When change accelerates, so does the need to adapt.
Financial Services is one of those professions that has not only successfully weathered the COVID pandemic but seen demand increase. As we emerge from COVID’s immediate economic impacts and Boomers move into retirement, service needs will continue to change.
Those organisations that respond to these changes by re-defining their market segments and services to align with these changes and opportunities in the market will maintain relevance and build business value.
We look at three macro-environmental shifts in Australia’s economy and the financial industry, and how they may represent massive opportunity for your practice moving forward, supporting the nation’s rebound from the economic effects of the pandemic even further.
1. COVID’s Lessons for The Young
Historically, periods of economic downturn often speed up the arrival of new trends – and some of those that have emerged thus far in response to COVID are, indeed, quite surprising.
The first major impact is that of COVID on household income, with a surprising response from Millennials and Gen Z.
UBank’s ‘Know Your Numbers’ study recently found Millennials – the generation most impacted by COVID’s economic stressors – have responded to the crisis with healthy financial practices, such as budgeting and saving strategies.
Of course, another surprising impact the pandemic has had is that upon housing prices. Despite this, UBank’s study found that millennials remain positive about their future, with 44% surveyed saying that saving for a property was one of their top two financial goals in the next five years. While motivated, 86% of this group considered themselves to be uneducated when it came to saving for a deposit and purchasing a property.
Another major change in the workforce is a spike in the number of sole traders established in the last 18 months. Xero’s Boss Insights 2021 recently revealed that many new micro and small businesses have been founded by individuals who lost their job from large corporations that had to shed staff in response to lockdowns.
If you like the sound of more sole traders and younger clients in your client base, one very effective way to raise your profile with Gen Z and Millennials is via content that is easy to share on social media. You may want to learn about listicles, (like ‘5 tips to boost your super’) and write checklists (ie. a first home-buyer’s checklist). Meanwhile, consider local networking events (online, or in person) or LinkedIn connect with sole traders or micro businesses, offering a free webinar or whitepaper that will help them navigate their new, more complex financial requirements.
2. Contraction of the Financial Services Market
The second major force in Australia’s financial services industry is the consistent drop in licensees in recent years. Higher fees and tighter regulatory requirements has seen an estimated 6,000 practicing financial advisors have abandoned the sector in the wake of the Hayne Royal Commission. Today, the number of advisers in Australia is at its lowest since 2015.
“Good-quality, affordable personal advice may help consumers make better financial decisions, especially during times of heightened vulnerability,” said Danielle Press from ASIC.
CPA’s The Value of Advice report found that society, businesses and individuals benefit from sound financial advice. CPA forecast a $24,700 increase each year for every person that has access to professional financial advice; an equivalent to an aggregate annual contribution of A$630.26 billion.
Recognising the value of professional financial advice, ASIC is currently examining what steps can be taken to improve consumer access to quality services.
Meanwhile, with less competition and significant financial insecurity increasing the relevance of professional financial advice, there’s massive opportunity for those firms still standing to grow market share.
Research regularly demonstrates the importance of trust in gaining new clients. Consumer trust is the major hurdle that stops SMEs and individuals from reaching out for professional financial advice. At an industry level, the exit of the big banks from the industry and a shift from vertical structures and sales and commissions to increased visibility – is certainly going to help on this front. But now’s the time for financial professionals to reboot at the business level too, in line with the sector.
Adopting a true consumer-centric advice strategy – one that is based on putting your clients service requirements and service expectations at the core of your business – and working on a more direct relationship with your target markets will add value for your clients, and your firm.
With younger generations turning to the internet, friends and family for advice, it’s worth considering how you may be able to use your current Baby Boomer clients to reach into the next generation, as well as take a look at your online presence to improve the profile and accessibility of your services. One major way to win trust is your Google Rating – have you ‘Googled’ your business and considered working on your star-rating?
3. The Three Billion Dollar Transfer of Wealth
The third shift is a major transition of intergenerational wealth from the most common financial services consumer – the Baby Boomers – worth an estimated $3.5trillion.
Many Generation Xers, however, aren’t interested in doing things the same way as their parents. We only need to look at the rise of self-managed super funds in recent years as evidence of this.
Indeed, while Boomers remain the majority source of business for financial services businesses at almost 40%, Roy Morgan found Gen X comprises of 27.5% of the professional services market. Millennials 13.1 percent and Gen Z 3.1%.
Yet, in 2019 Perpetual found as much as 76% of Australians don’t have a will and more than half with children (at 53%) haven’t discussed their legacy with their children.
While they’re typically self-reliant many Aussies still want advice. The Evolution of Advice 2020-2025 Discussion paper found younger generations are three times more likely to have asked friends and family than a professional for financial information.
In the wake of the Hayne Royal Commission, the industry has faced some harsh scrutiny. It’s evident that the desire for advice is there. Work needs to be done, however, at an industry and a practice-level to demonstrate the value of sound financial advice and to establish trust and relevance with younger generations that represent new markets.
Over the next few months, we’ll share a series of practical and lean, yet effective marketing activities that will arm you with tactics to help you and your firm establish a more direct, personalised relationship with your clients and prospects, helping you to win more business.
- Marketing planning – the fundamentals
- Social Media tactics
- Personal branding tips
- How to improve your Google Rating
- Direct email marketing