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Will technology save independent financial advice?

By allowing advisors to do more for less.
Advisors can take advantage of technology to make independent advice more viable, the author writes. Picture: Shutterstock

In recent years there has been growing concern that individual independent advisors and even small advice firms are being forced out of the market. For many, the weight and cost of complying with regulation have become too heavy to bear if they aren’t shared in a corporate environment with a large support staff that brings economies of scale.

This has created some concern that truly independent financial advice is going to be harder and harder to find. If not because large wealth managers are absorbing smaller players, but because many individual advisors feel it is simply too risky to operate independently.

However the growing use of technology in the industry may provide a way for independent advisors to manage the costs and risks of operating on their own.

“Technology is the only way that you can solve some of these problems because there are only a certain number of hours in a day and one person can only do so much,” says Greg Bernard, director of products at MCI Consultants. “Technologies being developed enable the advisor to adhere to things like RDR (the Retail Distribution Review) as they make it more feasible for them to reach customers and engage with them in an environment that can be recorded and accessed at any point.”

International fintech provider Objectway, which recently announced a collaboration in South Africa with MCI, has already seen how this has played out in other markets.

“What RDR did in Europe is put an onus on the advisors to create a lot more regulatory information and have more contact with clients in terms of establishing suitability and reporting,” says David Wilson, Objectway’s executive director for South Africa. “That is something that can be automated, and has to be automated because otherwise it’s too time consuming for smaller advisors to do.”

Rewiring the industry

Essentially technology can do two things for the advisor. It can significantly reduce the costs of administration and record keeping, while also making these processes simpler and more efficient.

“The idea is to enable advisors to reach their customers much more efficiently than in the past,” says Bernard. “Practically speaking, in South Africa an advisor might have clients dispersed around the country and technology enables them to reach all of those customers in a timely manner.”

This is not just happening in South Africa, but around in the world. In many respects, Wilson believes that South Africa is “ahead of the game”.

“The whole market place is talking about digital – the rewiring of the investor and the investment advisor,” Wilson says.

Practically, this means solutions that enable advisors to have whatever information they need always immediately available to them, and to reduce the steps in the advice process so that there isn’t a constant back and forth with the client just to get relatively simple things done.

“Advisors want to be more mobile,” says Wilson. “They want to have meetings with investors in a cafe or at home and to bring together all the things they need on a tablet or laptop so that they can make minutes, record aspects of the meeting, do suitability reporting, draw up proposals, even ask investors to sign on the tablet.”

Standing out from the crowd

This level of service can then be translated from face-to-face interaction to how the client is engaged on an ongoing basis.

“That is something that technology does facilitate, and in the South African context with LTE and fibre to the home, a growing number of people have access now,” says Bernard. “Advisors can take advantage of that.”

Hybrid advice models that allow for some elements of self-service by the customer, the use of chat bots, and even robo-advice are creating exciting opportunities for advisors in this respect. Using these technologies advisors are able to serve a much larger number of clients without having to be personally involved at every step.

Read: Will your financial advisor be replaced by a machine?

This might sound out of the reach of small firms or individuals, but with growing use of the cloud there are firms that offer outsourcing or platforms that can be used at a reasonable price. In particular, a lot of fintech companies are coming up with great solutions focused on improving the user experience.

However, it’s important that this is also backed up in terms of efficient administration.

“What’s happening is that people forget that at the backend you need to process what has happened at the frontend,” says Wilson. “You don’t want to end up with a lot of manual processing of transactions because you haven’t thought through how to integrate with the new systems. It’s vital to bring interaction between new user experience and the engines that make the processing work.”

Ultimately, the advisors that use technology to their advantage will gain two significant advantages.

“The first aspect is that you can reduce the cost to engage your customers, and the second is to differentiate,” says Bernard. “Everyone is looking for that edge, to give a better quality, reliable, consistent service and experience. That’s what technology can do.”

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I think technology (over the years/decades) has made it EASIER in fact: imagine in the days before cellphones, there must’ve been more travel frustrations; nowadays advisors have Financial Need Analysis software that can tell you where you are over or under insured for any event. In the really ancient times, they must’ve been on horseback or tram….now with motor vehicle technology, the advisor arrives quicker at your door 😉

End of comments.

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