Two weeks ago, I looked at many of the exciting new financial services technologies demonstrated at the recent Finovate Europe conference. As someone who has probably been as much of an evangelist for the adoption of technology in our market as anyone else over the last 20 years, even I was shocked at quite how far forward many of the propositions on offer are from traditional advice businesses.
I found myself coming away from the exhibition with serious concerns for the future of the traditional advice market given the challenges that services of the type demonstrated would pose. On reflection, however, this has made me realise how bright the future can be, provided firms make the right investments now.
One of the most active discussions in Money Marketing in recent weeks has been the debate over whether an IFA business can be scalable. I have a simple answer on the future of any advice business – it has to be built on scalable solutions. My only question is who will provide these?
What many of the solutions at Finovate demonstrated is that technology offers the capability to deliver practical guidance to large numbers of consumers, enabling them to take far better control over their financial affairs electronically. By embedding the tools to deliver this guidance in the devices and information consumers use on a day-to-day basis, valuable insights can be given to people in their daily lives.
One example is Meninga. com which embeds personal financial management tools within client online bank statements so, rather than simply looking at an online balance, the customer is presented with their current balance, their committed fixed expenditure, such as, standing orders and direct debits and their average spending on other things before the next pay date, providing an accurate perspective on the customer’s disposable income.
The system allows users to set financial goals as well as providing campaign management for cross-sales and up-sales, all delivered over a computer, mobile or tablet device of the consumer’s choice.
This is the sort of sophis-tication supplied by banks that advisers will be competing with in just a few years. I will accept entirely how poor banks have been leveraging their customer relationships to deliver financial advice but when it is made this easy even a bank couldn’t mess it up.
Finovate reinforced to me that the financial planning solutions of the next 10 to 15 years really will be radically different to the practices of the last two to three decades.
In terms of the ways in which people consume financial advice and guidance I increasingly believe we are very close to crossing the Rubicon. The emergence of mobile technologies, combined with the RDR are driving the delivery of very different ways of dealing with financial needs.
Where is the help going to come from for advisers to enable them to compete?
Over the last couple of months, I have seen a quiet revolution taking shape, with a range of different technologies emerging, many not from traditional IFA software suppliers, to help advisers build their new propositions.
A perfect example of this is the proposition management solutions recently delivered by Ideas Lab and Distribution Technology, both of which in very different ways provide powerful tools for advisers to define, shape, deliver and audit their propositions.
I will be covering the Ideas Lab offering and particularly how it is being used to help Positive Solutions’ members prepare for the RDR in more detail in a few weeks’ time.
Distribution Technology addresses what I believe will be an obligation from next year about which advisers are increasingly worried. Not only will this service help the adviser to shape and agree the customer service proposition with the client, including generating the paperwork to go with it but it will also establish a workflow so that the adviser is reminded of all the tasks they have to carry out and can generate a complete audit trail to prove they have met all their obligations under the agreed arrangement.
Almost every day, another platform is announcing a new execution-only or direct-to- consumer propositions.
Axa and Nucleus are the latest examples. Neither of these organisations has yet chosen to show me their new offerings, so I can make no comment on the extent to which they might meet this important need for advisers but it is an area that could have much to offer.
I am increasingly gaining the impression the market is accepting that it is the financial planning that advisers can deliver, not a 1980s’ definition of independence that is the best way to supply value to consumers. Not before time.
Embracing the solution offered by a particular platform will bring with it a reliance on that organisation and, in future, the ability to move away may be limited but, ironically, the technology needed to deliver volumes of low-cost advice has a price tag that few advisers will be able to afford on their own, so for many this may be a price worth paying.
As adviser firms are planning their propositions for after the RDR, it is obvious that one of the main challenges is how to provide a service to customers for whom traditional face-to-face advice is no longer economic.
Given there are not vast numbers of high-net-worth individuals who have never used an IFA queuing up for such services, the future success of many firms future may depend on how well they can adapt their propositions to the customers who may be left behind.
The answer to this must involve the use to technology to rationalise operating processes and deliver value at low cost. I believe many of the next-generation adviser services such as Nutmeg have important lessons for all adviser firms.
Ian McKenna is director of the Finance & Technology Research Centre