Predictions for brokers in 2024

The landscape of wealth advisory and broking in Australia is poised for significant transformation in 2024, as various trends shape the industry’s future. From AI advancements to digitisation of broking, here are five major trends set to impact the industry.

1. The rise of generative AI

Brokers and advisors are keeping an interested eye on what the rise of generative AI such as ChatGPT means for client behaviours and financial advice. Is ChatGPT’s ability to generate personalised financial advice a challenge to their role – and if it isn’t yet, is that day coming? How will it change client expectations, interactions and investment engagement models?

While AI can provide some insights, it doesn’t replace the value of relationships and personalised advice. Brokers and advisers will need to find a balance between leveraging AI for efficiency and maintaining meaningful client connections. In this environment, personal relationships and the human value-add matter more than ever.

2. Accelerating intergenerational transfer of wealth

This has been on brokers’ minds in recent years, but it continues to grow in relevance as the wealthiest generation – Baby Boomers – pass their wealth to Gen X and Millennials.

Our research (read our full report “What did High Net Worth Investors Do With Their Money in FY23?”) shows that, while high net worth investors over 70 have higher average portfolio values, those under 70 are on track to become even wealthier. Amongst our data set, over 70s (average age 78) HNWIs hold a median portfolio of $2.14mn in assets on platform – accumulated over a lifetime, although one without the benefit of the superannuation guarantee scheme. But HNWIs under 70 (average age 52) hold a median portfolio value of $1.34mn. Much of this is likely SMSF assets, since more than half of this group would have benefited from the superannuation guarantee.

This shows that, whilst baby boomers have been the wealthiest generation until now, Australian Gen-X are set to be even wealthier, with significant inheritance of baby boomer wealth adding to their own wealth accumulated through property and superannuation over the longest period of economic growth.

And we know that Gen X and millennials invest differently – with different priorities, guiding principles, and touchpoints. Brokers and advisers are considering how best to adapt their approach and offering for these upcoming cohorts. These demographics typically expect a more digital experience and are more likely to ‘self-serve’. For example, Superhero has announced plans to launch an adviser platform in H1 2024 to ‘meet the needs of its maturing Millennial retail investor base’.

Here too, strong client relationships will matter, especially as these clients are more hands-on tools. In a bid to reach into new markets of self-service younger investors, some brokers may choose to leverage APIs to build a retail offering, like Stake, Superhero and Webull. These will attract digitally-minded retail investors who can then be offered added-value through advisory services. We also see an increasing trend of brokers give clients ‘view-only’ access to their accounts on FinClear, enabled through our TradeCentre Adviser platform, to meet changing client expectations. The future of broking will adopt such hybrid models, which combine digital self-service tools with personalised advice.

3. Digitisation and seeking out efficiencies

Open APIs are becoming integral across the industry, with their benefit as a way of integrating systems that avoids moving data files and helps drives efficiencies.

The digitisation of wealth continues, whether moving from wet signatures to e-signatures, or creating bridges between different infrastructure components.

With the shortening of the settlement cycle to T+1 settlement in the US from May 2024, and other markets considering the same, smarter technological solutions are needed to manage the misalignment in settlement times and manage collateral requirements.

The power of open APIs is part of the larger trend of streamlining operations. As the cost of business continues to rise, the industry continues to look at more automated and more affordable options. This year FinClear brought version 8 of our TradeCentre Adviser online, fully interoperable with ASX, Cboe, and Iress. We increasingly see brokers migrate to TC Advisor, not just for its powerful capabilities, but also for the significant cost savings – trimming budgets by almost half across hundreds of screens.

4. Keeping up with regulation

Players large and small are also considering how digitisation can help to streamline their regulatory burden. Sophisticated RegTech solutions can be leveraged to lower transaction costs, empowering brokers and advisors to do more.

Many are reviewing where they can outsource AML/KYC checks and PEP screening, and leverage providers of clearing and settlement for leaner internal operations. Given its position, FinClear is often approached to support as it is well-placed to understand and apply the right technology to help brokers operate more efficiently.

5. Demand for international markets

Finally, we will see the demand for direct access to international markets continue to grow in the new year, with a flood to cash and yield products. Driven by a shrinking market, investors want to tap into strong performing companies in larger markets such as the US. The access to sectors such as tech stocks remains limited in Australia, and brokers find clients keen to swim in bigger ponds, with a particular focus on Silicon Valley and big banks, to diversify their portfolios.

Dynamic change needs a dynamic approach

In all, we expect 2024 to see major evolution in wealth management, with brokers and advisors at the forefront of technological, regulatory, and client change. Finding the best way to navigate these shifts – with the support of partners such as FinClear – will keep brokers comfortably ahead of the pack.