Technology - a threat or opportunity for financial advisers?
The discussion about the impact of technology on the advice landscape is becoming increasingly frequent. Consumers, living increasingly digital lives, will continue to look to digital channels as a means of servicing their advice needs – but is this trend a threat or an opportunity? Greg Johnson investigates.
Your GP down the road may actually have more in common with you as a finance professional than you think.
Ultimately, GPs are advisers – they assess the needs (symptoms) of a client and advise a course of action.
Whilst in some cases there is a very clear-cut solution for a patient, often doctors will prescribe a course of action that they think is the ‘best fit’ for their client.
For example, a client presenting with signs of heart disease could follow two different courses of treatment – one is a restrictive diet and regular exercise, the other is a pharmaceutical course prescribing drugs to manage and moderate the symptoms. Both are fully dependent on the particular individual and their current circumstances.
Recently, BUPA published research on medical self-diagnosis: in much the same way as consumers research financial products and services online, some patients do so when they become sick.
Whilst there are many in the medical profession who perceive this as a threat and have taken a combative approach to this trend – scaremongering consumers about the risks of self-diagnosis – there are others who have embraced this change. There is a significant rise in the number of self-diagnosis/ symptom checking tools online.
The purpose of these tools varies; however many of them are used as lead-generation tools and encourage the consumer to form a relationship with the provider of the website.
The simple process involved allows consumers to – in limited terms – assess their symptoms and diagnose their health.
The business providing the tool then looks to do two things – firstly, to sell the consumer solutions to improve their health, and secondly, where there is an issue that requires more immediate attention, to encourage that consumer to seek proper medical advice.
In the financial advice landscape, it is easy to see parallel models emerging.
And the reality is, consumers are looking online. However, in the same way that doctors have not been replaced, it is unlikely that advisers will be replaced by these tools.
Quality is the solution
Many doctors have reported that online research is actually improving the quality of the conversations with their patients.
Better informed patients are making it easier for doctors to explain the intricacies of a medical condition and the required treatment.
The logical question in the financial advice space is whether better educated consumers will aid financial advisers to give better, more actionable advice.
There is a simple litmus test as to whether you should feel threatened by the rise of digital consumers or whether this presents an opportunity.
Despite consumers doing their research when it comes to insurance, many are not equipped to determine how much is right for their individual needs.
If your advice process is simply a case of a human punching data into an advice tool and a computer processing those inputs to produce advice, then the quality of the conversation and ultimately the planner/client relationship is called into question.
However, if the advice service you are offering educates the client, addresses the complexities of their needs and produces robust advice, then perhaps the emergence of digital consumers is much more an opportunity than a threat.
Direct is not equal to digital
The lines between direct life insurance and digital tools have become blurred. For many, simply because an offering or a solution in digital is seen as direct to market, it is therefore a threat.
Digital technology has great opportunities to make the advice process more productive and help it lead to better outcomes – it does not need to replace it or make it obsolete.
Interestingly, direct-to-market propositions have been around for a longer time in overseas markets such as the UK.
Even in these relatively more mature markets, the actual penetration of direct models is limited to around 10 per cent. There is a simple reason – many consumers require advice and assistance in protecting their lives and livelihoods.
The cost of getting it wrong can be significant and therefore many consumers still do and will continue to opt to use an adviser.
Direct life insurers promote the need for insurance heavily through TV and magazine advertisements – raising the awareness of the importance of insurance.
Smart advice businesses are looking to the digital world to provide streamlined solutions and tap into this growing awareness and interest, educating consumers and encouraging them to engage in a conversation and sort out their insurance needs.
Ernst & Young have researched this space heavily and came to the conclusion that it is the integration of existing and emerging distribution that will lead to the future of the industry: “Market leaders will emerge from ... effectively integrating digital, direct and brokered distribution with seamless technology”.
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Greg Johnson is general manager for marketing and retail product at TAL.
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