted the landscape and presents advisers as an equally viable option to retirees.

This is because legislation is now being drafted which makes it easier for superfund holders to pay for financial advice using funds from their super – giving them more financial freedom and flexibility to receive relevant RIS advice.

In particular, Recommendation 7 will benefit advisers moving forward:
“Superannuation trustees should be able to pay a fee from a member’s superannuation account to an adviser for personal advice provided to the member about the member’s interest in thefund on the direction of the member.”^[8]

This will relax existing regulations which currently complicate the process of seeking and paying for advice out of a superfund.

Challenges and opportunities for advisers

It’s becoming easier for financial advisers to offer an effective RIS, as super regulation is refined and technology develops, but there remain some key challenges.

Regulation pertaining to the type of advice allowed to be paid for from a customer’s superfund has previously been a hindrance to advisers and their customers. However, this obstacle appears to be easing as Recommendation 7 of the QAR addresses the quandary.

Another challenge to advisers is that such a service relies on some level of proactivity from customers in need of an RIS. The issue being that 75% of Australian over-50s haven’t sought financial advice for retirement planning.^[5] This is partly due to a perception that the value of financial advice may not outweigh the cost of the service,^[9] as well as a drop in the number of financial advisers available – falling from 28,000 in 2019 to around 15,600 in 2024.^[10] Promisingly, the government response to the QAR has introduced a new class of financial adviser to increase availability of the service. Currently titled ‘qualified advisers,’ this new class will have a lower bar to entry than professional advisers and will offer simpler advice for a lower cost. While these plans may allow RSEs to keep advice in-house, it will also allow advisory firms to broaden their offering while encouraging more staff to join the industry.

The third challenge surrounds the limited data that is available to advisers as a means of providing RIS services. A survey conducted by the Financial Times Insider found that 56% of financial advisers “agree that retirement clients have specific investment requirements, but say they do not have the tools or skills to advise them differently.”^[11]

This is a technological gap that begs to be filled, as such a solution would provide the necessary means for advisers to improve their value proposition in the face of competition from RSEs.

The influence of open banking

Since the Australian Government agreed to implement the Consumer Data Right^[12] (CDR) in 2018, and open banking began in major Australian banks, the outlook for financial advisers has improved. Despite the red tape which is only now being cut, open banking gives advisers those tools and skills which they need to service retirement clients.

The secure access to key financial data enabled by open banking has given advisers a new value proposition where such access gives them a more comprehensive overview of a client’s financial situation. This data could include mortgages, household expenses, and investments, as well as simpler factors such as balances, income, bank product info, and transaction summaries.

The concept of open banking remains elusive to most Australians, however, as one survey found,55% had not yet heard of it.^[13] Meanwhile, there is a slight lack of trust in technology companies to keep banking customers’ money safe.

PwC’s Australian Customer Banking Survey 2021 discovered an interesting paradox in the psychology of respondents. It stated 69% of Australians say that ‘having the most up-to-date technology is important’ when it comes to choosing a bank for a financial product or service. In fact, respondents see this factor as increasingly important over the next five years.

However, only 40% reported trusting digital or neo banks to keep their money safe, while 45% trusted technology companies. Considering this figure was significantly skewed by millennial trust (55 and 58%, respectively), the trust among Baby Boomers slides closer to one in three.^[14]

This presents a challenge for advisers to convince customers of the security of open banking. How to convince a digitally untrained cohort of the benefits of a new and unknown banking technology?

Showcasing the technology

If there’s one thing that matters as much to retirees as trust in financial institutions, it’s the security of a well-planned and accurate RIS. So, it’s the adviser’s job to foster one using the other.

As open banking becomes more trustworthy and commonplace in Australia, more fintech options are hitting the market. This means more options for advisers and their customers to sift through in order to find the most reputable RIS solutions. Primarily, they’ll be looking for solutions that are secure, accurate, and efficient, and which have preferably existed since before the CDR and open banking was introduced to Australia. This will give an ageing population more faith that the technology is ready to handle an influx in retirees.

Trusted RIS solutions, such as Moneysoft, can provide comprehensive modelling tools, enabling customers to visualise their retirement outlook. By integrating open banking data with more basic information like income and super balances, advisers can provide detailed reports for their customers to digest.

However, merely emailing clients a detailed report won’t be enough for advisers to win them over. The PwC survey found that 72% agree that “it is important for companies to connect their digital and in-person experiences,” proving that human touch is still vital in a digitised world. Additionally, only 60% of respondents believed that banks (admittedly, not advisers) do it well, presenting an opportunity to please new clients.

Rather than diving straight into the details of open banking technology, it’s advisable to begin by spruiking the benefits – enhanced insights, security, and accuracy – without overloading customers on the finer technological details. Cultivating healthy scepticism among customers may encourage them to self-educate and ultimately engage with open banking for higher quality financial data.

Developing an RIS

According to the RIC, the purpose of an RIS is to:

1. Maximise retirement income;
2. Manage any risks to the sustainability and stability of retirement income, and;
3. Offer flexible access to funds during retirement.

In order to meet these three objectives, one public-sector super fund (Commonwealth Superannuation Corporation (CSC)) details a helpful walkthrough of its own RIS, stating how it developed the strategy.^[15] Of course, an adviser has a responsibility to tailor each customer’s RIS to their specific needs (the first step in the CSC’s RIS), so copying it exactly is inadvisable.

Nevertheless, just as CSC began by undertaking research to understand customer preferences, so too should advisers develop a clear, accurate, and detailed understanding of the customer’s lifestyle and their expected lifestyle in retirement. From a customer service angle, this requires an empathetic and hands-on approach. From a financial and technological angle, it requires comprehensive open banking technology capable of budgeting, goal tracking, and creating detailed reports based on securely accessed financial data.

Once the data has been scraped, it’s important to identify any data gaps and any opportunities or obstacles these may present in retirement. For example, if a customer has no history of investing their money, then an opportunity arises to do so and maximise their retirement income.

It should be noted that the Treasury’s Retirement Income Review 2020 stated that maintaining “65-75% of working-life income will allow most retirees to maintain their standards of living in retirement.”^[16]

To manage any risk of falling below this threshold, advisers should outline all types of risks to the customer and discuss their tolerance for each scenario and consequence. These types of risk may include ‘longevity risk,’ where the retiree outlives their retirement savings; ‘investment risk,’ where returns underperform initial forecasts; or the risk of higher than expected inflation.

A capable open banking platform, such as Moneysoft, should model each of these scenarios and provide a tailored retirement plan. The responsible adviser would then reconvene with the customer at regular intervals to assess their position and update their risk appetite.

To satisfy the third objective from the RIC, advisers should make it clear how retirees can access their funds at any stage of retirement and model how this would affect their future financial situation. It may be advisable to offer simple calculation services to assist customers in understanding how any withdrawals could impact subsequent pension payments. Additionally, as many Australian retirees may not understand the basics of their own superfund, an adviser may offer simple educational materials on how to withdraw funds or view a current balance.

Summary

The introduction of the RIC and QAR, as well as Australian developments in open banking will have significant impacts on financial advisers. While some may see the changes as a threat to the dwindling number of advisers in Australia, they also present opportunities to those 15,000 who remain. An ageing population and an influx of retirees not only foreshadow more retirement customers in the coming decade, but a need for more comprehensive, accurate, and secure financial planning tools. Open banking will allow these retirees to receive detailed reports that plan their entire retirement, but not before trust is garnered between them, their advisers, and the technology at play. Ultimately, not even the most comprehensive RIS will convince a sceptical and uneducated retiree to give up their financial data – the first step must be a warm handshake and the trust that their data is in good hands. 

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Notes:
[1] https://data.gov.au/data/dataset/taxation-statistics-2021-22/resource/6dd981d6-0323-427f-a19e-ed4b74061ae8?inner_span=True
[2] https://www.abs.gov.au/statistics/labour/employment-and-unemployment/retirement-and-retirement-intentions-australia/latest-release#superannuation
[3] https://treasury.gov.au/policy-topics/superannuation/retirement-framework
[4] https://www.apra.gov.au/implementation-of-retirement-income-covenant
[5] https://corporate.amp.com.au/newsroom/2023/september/australians-financially-illiterate-when-it-comes-to-retirement-
[6] https://www.apra.gov.au/sites/default/files/regulation_of_superannuation_entities_by_apra_and_asic.pdf
[7] https://ministers.treasury.gov.au/ministers/stephen-jones-2022/speeches/address-association-superannuation-funds-australia
[8] https://treasury.gov.au/sites/default/files/2023-01/p2023-358632.pdf
[9] https://asic.gov.au/about-asic/news-centre/find-a-media-release/2019-releases/19-223mr-consumers-see-value-in-financial-advice-but-lack-of-trust-remains-an-issue/#:~:text=%27While%20Australians%20believe%20financial%20advisers,only%20for%20the%20wealthy%2C%27%20ASIC
[10] https://www.adviserratings.com.au/adviser-movements?hss_channel=lcp-74880326
[11] https://www.ftadviser.com/investments/2024/04/15/under-pressure-financial-advisers-should-be-updating-retirement-strategies-as-needs-change/
[12] https://www.cdr.gov.au/about#goto-background
[13] https://content.frollo.com.au/Marketing_Content/The+State+of+Open+Banking+2024.pdf
[14] https://www.pwc.com.au/consulting/assets/customer-banking-survey.pdf
[15] https://www.csc.gov.au/Members/Retirement/Plan-retirement/Retirement-income-strategy
[16] https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-udcomplete-report.pdf

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Open banking is not just a trend; it is the future of financial services.

The rise of Open Banking in the financial services industry

The global rise of open banking has been driven by technological advancements and changing consumer expectations. Innovations in artificial intelligence (AI) and machine learning (ML) have further accelerated its adoption, enabling financial institutions to offer more interconnected and value-driven services.

Countries around the world are adopting open banking practices at different paces, with regions like Europe and Australia leading the way. In the UK, the implementation of the Open Banking Standard has already transformed the financial landscape.

In Australia, the introduction of the Consumer Data Right (CDR) has set the stage for open banking, with financial institutions and third-party providers now able to actively participate in this new data-sharing ecosystem.

As these practices become more widespread, they are expected to drive significant innovation in the financial services sector, offering new opportunities for both consumers and financial advice businesses.

This article explores the concept of open banking, and how it can be leveraged to drive margin relief, customer growth and better compliance, all while continuing to drive the highest possible client satisfaction.

What is Open Banking?

Open banking refers to the practice of enabling third-party providers to access consumer banking, transactions, and other financial data through the use of application programming interfaces (APIs). This model is part of the broader Consumer Data Right (CDR), aimed at promoting financial transparency, fostering innovation, and enhancing customer experiences across the economy.

In essence, open banking breaks down the traditional silos within the financial industry, allowing a more interconnected and transparent financial ecosystem. By facilitating secure data exchange among various financial institutions and third-party providers, open banking paves the way for advice businesses to unlock greater efficiencies and growth.

What is the Consumer Data Right (CDR)?

The CDR is the legislative element of open banking in Australia, it sets the rules and framework for greater financial transparency and innovation.

How Open Banking works under the Consumer Data Right

The mechanics of open banking revolve around a carefully orchestrated process designed to reshape the relationship between financial institutions, consumers, and third parties:

1. Consumer Consent: Open banking begins with obtaining explicit consent from consumers for data access through third-party applications. This consent is flexible, allowing consumers to revoke access if their circumstances or preferences change.
2. Identity Verification: Consumers play an active role in ensuring the security of their data by verifying their identity before sharing information with third parties, adding an additional layer of protection.
3. Data Sharing Confirmation: Before any data is shared, financial institutions confirm the details with the consumer, including what data will be shared, the purpose of the sharing, and the duration of access.
4. Data Transfer and Usage: Once consent is obtained and confirmed, the consumer’s data is securely transferred to third-party providers via APIs for processing.

Open Banking unlocking new and enhanced capabilities

1. A single view is just the beginning

A key challenge that we frequently observe in the market is advisers jumping in and out of different programs in order to show their clients a full picture of their wealth. It’s a clunky process. Logging in and out of multiple software platforms loses momentum; not only does it hinder you and your team from completing the work efficiently, but it’s also disruptive for your client experience.

Solutions that provide a single view of a client’s financial universe relative to their financial ambitions is where significant value can be generated. However, a single view is just the start of an even greater value proposition that can be unlocked.

2. Make Fact Find seamless

If you’ve ever gone for a morning run and found the first kilometre tough, you know how daunting the rest of the run can seem. The same feeling can apply to onboarding processes. Traditionally, Fact Finding has involved a tedious mix of manual data gathering and digital scraping methods. This approach carries the risk of data being out of sync or, even worse, incomplete.

By leveraging Open Banking and advanced technologies like AI and ML, you can revolutionise your onboarding process. These platforms allow for the aggregation of your client’s data, enabling you to thoughtfully design an end-to-end onboarding journey that is both seamless and efficient.

Instead of overwhelming clients with endless form fields, consider implementing intuitive digital Fact Find modules. These modules can be broken down into easy-to-navigate sections, aligned with the common areas where clients typically access the required data. This structured approach not only simplifies the information-gathering process but also enhances the overall client experience, making onboarding less of a chore and more of a streamlined, user-friendly interaction.

3. Make proactivity sustainable

As an adviser, much like in most service industries, you constantly face a familiar challenge: balancing a client’s desire for proactive engagement with your need to maintain scalability.

This is where we believe the role of technology in our lives has, at times, veered off course. When email became the preferred method of contact, the intention was to streamline communication and free up time for other value-creating activities. Unfortunately, it seems recently we’ve become more enslaved by this technology than empowered by it.

To truly harness technology for efficiency, it’s crucial to focus on automation that delivers value to multiple clients or use cases simultaneously, rather than just catering to individual situations. While it’s essential to tailor technology to meet specific client needs, these solutions can often be applied more broadly, offering additional value to others.

For example, setting up triggered alerts to highlight shifts in client spending relative to their budget allows you to efficiently demonstrate a high level of engagement and oversight. Beyond just managing cash flow, integrating key planning tools can facilitate similar, seamless proactive measures, like identifying optimal moments to implement the next phase of a client’s strategy. This approach not only enhances your ability to scale but also ensures that clients receive the proactive attention they expect.

4. Continually increase in value

Another common challenge in service industries is ensuring that the value you create continues to grow over time. Whether in financial advisory, operations or even marketing, many engagements begin with a strategy and planning phase. This is often when the greatest value is generated, but maintaining that value can be challenging.

Several factors can contribute to this difficulty, like complexities in rolling out the plan, or other unforeseen obstacles that hinder the progress. As a result, the initial clarity and direction established during the strategy phase can become muddled and diluted over time.

This is where single-view technology can be a game-changer. By providing a consolidated overview, it allows you to quickly and proactively identify when a plan is deviating from its course. With this insight, you can diagnose issues early and make necessary adjustments, ensuring that the value you established at the beginning of the engagement not only remains intact but continues to grow throughout the entire process.

5. Access to historical data to predict future events

Real-time data becomes even more valuable when it’s analysed alongside historical data. This combination allows you to anticipate changes in spending patterns, enabling you to help clients recognise recurring habits or significant events, and plan accordingly for their financial future.

However, this kind of insight doesn’t always need to be delivered on a one-to-one basis. With the right technology platform, you can automate the process of sharing this information. This could take the form of alerts, automatic analyses, or detailed reports, making it easier to keep clients informed without requiring constant manual input. You can also leverage one-to-many channels, like webinars, to discuss common barriers to achieving financial goals. These sessions not only educate but also offer best practices to help clients avoid pitfalls.

Staying connected and understanding day-to-day and month-to-month financial experiences is crucial. Just as we expect politicians to stay “in tune” with the concerns of the public, maintaining a deep understanding of what your clients face helps you stay relevant and valuable in their lives. This proactive engagement not only strengthens client relationships but also reinforces your role as a trusted advisor who is always ahead of the curve.

6. Data security and compliance

Open Banking, integrated with a client single view platform, offers powerful capabilities for synchronising and pre-populating data through connections with compliance tools like Xplan, Midwinter, and other third-party systems. These regulated integrations ensure that data flows seamlessly and securely between platforms, enhancing your ability to meet regulatory standards and reducing the time spent on manual data entry and audits.

By automating the compliance checks, these systems instantly verify adherence to regulations, minimizing the risk of non-compliance and the associated penalties. This automation also improves data accuracy, as it significantly reduces the errors that can occur with manual data entry.

Regulated connections ensure that data is transmitted securely, in line with industry standards like GDPR or the Australian Privacy Principles. This protects against data breaches while also demonstrating a commitment to safeguarding client information, which is key to maintaining trust and confidence.

7. Expanding client base and scaling operations

With a real-time view and seamless cash flow management for your clients, a significant portion of your service offering becomes automated. This automation creates substantial opportunities to expand your client portfolio.

You’ll gain additional capacity to take on more clients without compromising service quality. The accuracy and efficiency of an automated service model also give you greater confidence in presenting your offerings to potential clients. This then enhances your ability to propose an engaging and responsive service model, ultimately increasing your conversion rate for new clients.

8. Broadening value

The responsibility of liberating a client’s financial data, should not be placed solely on the adviser. It is a shared responsibility between the client and the adviser to achieve mutually beneficial outcomes. With a clearer picture of their financial universe, a responsibility sits with the client to stick to budget, cash flow and surplus strategies, enabling advisers to more effectively advance their financial position.

Equipped with tools and efficiencies that support an outcome-focused approach, financial advisers can further differentiate themselves by building strategic partnerships with a trusted network of professionals from related fields.

Collaborating with tax accountants, lawyers, mortgage brokers, or insurance specialists allows advisers to provide comprehensive solutions that address clients’ multifaceted financial needs. These partnerships not only enhance the adviser’s expertise and resources but also offer clients access to a wider range of services, ensuring holistic financial management.

Challenges and considerations

The regulatory environment is driving a fundamental shift in the landscape of financial advice in Australia. Previously, the Financial Adviser Standards and Ethics Authority (FASEA) and Future of Financial Advice (FOFA) was responsible for setting the standard for financial advisers, which has since been absorbed by the Australian Securities and Investment Committee (ASIC). Their role is to review every movement that advisers make, and streamline the process that has historically been complicated to navigate.

Additionally, the recent Quality of Advice Review (QAR) have urged advisers to broaden their offerings, moving beyond traditional services to deliver a more comprehensive range of advice-based solutions. This regulatory push, coupled with rising client demands, has created both challenges and opportunities for financial advisers to redefine their value propositions.

While open banking offers numerous opportunities, it also presents challenges that require careful management. With multiple entities accessing sensitive financial information, the risk of data breaches and unauthorised access increases, necessitating stringent security measures.

• Technology Upgrades: Advisers may need to upgrade their technology infrastructure to support open banking, including the integration of APIs and data analytics tools.
• Advanced Security Protocols: Implementing top-tier security technologies, such as end-to-end encryption, multi-factor authentication (MFA), and real-time threat monitoring across all data-handling processes ensures APIs are secured with industry-standard encryption and access to sensitive data is restricted to authorised personnel only.
• Employee Training: Comprehensive training programs should be implemented to ensure that all staff members are proficient in using open banking tools and adhering to security protocols.
• Regular Security Audits: Conducting regular security audits and vulnerability tests is crucial to identify and address weaknesses and should extend to third-party providers to ensure they adhere to the same high-security standards.
• Client Education and Transparency: Building client trust involves educating them about the security measures in place, explaining how their data is protected, and providing tools to manage their data-sharing preferences. Clients should know how to set permissions, revoke access, and understand the implications of their data-sharing choices.

The future of financial advice in the Open Banking Era

The rise of open banking marks a pivotal moment in the evolution of financial advice and for forward-thinking advisers the ability to enhance their service offering while driving greater efficiencies, creating a platform for significant growth.

As open banking continues to evolve, the opportunities for financial advisers will only grow. The integration of emerging technologies, such as AI and ML, will create new possibilities for innovation and differentiation.

Open banking is not just a trend; it is the future of financial services. The time to embrace this future is now. By leveraging the opportunities presented by open banking, advisers can not only enhance their services but also create a lasting competitive advantage that sets them apart in a rapidly changing market.
——–

Notes:
[1] Australian FinTech
[2] https://www.cdr.gov.au/about
[3] https://www.moneysoft.com.au/
[4] Ibid.

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Younger people rank budgeting and cashflow management as the most valuable type of financial advice.

Younger people overwhelmingly rank budgeting and cashflow management as the most valuable type of financial advice they can receive, according to a recent ING and Rice Warner survey of more than 1000 Australians.

Gen Z (66 per cent), Gen Y (60 per cent) and Gen X (40 per cent) all cited budgeting and cashflow management as more valuable than holistic advice and retirement planning advice, according to the report.

Baby Boomers understandably rated retirement planning as their most valued advice service (more than 45%), however almost 30 per cent said budgeting and cashflow management services was most valuable.

The findings, revealed in ING’s recent My Generation report, represent a new opportunity for financial planners, many of whom still focus on cashed-up Baby Boomers interested in retirement planning, investment or insurance advice.

Firefly Wealth founder and financial planner Adele Martin, who focuses on younger clients, says the rise of the gig economy is making their income more variable as the cost of living continues to rise.

“We haven’t had wage rises in five years but we’ve seen other expenses like electricity, private health costs, and home loans increase, so they’re definitely feeling the pinch. At the same time, the next generation is not going to have the same job for 30-40 years – they might work part-time or generate income through Airtasker or Airbnb – so they don’t necessarily have that regular consistent income.

“They want to feel more in control and that means they need to understand their money and where it goes.”

But meeting this demand for cashflow and budgeting advice needs advisers to embrace new ways of working and smarter use of technology to effectively scale the service across many clients, according to Martin.

“Many advisers are realising there is demand but they don’t know how to make it profitable or have that conversation with clients. That’s where programs like Moneysoft are great because that can do a lot of the legwork for you.”

Moneysoft’s software platform, which includes their Pro and Lite solutions, make it simple for advisers to collate and analyse clients’ spending patterns. Its open API architecture allows for easy integration with a range of other popular software including IRESS’ XPLAN, Teachable, and Microsoft Dynamics, which helps advisers create efficient workflows.

Martin also uses three Facebook groups to connect with her clients and offer cashflow and budgeting advice and support.

“I’m a massive fan of delivering advice on a ‘one-to-many’ basis. Facebook groups allow me to connect, give more value, and get in front of clients regularly without having to do it all one-on-one.”

Her Facebook groups include The Savings Squad, a free group that accompanies her podcast; My Money Buddy, a paid group for clients in her Savings & Goals program; and My Money Community, a paid group for financial planning clients.

It is a strategy that meets the higher touch needs of younger investors. The ING My Generation report found that financial coaching was Gen Y and Gen Z’s second most valued advice service. Martin says many of her Gen Z, Gen Y and Gen X clients are comfortable asking for help and don’t view it as a sign of weakness.

“The best athletes in the world have multiple coaches so why wouldn’t you apply those same principles to money? It’s that extra accountability, that sounding board, why someone should have a money coach – you get results quicker.”

Moneysoft Head of Marketing & SME Operations, Neil De Beger, said advisers and other finance professionals are perfectly placed to help everyday Australians improve their financial habits.

“Moneysoft’s Personal Financial Management Platform has been specifically developed for advisers and other finance professionals to help everyday Australians meet their lifestyle and financial goals,” he said.

The Lite solution includes a financial health check and provides a starting point for developing healthy financial habits, while Moneysoft Pro offers a full-service solution.

“Our solutions aim to make it simple for financial professionals to help Australians improve their financial wellbeing.”

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Australia’s household debt-to-income ratio has risen sharply in recent years and now ranks as one of the highest in the world at about 190 per cent, according to the Reserve Bank of Australia. Meanwhile, more than one in six (18.5 per cent) consumers are struggling under a mountain of credit card debt, according to a report by the corporate regulator, ASIC.

Yet only a minority of financial planners offer money management or budgeting advice, citing concerns about the time it takes to offer such services and how to charge clients for it.

Luda Financial Solutions founder Jacques Hugo is one of a new breed of financial planners using technology to position money management as a central component of financial advice. Jacques migrated to Perth from South Africa in December 2011 and set up Luda in January 2012.

Jenny* first saw Jacques when her imported confectionery shop began to struggle just as the major supermarket chains started selling the same goods. She quickly found herself owing about $20,000 to suppliers plus a further $20,000 of credit card debt.

“I had about four suppliers with whom I had overstayed my welcome and the credit card was maxed out. It was scary and demoralising – you try so hard for years to run this business and then at the end you just have a $40,000 debt.

“Through my own naivete I thought I was going to lose my marriage and my house because I hadn’t been completely honest with my husband about how bad it had become. I didn’t want him to feel pressure he didn’t need.”

Jenny and her husband Rick saw Jacques who helped set up a financial plan to get on top of their escalating debt. They re-mortgaged their home to get a better deal, unlocked additional home equity to ease the short-term pressure, consolidated a range of debts and began budgeting.

“Jacques never made us feel like we were cutting everything out – you have to have your treats but just budget and plan for them. It’s important to have a date night and time to yourself. Maybe that $5 you save a day on coffee can pay for a babysitter so you both can have a night out. He almost became a little bit of a marriage guidance counsellor as well.”

Budgeting ranks as one of the top unmet advice needs of everyday Australians, alongside retirement planning, according to research house Investment Trends.

“Many years ago, I was in my early 30s with two children and had a good accounting practice,” Jacques said. “I started importing water purifiers into Africa but I was 10 years too early so we just about lost everything. I understand what it’s like when you don’t know where the money is going to come from to buy food for tomorrow.”

While Jacques offers a full spectrum of advice, including traditional areas such as retirement, insurance and investment, it is a condition that all of his clients embrace budgeting and money management.

“The first thing we look at is how they manage their cash because if they don’t understand their own expenditure, it undermines every aspect of financial advice and ultimately, their financial wellbeing.”

Jacques uses leading financial technology platform, Moneysoft. The technology creates efficiencies for Jacques that save him time and effort in his own business which would otherwise need to be managed manually; enabling him to concentrate more upon working with clients such as Jenny and Rick.

The technology automatically collates, analyses and categorises his clients’ expenditure across their multiple accounts, which then provides a strong foundation for coaching them about money management. Clients receive regular, automated expenditure and budget reports ongoing, which boost their engagement, awareness and accountability.

He points to the ease of using ‘tap and go’ contactless cards as one reason people overspend. Takeaway food and coffee shops are a major area of overspend, with the average family spending $450 a month on those items.

Luda Financial Solutions recently added a four-hour habit change workshop for their clients to help them avoid falling back into damaging spending habits. “We also plan to launch a separate cashflow business where we offer this service for a once-off fee,” Jacques said. “There is an enormous need for this type of advice – helping people to get on top of their cash flow and improving their overall financial literacy, which really should be the foundation for the provision of ongoing financial advice” .

Moneysoft was launched in 2012 to specifically partner with financial advisers and other financial professionals who work with clients in the area of money management. It has partnership deals with many major financial planning groups who are also looking to help their advisers work with clients in this area, increasing the overall financial capability of every day Australians.

These partnerships include Fortnum Financial Advisers, InterPrac, Clearview, RI Advice, WB Financial, Millenium3, Financial Services Partners and Centrepoint Alliance as well as broker Mortgage Choice and life insurance specialists AIA Australia.

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We can’t afford to wait for the Royal Commission to release its final report next year before taking action.

Tackling the trust issue is one of the greatest challenges currently facing our industry. Peter Malekas explores practical ways for advisers to turn the tide.

We are experiencing a national crisis of confidence in our institutions. Our trust in business, government, media and non-government organisations has fallen drastically in the past year, and signs point to it getting worse before it gets better.

Australia is among the countries to have experienced an extreme loss of trust in the past year, with public trust in our institutions plummeting by a total of 10 percentage points between 2017 and 2018, according to the Edelman Trust Barometer.

The financial services sector was the second least-trusted industry in Australia, Edelman reported, with only the energy sector ranking lower.

Those results reflected public sentiment before the financial services Royal Commission began. Since then, the serious and widespread issues revealed by its hearings have sparked consumer outrage, government condemnation and media scrutiny.

Time for change

Those who have been part of the problem will need to face the consequences of their behaviour or inaction.

The rest of us need to be part of the solution. We can’t afford to wait for the Royal Commission to release its final report next year before taking action.

Rightly or wrongly, consumers are likely to see reluctance to change the status quo as tacit support for the issues that have been exposed. Most people (65%) say CEOs should lead change rather than waiting for the government to impose regulations, the Trust Barometer reports.

Financial planners face a greater challenge. Unlike retail banks and energy providers, they provide a discretionary service, making them more vulnerable to consumers voting with their feet and opting not to seek advice.

Raise your voice

People still want something – or someone – to believe in. With trust in institutions falling, individuals are gaining greater influence as voices of authority. Technical experts and academics have significantly higher credibility than institutions, and the gap is continuing to expand, according to the 2018 Edelman Trust Barometer.

At the same time, the advice market is continuing its move towards higher professional standards with consistent education and ethical requirements.

Advisers who demonstrate their competence can become powerful advocates for their own business. Whether it’s helping people develop greater financial literacy, demystifying industry jargon, or explaining how beliefs and biases can help or hinder achieving financial goals, sharing knowledge can be a powerful marketing tool.

Simply sharing useful, credible information from independent researchers and industry experts across your social networks can be a way to get started.

Be an open book

Transparency is a critical part of building trust. That means proactively providing the answers people are looking for before they have to ask.

Advisers need to go out of their way to satisfy their clients’ potential concerns.

That may mean advisers adopt an increasingly active approach to disclosing their structure and ownership, independence, remuneration structure, policy to address conflicts of interest, and investment philosophy. Millennials, in particular, aren’t averse to asking these hard questions of their advisers. They may not be all advisers’ clients today, but they will be in future.

To have the answers, advisers first need to ask themselves the tough questions. Are there changes they should make to meet clients’ expectations?

Being transparent also means making information easy for clients to understand. The top ranked factor that increased trust in financial services was having terms and conditions that were easily understood, according to the Trust Barometer.

Show, don’t just tell

Building trust and demonstrating value calls for action as well as words. Technology can help on both fronts.

People increasingly expect technology to be part of financial solutions. According to the Trust Barometer, 79% say it’s important for a financial services firm to use the latest technology.

However, clients are clear that technology plays a supporting role and personal relationships are front and centre. Nowhere is that more important than in the advice industry. Getting investment advice was rated as the most important financial service to be provided by a real person, according to Edelman’s survey.

Smart tools and increased process automation free up valuable time for advisers to spend interacting with clients. They can also make it easier for advisers to present complex concepts to clients and bring financial plans to life.

Using data analytics and open architecture, solutions can deliver real-time insights into clients’ actual financial situation and behaviour. Advisers can use this to model the dollar impact that even small changes can have to reduce debt or increase wealth, showing tangible value based on reliable information.

Further industry upheaval is likely to be inevitable as the Royal Commission continues to play out. Advisers who embrace the change stand to emerge stronger and more resilient, equipped to navigate the uncharted waters ahead.

Link Group has an investment interest in Moneysoft.

By Peter Malekas, founder and managing director.

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Peter Malekas

Financial planners need to broaden their role and help clients understand their household expenses in the wake of the Royal Commission’s damning revelations.

Australian households have racked up record levels of debt as interest rates have been cut to historic lows in recent years, but the Commission heard that most lenders still over-rely on the poverty-level HEM benchmark that underestimates true living costs.

“The Financial Services Royal Commission has raised many disturbing issues across the banking and advice industry. It will inevitably lead to widespread and much-needed reform,” said Moneysoft CEO Peter Malekas.

“However, we shouldn’t wait for the final report in 2019 to reassess as an industry, what we do and how we can better serve clients now. Cashflow management and budgeting are within the top unmet advice needs of everyday Australians, according to Investment Trends research. However, many financial planners are still concerned about turning that demand into a sustainable and scalable service.

“Technology has solved both of those issues, allowing financial planners to add a ‘cashflow as a service’ element to their ongoing client packages. This shows ongoing value to clients who can learn to understand and control their expenditure, building a solid financial foundation.”

Without the guidance of a trusted financial planner, many people’s debt woes are likely to grow. Australians’ household debt to income ratio now stands at a record 188.6%.¹ Around three in ten households (29%) were classified as ‘over-indebted’, with mortgage holders and high-income earners particularly susceptible, according to ABS data released in late-2017.

The head of the Royal Commission, Kenneth Hayne, has also acknowledged concerns about people’s ability to understand their own expenditure before making major financial commitments such as a mortgage.

“In light of the evidence that has been given, I think, by a number of witnesses, that by and large customers are poor historians when it comes to identifying their outgoings,” he said at the conclusion of round one of the hearings.

“People are not very good at providing the information, not for want of trying, not for want of prompting, just by and large people are poor historians. What does that say, if anything, about judging home loans on a measure of UMI [Uncommitted Monthly Income]?”

Moves are already afoot for financial planners to take a broader advice role beyond investments and insurance.

Earlier this year, a Productivity Commission draft report into competition in the Australian financial system raised the prospect of financial planners providing advice about credit-based products, including mortgages, without the need for a separate license.

Last year, the now former CBA chief executive Ian Narev proposed “the potential extension of regulations such as future of financial advice to mortgages in retail banking” in a letter to the Retail Banking Remuneration Review.

Moneysoft offers low-cost technology solutions that are easily accessible to advisers: Moneysoft Pro and Moneysoft Lite to help automate and build a sustainable service by cutting lengthy manual data collection and data entry requirements. Both solutions are built on a platform that easily integrates with a range of popular financial planning software such as XPLAN, which provides clear benefits around efficiency and compliance.

Simon Rayner, a financial planner at Dynamic Orange, says money management has traditionally been missing from the advice industry.

“Our industry jumped over the cash flow and having a plan that was tracked against real data and instead sold product. But this is really the core part of what we should be doing – managing cash flow – because that’s how clients make money.”

He says he recently helped one professional couple cut frivolous and unplanned expenditure, helping them save $17,000.

“They can now afford a full plan that involves overseas travel, purchasing another property – and they know exactly when they’ll own their own home. We’ve done their insurance, super, estate and wills, and will refinance their loans when they come out of their fixed structure. Initially the client had no savings and after three months of using Moneysoft we implemented a strategic plan that will produce over $7,800 in revenue for this practice.”

Moneysoft Pro delivers a complete financial money management service that enables deeper client conversations. It includes budgeting and cashflow, a full range of financial reports, real- time data, goal tracking, and account alerts. Moneysoft Lite offers a more cost-effective and streamlined money management solution that includes a financial health check and gap report.

1. RBA Household Finances – Selected Ratios – E2. https://www.rba.gov.au/statistics/tables/

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One in five Moneysoft subscribers now uses Lite, which was launched in late-2016. It caters to advisers and other finance professionals who want a simple, cost-effective way to introduce ‘cashflow as a service’ to their clients.

The Lite platform enables advisers to build engagement with different types of clients at varied stages of the financial life cycle, said Neil De Beger, Moneysoft’s head of distribution and marketing for SME.

“People want to have clear visibility of their finances without spending much time. That goes for both advisers and their clients.”

“Moneysoft Lite provides a financial health check which is a useful starting point in a new advice relationship. It offers ongoing insights into income and expenditure to help guide behavioural change, or simply to make sure everything is on track.”

Moneysoft developed its Lite solution to meet the specific needs of financial advisers, mortgage brokers and superannuation funds searching for a way to engage with their clients as part of a sustainable and efficient business model.

“We looked at how businesses and their clients were using Moneysoft Pro, and saw we could provide real value by offering a light-touch alternative. Moneysoft Lite is a direct response to that need,” said De Beger.

“Not everybody wants to get hands-on delving into detail when the information they need is summarised accurately and put clearly in front of them in a way they can understand. It frees up advisers to concentrate on developing client relationships and scaling their business.”

The growing shift to holistic advice is a key factor behind Moneysoft’s growth. As finance professionals seek to demonstrate the value of their services, they also need to meet growing compliance requirements. Moneysoft boosts client engagement while also increasing efficiency through integration with a wide range of popular industry systems such as XPLAN.

It also enables advisers to provide new service offerings.

Budgeting, alongside retirement planning, ranks among the top unmet advice needs of Australians, according to the latest Investment Trends research.

The Royal Commission into financial services has revealed rampant under-reporting of household income by borrowers. While many financial planners don’t typically directly provide credit advice (which requires a separate license), ignoring clients’ debt and overall financial position can derail the best laid financial plan.

Relying on clients’ ability to remember their financial behaviour can often lead to expenses being significantly underestimated.

Moneysoft Lite is helping financial planners to tackle these issues in a cost-effective way by seamlessly collating and analysing clients’ multiple accounts and investments.

“Moneysoft was one of the things that we could easily plug in and not have it take too much time if we didn’t want it to,” Jodie Douglas, principal financial adviser and managing director at Mad About Life, said.

“When we started we had all our clients on Moneysoft Pro but I didn’t realise Moneysoft Lite was so good. It’s similar – you just don’t have the budget side of it. That was good because the budget can be time consuming. Most of our clients just want reports on their balances and how they’re tracking.”

Douglas says Moneysoft Lite helps her clients to be aware of their spending patterns and account balances, which helps control their financial behaviour without swamping them with information.

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Peter Malekas

Moneysoft has re-launched its client engagement and financial wellbeing platform with a more intuitive and streamlined user interface that cuts the time it takes professionals to analyse their clients’ key financial data.

The launch follows a 12-month research and design process including extensive interviews and testing with a range of financial professionals who use Moneysoft’s personal financial management tool.

Founder and Managing Director, Peter Malekas, said that seeking feedback is central to Moneysoft’s ethos of ongoing product and customer service improvement.

“We encourage our users to tell us the features they’d like to see next, so that we can focus on making improvements that deliver the biggest impact to their businesses,” he said.

“The improved design includes some completely new features which enhance the client service provided by professionals such as financial advisers and mortgage brokers. This functionality will lead to stronger engagement, cementing the value of advice and helping clients make lasting changes to their financial behaviour.”

The upgraded Moneysoft platform delivers a smoother, faster on-boarding process to advisers, brokers and their clients. Improved back-end reporting makes it easier to keep track of clients.

Clients will also benefit from new dashboard reporting which makes it easier for them to see a snapshot of their overall financial position. They can now also recategorise multiple financial transactions at the same time, perform category searches more easily, and quickly view and edit notes.

Current Moneysoft users will be migrated to the new UI platform over the next six months, while new users are already using the new interface.

“Moneysoft has an ongoing commitment to continue improving our world-class platform and the relaunch of our UI is just the first stage,” Malekas said. “Plans are already underway for the next round of upgrades, which includes greater customisation and in-app messaging.”

Moneysoft’s personal financial management platform was launched in 2012 and is now used by financial planners and professionals across 15 dealer groups and institutions. A key attraction is Moneysoft’s open API architecture, which allows it to be integrated with a range of other software including XPLAN, Prospera, Investfit, Xeppo, Bill Butler and FinPal. This has seen Moneysoft recognised as a finalist in the Fintech Business Awards for the second year in a row.

Moneysoft’s proprietary platform reveals a client’s entire wealth position by seamlessly bringing together and analysing their cash flow from disparate sources, providing valuable insights into spending patterns and trends. This information underpins better advice and strengthens client engagement, as well as providing a new income stream for professionals who can help individuals to manage their cashflow.

Advisers can select from, or combine, two solutions to suit clients at different stages of their wealth journey. Moneysoft Lite provides a robust financial health check process, while Moneysoft Pro supports clients who want to take a more hands-on approach to managing their money.

Last year, Moneysoft also launched Round-ups, which allows fund managers and superannuation funds to encourage small, regular contributions by their clients by from the spare change from electronic purchases.

Global fund administrator and share registry service provider Link Group took an equity stake in the company in October 2016.

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Heather David

Moneysoft has partnered with managedaccounts.com.au to offer its personal money management solutions to all financial planning practices using the ASX-listed online platform provider.

Under the agreement, advisers receive preferential pricing on both Moneysoft Lite and Pro. Those tools enable them to provide additional client services, build greater engagement and unlock further efficiency.

Managing director of managedaccounts.com.au, David Heather, said that there is a natural alignment between the two companies with their shared focus on empowering advisers and their clients.

“The growth in managed accounts is part of an industry-wide shift to more transparent and efficient investing. Pairing our next generation platform with Moneysoft’s money management, cash flow and budgeting services creates additional value for advisers by giving them and their clients greater visibility of actual financial behaviour,” he said.

“Those direct insights help advisers have deeper conversations with clients and be more highly responsive to their changing needs. We think that will make Moneysoft very appealing to the businesses we work with, who really understand the advantage technology can provide.”

Advisers who use managed accounts already save an average of more than 14 hours each week from reduced administration and compliance tasks, according to recent research by Investment Trends.

Moneysoft head of technology and commercial operations, Jon Shaw, said that increasing automation across the information gathering stage offers further efficiency gains for advisers.

“Using automated data collection underpins a more robust ‘Know Your Client’ process while also enabling advisers to focus on developing strong personal relationships as a basis for providing advice. Those system efficiencies flow into reporting, analysis and marketing activities to help grow a scalable practice.”

The partnership builds on managedaccounts.com.au’s recent investments to upgrade its user interface and middle office software to provide better experiences for advisers and their clients.

managedaccounts.com.au now has more than $12.3 billion in funds under administration after its recent acquisition of platform and administration provider Linear Financial Holdings.

Moneysoft has developed a range of cloud-based digital money management tools that help financial advisers, mortgage brokers and super funds to build their clients’ and members’ wealth and achieve their personal goals. The Lite solution includes a financial health check and provides a starting point for developing healthy financial habits, while Moneysoft Pro offers a full-service solution.

Moneysoft solutions can be re-branded by advisers as part of their broader marketing and digital strategies. The Moneysoft client service and account management team will support managedaccounts.com.au users across the implementation and on-boarding process.

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