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John Porteous: Don’t let technology dominate the advice process

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Given the lack of any universally accepted definition as to what financial planning means and how it should be applied in practice, it is hardly surprising much of our profession questions how best to deliver a planning-led service with the rigour and discipline that scale requires.

There is certainly a strong consensus that planning involves delivering a client-led service based on goals and needs, as opposed to product selection or transactional advice. This requires a clear framework to support the initial client discovery session, which sets the tone for both depth and breadth of any planning a client many require. Ultimately, it is a firm’s culture that puts the client at the heart of the planning process, while supplementary tools act as an enabler to build consistency.        

While technology is generally positioned as central to the delivery of a repeatable and robust client experience, it often fails to provide the full picture. In many cases, online planning tools offer an effective context for clients but, arguably, their greatest contribution is to promote better discussions between adviser and client. This is a trend I expect to continue as firms focus on guiding clients rather than allowing technology to dominate the process – a scenario that may have fee implications over time.             

It is generally thought desirable that all systems and planning tools should be perfectly integrated and housed in a single desktop. Unfortunately, this is not always possible, as the “best fit” system for delivering a firm’s proposition may not always facilitate a smooth back office, given the intended process and consequent client outcomes should inform the choice of partner technology, not the other way round.

Over the past few years, much stock has been placed in ensuring the building blocks that underpin an effective planning practice are implemented. In general terms, this has included a risk profiling system, cashflow modelling software and a platform strategy that links to a given number of investment strategies. Furthermore, firms have realised the power of having accurate and comprehensive client data. Indeed, state of the art systems offer little operational leverage without quality inputs that, in turn, deliver reliable client reporting and firm level management information – two critical components of scale.        

The use of cashflow modelling has been widely adopted in recent years. This is another example where the impact is determined by how a system is applied and the various scenarios then modelled, rather than its use in isolation. In fact, this has led to a transition from a broad discussion on risk, through to a quantification of achievability of objectives illustrated by multiple scenarios. Skilled practitioners often refer to how they make the cash flow modelling process “come to life”: this is an excellent example of how client engagement techniques can maximise what otherwise could be perceived as static output.            

The availability of interactive client portals as a core component of most back office systems has the potential to transform the nature of client engagement – especially when supplemented with data aggregation tools. This is a very exciting area where the interplay between face-to-face discussions (insight) and online reporting (information) will be something progressive firms seek to develop, if they have not already taken steps to do so. Equally, rich functions are not enough – the end user needs to be engaged enough to adopt and repeatedly use them. This is an area there remains some room for improvement, although there are certainly more examples of innovative thinking and clear communication coming to the fore.

An important principle in fusing a compelling proposition with supporting technology is to recognise the digital space is always evolving. Firms need to align the way their technology interacts with communication preferences, coupled with a continual refresh of content. 

Looking to the future, data management will be critical for those seeking to build their planning capabilities. I expect the influence of back office systems to become greater as effective integration becomes commonplace, with a view to pushing data onto planning applications and reporting engines. This may have some interesting implications for the technology supply chain and may challenge traditional pricing models.

On the basis that last year’s innovation is this year’s expectation, new ways to engage, educate and serve clients will evolve at an increasingly rapid rate.              

John Porteous is head of client proposition at Towry               

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. An interesting article by John Porteous.

    The problem with integration is generally one of cost – if it was that easy to do it would have been done.

    One major challenge for interactive portals is that they will require generally a relatively high degree of financial sophistication and regularity of use to benefit from them. Trying to meet the needs of the less experienced investor combined with infrequent use, and the needs of a more sophisticated user is a big challenge for designers of such systems.

    Regarding cashflow modelling, one would hope that the majority of financial planning firms will employ people who are chartered and know what they’re doing. Unfortunately, the same can’t be said about risk profiling tools; they are one dimensional and therefore extremely limited offering little if anything other than some tick-boxing towards the investor suitability process. Suitability is by nature multi-dimensional covering a broad range of investor issues such as investment timescales, liquidity needs, etc, etc and yes capacity for loss and volatility tolerance.

  2. As I see no mention of FCA, FOS, RDR, MMR (isn’t that a vaccine?), long-stop or commission, I risk being in a solo discussion by commenting here, unless Ian McKenna’s free. But unabashed, here goes.

    A major threat to various of the advice-based professions has been identified from the fact that whatever can be automated will be automated. Rather than this adding to the general uphill struggle that has become the adviser’s lot, John’s article finds grounds for optimism, I think, which boils down to the potential for technology to help:

    Take the grunt-work out of the general basics and must do’s
    Transform fact-finding (how tedious) to personalised meaningful automated data delivery
    Help take your business beyond being transactional / product-led
    Make the whole planning and advice process more interesting and productive for you and clients.

    Ultimately, to free your focus up for
    client relationship nurturing, problem solving and demonstrating expertise

    Trouble is, I believe we’re still really only at the start of the journey. There’s a long way to go before the techie (and, yes, regulatory) ecosystem is joined up and reliable enough to deliver this nirvana. Seeing as it’s a massive work in progress needing a more collaborative effort to develop it than has ever occurred in financial services, now’s a good time to find a way to pitch in and help direct what this future will actually be, before all the egg-heads working on this stuff build the wrong thing.

  3. ….Err, Pitching in like Robert’s already done….sorry, Robert, hadn’t seen your contribution before firing in mine. And yes, cost and devilish detail / elegant compromise always tricky.

  4. An interesting article by John Porteous.

    The problem with integration is generally one of cost – if it was that easy to do it would have been done.

    One major challenge for interactive portals is that they will require generally a relatively high degree of financial sophistication and regularity of use to benefit from them. Trying to meet the needs of the less experienced investor combined with infrequent use, and the needs of a more sophisticated user is a big challenge for designers of such systems.

    Regarding cashflow modelling, one would hope that the majority of financial planning firms will employ people who are chartered and know what they’re doing. Unfortunately, the same can’t be said about risk profiling tools; they are one dimensional and therefore extremely limited offering little if anything other than some tick-boxing towards the investor suitability process. Suitability is by nature multi-dimensional covering a broad range of investor issues such as investment timescales, liquidity needs, etc, etc and yes capacity for loss and volatility tolerance.

  5. And, Mr Porteous, as my parting shot this evening, you may be gratified to hear that today Accenture have released some research on these issues in the U.S., basically backing you up. (Though they don’t mention you by name!)

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