Traditional financial advice business models are under attack from all sides as demography and technology combine to challenge the status quo. Heathcote Investment Partners founder, Clayton Coplestone, examines the gathering forces and how advisers can fight back…
“Difficult to see; always in motion is the future,” the resident alien philosopher, Yoda, mumbled gnomically in Star Wars Episode V: The Empire Strikes Back.
But it probably doesn’t pay to take advice from a short-sighted blob with grammar issues.
For anybody with a basic grasp of the forces swarming around the global financial services industry, at least, the future has resolved into sharp focus… and it’s not in a galaxy far, far away.
NZ might lie on the outer edges of the finance universe but the same demographic, technological and economic battles raging at the core are sweeping our way too.
In a world featuring sustained fee compression, a demographic baton-change, ongoing consolidation and rapid technological innovation supercharged by artificial intelligence (AI), there will be few places left to hide for financial services firms unable to adapt to the new reality – even in NZ.
Specialist consulting firm, Oliver Wyman, in a recent report estimates that the global population of asset and wealth management firms is set to shrink by 20 per cent before this decade is out, decimated by shrinking margins and ballooning costs (tech, compliance etc) that squeeze non-scale businesses into irrelevance.
The study suggests the multi-force pressures will apply across the financial services spectrum from large asset managers down to the one-man-band advisory operations so prevalent in the NZ industry as detailed in the 2026 Financial Markets Authority (FMA) sector review.
According to the FMA report covering financial advice provider (FAP) annual returns over 2024/25, single-adviser businesses remain by far the most common structure.
Some 776 of the 1,553 FAPs registered as at June 30 last year represented just one adviser, albeit that the total population of advisers is now close to 9,200.
“Overall, [the FAP data] shows a market consisting of many small advisory practices alongside a small number of very large providers,” the FMA report says.
But the fragmented industry as described by the FMA figures is unlikely to survive intact as waves of change crash through the sector.
Large global firms boasting mega technology budgets and operational scale will undoubtedly continue to apply real pressure on smaller domestic operators. Note, for example, the recent advisory firm acquisition spree by Craigs Investment Partners, bankrolled by US private firm TA Associates.
Consolidation among local advice businesses will accelerate, too, as compliance obligations, cybersecurity requirements and rising client expectations make operating independently both costly and complex.
Independent financial advisers may have to affiliate themselves with networks or platforms to access the technology and compliance infrastructure that was previously the exclusive domain of major institutions.
Yet restructures alone won’t save adviser businesses as increasingly sophisticated consumers – raised on a diet of low passive investment fees and real-time information flows – question the value of advice fees.
AI tools are already helping individuals compare KiwiSaver providers, assess insurance needs, model retirement scenarios and generate basic financial plans, quickly and cheaply.
Counterintutively though, small advice businesses that embrace technology intelligently and offer deep specialist expertise may find themselves more valuable, not less.
Human attributes of trust, empathy and bespoke judgement remain outside the scope of rules-based algorithms, no matter how clever, giving advisers a clear advantage in fields such as behavioural coaching, emotional discipline during periods of market stress, retirement confidence, complex family decision-making, tax structuring and business succession planning.
The potential need for human-based financial advice is also expected to rise across generations from retirees seeking income-planning guidance through to middle-aged members looking to better-manage burgeoning KiwiSaver balances and even among tech-savvy youth.
Indeed, student debt, housing affordability pressures, broken career paths and genuine uncertainty around retirement adequacy all combine to create a paradox for Gen Z individuals: a generation sceptical of traditional financial advice that may ultimately need it more than any cohort before them.
Technology won’t replace the demand for genuine human-delivered advice any time soon. However, traditional advisory business models are ill-equipped to survive the unstoppable demographic, technological and economic trends heading their way at warp speed.
Financial advice businesses that continue to rely on legacy remuneration structures, manual administration or product-centric value propositions may find themselves overwhelmed by forces they could see coming but chose to ignore.
Or as the grammatically correct, if difficult to pronounce, Shmi Skywalker put it in Star Wars Episode I: The Phantom Menace: “You can’t stop change any more than you can stop the suns from setting.”