by Vasyl Soloshchuk, CEO and Co-Owner at INSART
Stephen Huppert - Head of Engagement at Optimum Pensions and Director of Stephen Huppert Consulting
Stephen mainly focuses on the pension and wealth-management industry in Australia. Prior to going solo, Stephen worked in financial services for about 30 years, where he spent 10 years as an actuary at a life insurance company and the rest in consulting. He started off in a boutique consulting firm and more recently was a partner at Deloitte in Australia, providing consulting services to the big pension funds across the country.
Recently he spent 12 months in a FinTech helping with regulatory matters and infrastructure for emerging pension and wealth-management companies. As part of that, a number of innovative pension funds were launched that focus on amongst other things, millennials.
Nowadays, Stephen utilizes his years of domain expertise to help firms look into the future and understand the different influences and current trends both in the industry and beyond it.
Industry shift
The trend in wealth management in Australia is dominated by the pension industry, since the country has a compulsory contribution system. Every Australian worker is automatically enrolled in a pension fund, usually by their employer. This means many Australians struggle to even the pension fund that they are a member of. Many are members of more than one! Pension funds and wealth-management companies are trying to work out how to better engage with and connect to their client base. For the last four or five years, an incredible amount of money has been spent on their websites and member portals to enable members to get much more access to information about their pension fund, what their choices are, and how they can improve their outcomes in retirement. This can include digital robo-advice-type tools being adopted by pension funds or general education materials to help members become informed about their pension fund and what actions they can take.
“We’re seeing a lot of emerging pension funds that see the communication gap between the end users and service provider, so they try to tap into that space and start focusing on niches such as investing in technology or fossil-fuel-free investing; they create gender-specific offerings with a focus on women or a particular group; for example, millennials.”
Historically, the barriers to entry in the pension and wealth-management industry have been very high. However, technology, and especially its digital component, is greatly lowering these barriers. Thus, more and more startup businesses are emerging, and are connecting with their target segments much more easily.
Difference between robo-advice and digital advice
Stephen believes that robo-advice is not a great term to use.
“It brings to mind things like Robocop. I prefer more algo-advice, because it’s actually algorithms giving the advice, not robots.”
Talking about broader digital financial advice, or digital capabilities, in Australia, pension funds have had calculators with various amounts of personalization for a long time, where clients can get on a website, look at what their balance is now, and see how it changes in the future. There are also a few levers that they can move to try different things.
“We’ve had tools like risk profile quizzes and calculators on pension fund websites for some time.”
For over a decade, such quizzes were typically paper-based; now we are seeing increased use of digital technology to increase the ability to personalize and engage.
In Australia, several robo-advisers—from acquisition through to investment—have developed very similar models to those of Betterment and Wealthfront, adopting a full-service approach. Other firms are more focused on risk profiling and algorithms to give recommendations, but do not necessarily run right through to investing. Still others are more focused on older demographics: talking people through the transition into retirement, where it’s much more complicated.
We’re also seeing a similar trend to the rest of the world, where it’s more of an argumentation of conventional advice and where stand-alone robos are struggling to get customers; thus, mergers between robo and human advice are developing rapidly. Most wealth-management businesses and pension funds are looking at either developing their own solution or partnering with startups. Some have done so successfully, while others continue to struggle.