‘FinTech’ is the word on everyone’s lips at the moment. Put simply, it’s a marrying of finance and technology. However, don’t be fooled into thinking it’s just this season’s latest buzzword but rather a global technology movement that’s disrupting sectors such as mobile payments, money transfers, loans, and even asset management.
The concept isn’t new. Over the past 10 years, technology has succeeded in disrupting a number of old fashioned industries including retail, travel, journalism, and even transport – and now the financial services industry. Fintech innovators are figuring out better, cheaper and faster ways of doing things. So fast in fact that Stone & Chalk, a local independent Fintech group, has outgrown its first office in Sydney before they even moved in.
While the common perception of technology and automation is that it’s here to take over the jobs of humans, it certainly should not been seen by financial advisers as the death knell. It’s true that clients expect a lot more from their advisers these days – and yet expect to pay less. However, the needs of advisers are also changing. The profession is heading towards a new reality, where business efficiencies, client engagement and on-boarding strategies will become more important than ever before. The way forward is simple – technology must provide clients with the flexibility to access advice when they need for it, while also being tailored to their increasingly unique circumstances.
Advisers will need to be just as knowledgeable about the broader use of Fintech and other new technologies by their customers, as they do about its use in their own business.
I read an interesting article in the AFR recently that reported our bank accounts may soon be storers of values rather than just currency. This takes into consideration a wide range of value from fiat currency and cryptocurrencies like Bitcoin, to online assets like air miles. It seems that virtual currencies are moving beyond simply being fringe concepts.
Bitcoin has emerged from the realms of the technorati and the underbelly. It’s real, and some of our biggest banks are talking about it. The question now for advisers is whether they’re equipped to deal with clients who are exposed to cryptocurrencies.
A recent survey of 200 advisers undertaken by Zurich revealed that only half (50.2%) have heard about Bitcoin; just 15% reported to know how it’s treated by the ATO, and 70% admitted they were not confident in their ability to advise clients on Bitcoin as an investment vehicle.
But it doesn’t look like a trend that’s going to burn out any time soon. If you google ‘SMSF Bitcoin’ the volume of search results will convince you this is a trend you really need to understand – now! To get you started, we’ve added ‘new money’ as one of the top trends for advisers to watch in 2015 in our latest #TRENDING report.
Old fashioned cash isn’t going anywhere any time soon though. It’s still proving to be a very popular investment choice for SMSF investors. Compared to countries around the world with similar retirement schemes – even their retail and industry fund counterparts, our SMSFs have significantly higher allocations to Australian shares, property and cash with relatively little in fixed interest and global shares.
For a long time this has worked to their advantage – particularly throughout the Australian equity boom. But today’s unprecedented low cash rate is forcing investors to consider new ways to generate returns. With the domestic equity market still patchy, global equities may suddenly start entering many investors’ consideration set.
Of course the fundamentals still remain as important as ever.
