Any advisers among the one in five people in the country who bank with HSBC may have noticed something different when they logged on to their online banking service in recent months.
Since the end of last year, the bank has been trailing that it will shortly be giving customers the ability to see the value and balances of a whole range of other financial products. HSBC is not alone in this – another major bank recently shared with us the draft screenshots for its equivalent service.
Add to this the fact that Barclays, while announcing its withdrawal from traditional, face-to-face financial advice, has at the same time been building a powerful wealth management service, where technology is a core part of the proposition, and it soon becomes clear that big numbers of consumers will shortly be able to get detailed access to their investments as easily as they can log on to their bank account.
It is also becoming obvious that comparison website providers will soon make their entrance into the investment community and other areas that IFAs believe are their own exclusive preserve. Money-supermarket’s dialogue with Cofunds is likely to be the first of many such deals between these services that may have been built on selling credit cards and general insurance products but clearly have wider ambitions.
There is an increasing body of evidence to suggest that anyone reading Money Marketing in 2020 will most likely work for a business that bears little resemblance to the majority of the readership today.
I am in no doubt that people will take financial advice in the future but what I believe is very much open to question is what sort of firms will dominate the market. In practice, this may be of little consequence for many advisers. The community has long been made up of those of us with fewer working years ahead than behind but for those wanting to stay in the industry long term, there is a need to seriously review their customer proposition.
This raises challenges as much for life and pension providers which used to dominate the marketplace as it does for advisers.
There are many valid reasons why increasing numbers of advisers prefer to place new business with platforms which offer a level of streamlined processes that most offices which have yet to embrace the platform approach struggle to achieve. I still hear far too many people stating why advisers need to understand the issues that insurers’ legacy systems present them with and why this means they cannot deliver the services that advisers need.
As recent research by F&TRC on the cost of advice demonstrates, leaving assets with insurers which cannot provide efficient servicing simply does not make financial sense for advisers or clients. The costs of maintaining an advice service soon become disproportionate to the benefits. Some life and pension providers are looking at fresh and innovative ways to address this, others are churning out the same old message.
The RDR represents the industrial revolution for advice. Cottage industry practices of handcrafting individual solutions for each client will in future be uneconomic. Advisers will need access to technology for which the first licence will cost millions although second and subsequent licences may only cost nominal amounts. Advisers looking to thrive after the RDR who cannot afford these themselves need to be identifying now who they can partner with to access the solutions.
These partners may come in many shapes and sizes, they may be networks or support groups or they may, especially in the restricted advice market, be product providers.
The My Money Works service from Scottish Widows is a workplace benefits platform being built to offer an increasing range of financial education and other benefits and is an early example of the sort of solution I expect to see emerging in both the corporate and individual markets.
The argument for many of the above changes is not new. What is new, however, is such clear and present evidence that a new level of competition will be directly targeting advisers’ clients using technology.
Banks and comparison services moving to give clients online access to their investments dramatically alters what consumers will expect as a hygiene factor. Adviser firms, however professional, which cannot deliver such levels of service run the risk of being increasingly seen as the poor relation – under- capitalised and unable to com-pete in the 21st century.
In the light of this evidence, everything just got more urgent. Up to this point, it could have been argued that having the new systems in time for the RDR would have been sufficient. Adviser firms should be putting in place an array of technology solutions far wider than all but the most advanced firms have at their disposal today. Every delay weakens their ability to compete.
Technology-based solutions will give customers access to ever deeper levels of infomation and guidance in the way they want, when they want it, whenever they want it. There will be the need to support a wide range of communication devices and platforms.
I have never believed advisers should try to build their own software but the range of services and delivery platforms that will be needed to be able to compete with the next generation of technology from these emerging new competitors should put this beyond question.
The development and marketing budgets that banks and comparison services can invest will dwarf the resources of all but the biggest adviser firms. Consequently, adviser firms need to be identifying organisations that can deliver to them both the financial and technology resources to not just be the best option for consumers but to be able to be seen to be the best option.
Ian McKenna is director of the Finance & Technology Research Centre