Advisers leading an army of robots
In the ‘second machine age’, advisers must find faster, cheaper ways of providing holistic financial advice while still holding the client’s hand, Andy Marshall writes.
Are we on the cusp of the ‘Second Machine Age'1, where software will change the way consumers pay, invest and interact with financial service providers — in particular, financial advisers?
Megatrends in science and technology like the mobile revolution and peer-to-peer (trends which are here and now) and, of course robotics, will all change the way we work and live, and significantly impact how we engage and influence each other — including our clients.
And they offer significant opportunities to build efficiency in how we run our businesses, which of course, is of keen interest to many advisers in the current environment.
The opportunities and challenges inherent to the Second Machine Age was a recurring debate at the Million Dollar Round Table (MDRT) annual meeting held in New Orleans from 14-17 June this year.
More than 10,000 of the world's best advisers flocked to the event to see some of the most influential keynote speakers ever assembled. And Australia did not disappoint.
Many of our most respected and accomplished advisers were not only in attendance, but were recognised by their peers as some of the best in the business.
I was delighted to see Australian adviser, Ross Vanderwolf honoured with the inaugural ‘Collins Phillips Award', for his outstanding contribution to the advice community.
Other advice leaders used the annual meeting to highlight the importance of excellence in service, customer engagement, positive psychology, marketing, and provided insights like this from one speaker who dramatically underlined that some people are now working as the last ‘human' in their field.
When Tom Friedman took the stage, he brought with him the pedigree of being the New York Times' globalisation and technology columnist and author of the bestseller, ‘The World is Flat'.
Like others before him (notably MIT researchers McAfee and Brynjolfsson), Friedman holds the view that the Second Machine Age is coming — and it is going to be big.
The opportunity it offers us now is how to do the things we need to do but in faster, cheaper and more efficient ways2.
So, what does this mean for both holistic and pure risk advisers?
The answer is in processes
Take a look at the insurance advice process.
When you break the process down into steps that you might, for example, create into threads into your work flow software then you are presented with 30 steps, irrespective of the complexity of the insurance case you are dealing with.
When you assess the time taken during the advice process for each of these steps, the inherent inefficiency of the process should be alarmingly clear.
Inefficient processes like these can sap between 10 to 40 plus hours from an advice practice, depending on the complexity of the case at hand.
If we were to look at a 10-hour example, four of these hours may indeed be client facing, taking into account the first and second meetings, the statement of advice (SOA) presentation, and policy delivery meeting.
The rest of the time likely involves product research, application, underwriting liaison, and document administration — and that is just for one case.
Clearly, it begs the question — is there a more efficient way?
At Zurich, we believe there is.
We also strongly believe that as an insurer, we have a role to play in helping advisers run their practices as efficiently as possible.
Can a robot hold a client's hand?
Features like client engagement screens, which assess a client's financial health are the first step in a coming wave in the evolution of advice.
But just how far can it go? Does technological disruption in the financial services industry signal the death knell for advisers?
Fundamentally, I believe it does not. And it was certainly not the message being circulated at the MDRT annual meeting.
In fact, our belief is that advisers will be more successful in this coming age — provided that they are willing to adapt to the change.
There is no algorithm that delivers a benefit to a widow, or visits a client in hospital, or one that can share in their values and dreams for the future.
In a study by the Australian Psychological Society, participants were asked about their preference for online communication in comparison to face-to-face interactions.
Our advisers are some of the best in the world, and they are hungry for the next best thing. They are smart, but they need to get smarter. They support each other, but they can do more.
Not surprisingly, the majority of respondents reported that they preferred to communicate with people in person rather than using online social networking sites — it is just human nature.
And it shows quite clearly that people are not moving away from face-to-face communication, but rather using online social networking to enhance their everyday human interactions3.
Robo-advisors use algorithms and model portfolios to allocate investments according to a client's particular objectives and risk tolerance.
They are not equipped to provide more detailed and nuanced financial planning services — this is the specialty of traditional advice firms.
When it comes to the advice relationship, it is important to remember that it is all about value and collaboration.
This is the unique opportunity that presents today's adviser, but there is still room for improvement.
There are gaps
According to research done by Phoenix Marketing International and Cerulli Associates, dissatisfaction with current and previous adviser relationships is the main reason investors leave their advisers.
Further, only one out of every two clients in the 30-49 age group are currently satisfied with their primary advice provider.
This suggests a lack of value perception and collaboration as the critical missing elements to the relationship4.
To successfully compete in the Second Machine Age, advisers must address these elements. The MDRT understands this, which is why their annual meeting was significantly focused on how technology can be an enabler of client engagement — not a detractor.
We should all be following the advice of Tom Friedman, who offered these five top tips to delegates:
1) Be a paranoid optimist: Be aware of how quickly your business can change but embrace the opportunities that the change brings;
2) Be an artisan: Develop tailored valued services that are unique to your business;
3) Be a start-up and always be in beta: Or in other words, continually develop your process and proposition;
4) Develop your emotional intelligence quotient (EQ): Passion and curiosity, will beat IQ; and
5) Be an entrepreneur: Find out what it is that you can control — and take control of it.
Fusing techno and client
This collision of technology and modern life is what I call ‘technoclientology'.
It is the psychology of engaging clients in a modern world and encompassing the skills, techniques and concepts of sales, modernity, social, and the insights from the field of neuroscience, that when combined, allow us to observe and collate data, to figure out just how people will react and make decisions in a given situation when faced with competing choices.
This is simply a process.
It is a process that demands the development of your EQ and that is why events like the MDRT annual meeting are so important.
This is where you learn about global best practice in client engagement. It is where you determine how you can best assess your client experience, how you can entwine technology with client engagement to enhance business efficiency, and the value you ultimately deliver to your ever-changing clients.
It is the positive engagement with those questions that MDRT delegates experience and what product providers are building frameworks around to help advisers thrive.
Our advisers are some of the best in the world, and they are hungry for the next best thing.
They are smart, but they need to get smarter. They support each other, but they can do more. They collaborate and share, but they can take it to the next level.
They accept and adapt to change, but now is the time to embrace and change shape. I believe that if we can achieve all this, Australian advisers will be more than ready to lead an army of robots into the new era of advice.
Andy Marshall is the head of sales strategies and research at Zurich Australia.
Footnotes
1. The coming of the second machine age, Bill Teuber, Huffington Post, 22nd January 2014.
2. op cit.
3. The Australian Psychological Society, 2010, The Social and Psychological Impact of Online Social Networking.
4. Cerulli Associates, 2011, Quantitative Update : client and provider relationships.
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