Financial advisers have historically been cautious when integrating technology into their business models. This is not only due to operational challenges but also out of concern over losing the longstanding, personal relationships that are key to the advice industry.
But this is changing. Covid-19 has caused people to rely on technology even more in their day to day lives, as the use of video calls and digital apps has become the new normal. There has also been increased interest in the health of savings and investments as uncertainty grows around the lasting economic impact of Covid-19. These factors have forced firms to consider adapting to a more socially-distanced society. Going digital is no longer just key for remaining competitive, but key for survival.
It is important to remember that digital does not have to mean ‘faceless’. As traditional advice models come under increasing pressure from challenger banks, robo-advisers and digital first solutions, technology is giving rise to a ‘Human+’ approach, which wraps technology around human interaction, while keeping personal relationships at its core.
Since the onset of Covid-19, financial advisers had to become digital overnight and many found that hybrid advice models can help advisers understand client needs on a deeper level. The capture, aggregation and analysis of all conversations provides a detailed and holistic understanding of an individual client, providing insight into their investment priorities and risk profile.
The widespread adoption of video conferencing as the primary tool for client service is a genuine gamechanger for the industry. It enables advisers to remain “just a phone call away” but presents opportunities to expand in other markets and increase the appeal of financial advice to the next generation of wealth, not to mention reduces costs and increases operational efficiency.
However, while opportunities clearly exist, advice firms need to consider carefully how to integrate digital tools into their operating models. There is pressure in the sector to “act now” in a knee jerk response to Covid-19, but firms must carefully plan, assess and remain focused on the end client when considering how digital tools can best be deployed in a hybrid advice model.
Digitisation does not mean sacrificing a personalised client experience that works for all and should not disadvantage certain groups of clients. For example, some clients may be familiar with using digital for many aspects of their day to day life, preferring a quick process with less guidance, whereas others may require an additional amount of direction and support.
Equally, financial decisions are not always straightforward for clients. Firms must allow clients the opportunity to reflect within the digital journey, replicating the consideration time clients would have between face to face meetings.
Integrating short term technology solutions in a quick response to Covid-19 may also cause challenges later down the line. Onboarding multiple digital solutions at once can result in fragmented client journeys. Consequences of this can include the need for manual workarounds, poor client experience and can hamper productivity.
The benefits of efficiency and speed which a digitised advice process can bring must also be balanced against the need to protect the client. It is crucial that firms are aware of where this data is stored, how it is being used and have embedded appropriate controls in the technology infrastructure as well as policies across the organisation to reflect this change in offering.
At a time where future revenue streams look less certain, the cost and complexity of compliance is a material challenge for the financial advice industry. Market volatility and recession will only make this worse, likely leading to an increase in complaints, claims and regulatory intervention.
However, transitioning to a hybrid advice model creates a major opportunity to transform risk and compliance. Real time risk management is another advantage to adopting digital client interactions. During conversations with clients, AI ‘assistant’ technologies, such as those offered by firms such as Aveni.ai, can flag risks to the adviser and prompt key questions to ask, for example, where a potential vulnerability needs to be resolved and recorded.
The widespread adoption of video conferences is not just a method of connecting with clients but is an enabler of new technologies such as machine learning and natural language processing that can deliver transformational change.
Today, advice firms are recognising that digital solutions can not only maintain personal relationships but even enhance them. The benefits of adopting technology have often been dismissed against the increasing complexity of delivering advice due to factors such as compliance, product or client needs. This time it will be different. Actions taken now will create winners and losers in the industry and it is time for advice firms to take the leap to digital.
Dan Mahony, Head of Pensions and Retail Investments at Alpha FMC