3 fintech ingredients to make 2017 great

Ingredients for Australian fintech
 
At the start of 2017 I was appointed to the ASIC Digital Advisory Committee which consists of members from the fintech ecosystem and government. I hold strong opinions on the topic on good financial advice so naturally I attended my first meeting eager to contribute!

The ‘Fintech in Australia’ report by Frost & Sullivan predicts revenue from the Australian fintech sector will grow at a compound annual growth rate of 76% and reach A$4.2 billion by 2020. The potential of fintech to create competition, innovation and jobs for a 21st century Australian economy is huge and worth campaigning for.

So after hearing the views of many fintechs, government and consumer advocacy groups, here’s my top 3 ingredients to drive Australian fintech forward in 2017.
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SMSFs in the fintech age

SMSFs in the fintech age
 
We recently became the first robo-advice business to announce a partnership with Class Super. For those who haven’t heard of Class, the business was founded in 2009 and in just 8 years has grown to be the largest independent administration software provider to Self Managed Super Funds (SMSFs).

What does that mean? In a nutshell, Class has built software to help SMSFs get their data and compliance in order – saving accountants and advisers many hours each year.
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Choosing the best investment app or robo adviser

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In 2013 we started Stockspot to help more Australians access expert investment advice. Since launching, our investment strategies have outperformed the broad Australian share market with relatively lower risk – proving that technology can help ordinary people invest smarter.

We’ve now had over 400,000 Australians visit our website which means that more and more people are discovering how they can invest without high-costs, complexity or conflicts of interest.

In parallel, automated investing businesses continue to gain traction around the world. Not only are these services demystifying investing for the younger generations, but they are also helping those in their 50’s, 60’s and 70’s invest with less stress. Recent research suggests that the amount of money managed by robo-advisers will grow 100x from less than US$20 billion at the start of 2015 to US$2.2 trillion by 2020 as more people of all ages embrace technology to simplify managing their investments.
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How to save an extra $2,016 in 2016

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As we near the end of another year, many of us, for better or worse, will attempt to make New Year’s resolutions. It seems the food coma between Christmas and New Year’s provides the motivation for us to sit back and reflect on how we could have done things better, saved more, achieved more, made more healthy choices, kicked a bad habit – the list is endless.

Before you sit down and ponder what you’ll do differently in 2016, here are 4 simple ways you could increase your general wealth and save more money…
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Bank rip-offs that won’t exist in 2020

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When you take a step back, you may be surprised at how many bank fees, charges and costs we take for granted. As a result of their cosy oligopoly, Australian banks have become the most profitable in the world, collecting $29 billion in profit this year. But have you ever wondered why certain fees exist at all – or what could be done to get rid of them?

Fortunately a new breed of technology-focused financial upstarts (‘fintech’ for short) have started to emerge in Australia and around the world to eliminate wasteful bank fees and leverage technology to change the way people and small businesses manage their finances. By delivering financial services in a more cost effective, convenient and consumer-focused way, many of these online players are starting to win over disgruntled bank customers.

Already in the US and Europe many ‘fintechs’ have become mainstream; London-based money transfer business TransferWise was recently valued at US$1 Billion and has saved consumers tens of millions in international transfer fees. LendingClub who reduces the cost of personal loans, listed on the New York Stock Exchange this year at a value of US$5 billion.

In Australia, the fintech revolution is still in its infancy but over the next few years many fintech businesses will become household names as they revolutionise financial services. Some argue that the banks won’t let this happen – that they’re too powerful and have too much riding on it to let smaller players eat their lunch. But disruption has a habit of transforming industries much faster than incumbents have time to respond.

The new breed of challenger fintechs have a clean slate to design the banks and financial institutions of the future. Already their impact is visible and many predict this will only increase over the next 5 years. This will have a positive impact for consumers with a broad range of bank related fees and costs set to disappear.
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Fintech and innovation in the spotlight

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Innovation and disruption has been in the spotlight recently with our new Prime Minister Malcolm Turnbull throwing his support behind boosting Australian start-ups and the fintech industry.

Given his personal background as a technology entrepreneur, Mr Turnbull certainly understands the importance of innovation for an economy. We’re hopeful that this translates into more policy that encourages capital and skills to flow into technology businesses. Ultimately these are the businesses that will give Australia a competitive advantage on a global scale and translate into future jobs and tax revenue.

What’s encouraging is that both sides of politics are recognising the importance of innovation – the Federal Opposition Leader and his shadow ministers spent time with us a couple of weeks ago to understand how governments can support growth-stage businesses like Stockspot.
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Expert help with your investment portfolio

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While investing can be a rewarding hobby for some people, most Australians find the prospect of managing their own investment portfolio risky, time consuming and emotionally exhausting.

It used to be almost impossible for most Australians to seek professional help to invest due to the high fees and account minimums required to get personal investment advice. However, technology has fundamentally changed the investment industry, making it more accessible, affordable and honest. Automated investment services like Stockspot have opened up access to professional investment expertise and made investing in a global portfolio accessible to everyone.

To help investors understand the different investment options available, we’ve created an infographic that explains the 3 main types of service Australians can choose from when getting professional help with investing:

    1. Traditional advisers
    2. Technology-assisted advisers
    3. Automated investment services

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Better investing on autopilot

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Almost 6 million Australians own direct shares or Exchange Traded Funds (ETFs). As a result, one of the questions we often get is “How does Stockspot compare to managing my own investments?”.

Certainly the trend over the last 10 years has been towards more people investing themselves. The latest ASX Share Ownership Study highlighted that direct ownership of shares and ETFs has rocketed over the past decade while interest in managed funds and professional advice has fallen. This is understandable given the high costs and below-average results that many professional funds have delivered over that time. Also as information and tools have become more easily accessible online, a larger number of people are taking an interest in investing themselves.

So why use a service like Stockspot rather than manage your own portfolio? While it might not be right for everyone, there are a few ways most people can benefit from an automated investment service like ours rather than managing their own investments.
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What really is robo-advice?

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The topic of robo-advice has been gaining a lot of attention lately. That’s exciting for us because when we launched Stockspot in 2013, nobody knew what we were talking about.

Fast-forward a couple of years and robo-advice is gaining widespread acceptance as the way of the future for personal wealth management – not only in Australia, but right around the globe.

In March, a US research company released a report profiling the world’s 19 leading robo-advisers including Stockspot. The report estimated that the total assets managed by robo-advisers will grow from US$19 billion today to US$450 billion by 2020.

“The robo-advisor phenomenon will force the traditional wealth management industry to reconsider the generally accepted belief that wealth clients will always prefer the face-to-face contact of their own dedicated personal advisor.”

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Investing in the digital age: Technology and Robo-advice

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Technology has played a huge role in disrupting many industries, transforming the products and services available to consumers and the way they access them.

The music industry has gone through many stages of disruption over the years through Napster, iTunes and Spotify, while the travel industry has seen changes in the way people research and book their holiday through the rise TripAdvisor, Expedia, Zuji, Webjet and more recently Airbnb.

Digital disruption has also impacted the financial sector with the growth of many Financial Technology (FinTech) companies around the world.
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What the Murray FSI Report means for super & technology

Superannuation and technology were two key areas of change recommended by the Murray FSI Report which both have the potential to benefit consumers to the tune of tens of billions of dollars in savings.

1) Superannuation fees still too high –

Superannuation fees are too high in Australia and reform is required to better benefit consumers. This was one of the key findings of the Murray Financial System Inquiry (FSI) Report, Chaired by former Commonwealth Bank CEO, David Murray and released on December 7th. The Report stated that “fund fees could be lowered without compromising returns to members”.

The decline in superannuation fees over the past decade has only been modest given the economies of scale that the sector has achieved. The size of the average fund increased from $260 million in assets in 2004 to $3.3 billion in 2013, whereas average fees fell by just 0.20% in total over the same period. As a result, fees paid to the average superannuation fund have ballooned 988% over the past 10 years.

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Banks brace for tornado of disruption

Australia’s banks are the most profitable on Earth, five times more profitable than Britain’s and 12 times more than German banks, a new report from BIS revealed this week. On average, every adult Australian will hand over $1,600 in profit to the big four banks this year.

More give, less take is NAB’s ironic slogan. Its ad campaign leads us to believe that NAB is different to other banks – more of the good stuff like Dorothy from The Wizard of Oz and less of the bad stuff like the Wicked Witch of the West. Unfortunately evidence would suggest that, like the Great and Powerful Oz, these claims are mostly smoke and mirrors.
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