Advice 2.0: Upgrading The Advice Process

Rapid changes in technology are being adopted by consumers which is driving change in many industries, but does this include financial advice? While advisers may argue the nature of personal advice cannot be replicated in the online world, others are challenging that assumption and are looking to disrupt the model. In this virtual roundtable, riskinfo’s Senior Journalist, Jason Spits pitched a range of questions at advisers, licensees and insurers and found that technological driven change is already here and advisers can and should adopt it as soon as possible.

The Virtual Roundtable Panel

  • Andy Marshall (AM) – Head of Sales Strategies Life and Investments, Zurich Financial Services Australia
  • Deborah Kent (DK) – Director and owner, Integra Financial Services & AFA President
  • Fraser Jack (FJ) – COO, myonlineadviser
  • Paul Forbes (PF) – CEO, Robina Financial Solutions, Australian Advice Network
  • Samantha Clarke (SC) – General Manager Policy, Professionalism and Marketing, AFA
  • Jason Spits (RI) – Senior Journalist, RiskInfo

No-one honestly believes that consumers will one day sit down face to face with a humanoid robot and engage in a conversation about their financial needs, with this type of thinking best left to blockbuster sci-fi movies.

Yet, consumers interact with automated financial services everyday through ATMs, online banking, budgeting software and online life and general insurance.

Advisers have also been interacting with financial technology, also known widely as fintech, for many years through platforms and wraps, financial planning software, research and comparison tools and websites, and electronic documents and video conferencing.

However, in recent years the advent of robo-advice has refocused the attention of advisers to the changes that can and are happening in their world.

RI: Given the immediate concerns around robo-advice have given way to a consideration of how it can be used in the financial advice model, from your perspective where and how can automation be put to beneficial use in an advice business?

FJ: First of all, I think the term robo-advice is terrible since fintech is about automation and enhancing the relationship with the client. It should be set up to help customers and solve problems out there while recognising there will always be a need for the human connection.

It has been hard for advisers to adapt to these changes because their process has not been systematic. Plenty of them use software as tools but do so in the same way for every client instead of being client specific

SC: Advisers already have experience with fintech through planning software, through platforms and portals but are now looking for business efficiencies that produce cost savings and leads to the seamless preparation of advice documents.

It is a journey and leading practices are using technology but still remain frustrated that there is no end to end solution and are looking for greater synergies between planning software and accounting tools and so on.

PF: There will be a coup when you can get the planning software and accounting, mortgage and legal software all taking the information from one CRM, but speaking to some big integrated businesses – no-one has solved that yet.

SOAs are time consuming and really a PDS so anything that helps the creation of the 80% that is generic is a useful tool. Many advisers treat their SOAs like a ‘Picasso’ but really they can be very vanilla.  The important piece is the strategy, implementation and ongoing management and while this has and continues to be streamlined, there is still a mountain of manual intervention.

RI: How are you seeing fintech being specifically used at present by advisers and is there a ‘stand-out’ example of that happening?

PF: We can do voice notes rather than written and we have voice to text programs as early examples of fintech. Skype interviews are now being increasingly used and video technology is increasing our reach as well as improving our time efficiency by delivering one message to many.

SC: Leading advisers are using things like pens that record written notes, electronic whiteboards that capture information and software which records online video meetings with clients and feed those into planning software as files notes.

DK: We are seeing it being used mainly around education, using websites as a means of attracting clients with information and tools to assist in understanding advice but I don’t see any stand-outs at this stage and I think Australia is just starting to catch up on technology of this sort.

AM: It has been hard for advisers to adapt to these changes because their process has not been systematic. Plenty of them use software as tools but do so in the same way for every client instead of being client specific. Some appear to be sceptical of fintech and are using it as a diagnostic tool to create reports but not to lead to advice.

At some of our recent roadshows we were seeing risk advisers who do not have a distinct value proposition or set of services, but fintech can be used in developing that by providing trusted tools for self-service or basic services that connect to the adviser if they need more assistance.

SC: Advisers have lived for years with product tools and software but now the move is to services and education tools but are they using them differently than product tools? They are using them for information and education but the value they add is to move a client to thinking about a strategy and its implementation.

The field of robo-advice is large enough, that parts of it will choose to work with advisers and there will be separate engines that go straight to consumers

RI: Many industries have been disrupted by new technology – news media, film photography, travel agents and taxi cabs to name a few. Is robo-advice the ‘Uber’ or ‘AirBnB’ of the financial services industry?

DK: Robo-advice is being used widely in the US where sites like Betterment and Weathfront have been growing rapidly, and after originally being set up for small sums of investment, they are now attracting much higher sums above $100,000. It will potentially make an impact here in Australia and if you are an adviser that does simple advice, you could lose out to robo-advice.

Where it fails is it does not do strategy and it does not have the emotional intelligence to understand the differences between, say a husband and wife, and their views around investment.  It also will not keep clients calm in market instability like we are having now.

FJ: Its worth keeping in mind that Uber and AirBnb met a need, which was to use a car or a room to make money but they are not the only way to use a car or a room. The field of robo-advice is large enough, that parts of it will choose to work with advisers and there will be separate engines that go straight to consumers. Uber and AirBnb are conduits between needs and solutions and the same will happen with robo-advice and financial advisers.

AM: These services which bring disruption also need to be seen as progressions and not one off events. Think about Blackberry, Borders and Blockbuster which all failed because they had not moved on and consumer behaviour for them was the key, and they are good examples for financial services.

Are we driving technology in financial services that asks what is the client experience and can we enable them to take simple actions without having to call their adviser or their insurer? The next generation of young people will be digital natives and they don’t have to put up with pen and paper meetings and will make choices away from that and we are not too far from people choosing the online/fintech approach.

RI: Where is fintech making an impact and where will it fail to make an impact?

SC: I see robo-advice as acting as a broader disruptive trend but unlike Uber we have yet to see one killer app or one killer disruption at present, and it is not a set and forget approach either. Fintech still requires constant oversight because there are complex interactions taking place and the scope for surprises is still there.

PF: I liked Michael McQueen’s presentation and book from the last AFA conference on maintaining relevance – he challenges your thinking with the point that any job that has the word ‘agent’ included is in the process of being disrupted. Robo-advice may push the cost of advice down and if you are a ‘paraplanner’ only or data inputter I think your days are numbered.

AM: Any advice process that requires a third party, such as aged care, Centrelink entitlements or estate planning involving a solicitor will still require face to face advice and the financial adviser can be the central facilitator with other professionals.

Robo-advice is a friend in these situations where it deals with processes and basic, entry level information and advice but research has shown that when people make a significant decision they do it face to face particularly if it requires a value judgement to make that decision.

RI: Online reviews sites are commonplace – from Amazon to TripAdvisor to the Whitepages. Are public adviser review websites ‘the TripAdvisor of the financial services sector’?

FJ: Rating services will play their part but they will have a smaller impact than TripAdvisor has on accommodation. Advice is a large decision purchase and people will go online to check out who they are dealing with, and if financial advisers don’t think this will happen then they are crazy.

Consumers will be looking for the tangible such as referrals and are more likely to talk to more than one adviser before they make a decision and this will be based on their own conversations with the adviser, and so it comes back to a personal relationship.

PF: We are highly rated by Most Trusted Adviser and Troy (Theobald) has actually just won one of their annual awards but we don’t see much traction with the public. Trusted referrals from a lawyer, accountant, colleague or family member is still a better result than online reviews, but once they have selected a short list they will use the internet to establish your credentials and verify the referral.

SC: The AFA, through Your Best Interests, has a function where advisers can add a profile and consumers can search for an adviser and it is clear that consumers are looking at these types of things. Advisers tell us they get referrals but of those 100% have checked them out in some way online first.

People want to know about the adviser, who can do some basic things to boost their profile online such as adding an image of themselves, linking to sites, blogs with useful information and providing that via their own websites.

There is a very strong probability that review sites will become as important as TripAdvisor which is a good thing as it will highlight the importance of advice and create public recognitions of advisers from their customers.

As an insurer we have looked at how far technology can go but advisers have resisted that push as they still regard themselves as the guardians of advice and the advice process

RI: Will the emergence of new technology and communication options allow advisers to redefine their market reach and the services they offer?

PF: We are seeing this already with clients all over the world.  The services we offer will be the interesting ones and I like the idea of concierge services but it will be an ocean of red ink with accountants and lawyers trying to fill the same space.

We do have to be careful of overkill. We ask our clients what they want and they want newsletters sent electronically and one off communications that are relevant but don’t want weekly blogs or email and social media bombardment especially where they see a sales agenda.  Everything should drive them back to your website and that should be your social media engine according to advice we received.

DK: Advisers could definitely redefine their market, taking up fintech options and new levels of communication could lead to giving more advice to Gen Y and also targeting women. With new technology advisers will need to think about the role that they play, dealing in more complex matters around strategy and estate planning but we are already seeing an increase in the use of new ways of communicating with clients with social media, zoom, go to meetings and video all on the increase.

FJ: Technology can allow this but advisers have to work out who these new target clients will be. They have to know themselves as an adviser and then know what new clients they want and what services those clients will require and then demonstrate to that market what they have on offer. People want to ‘know, like and trust’ and so they look at ratings and an adviser’s website looking for authenticity.

So many websites are the same and are not differentiated and often the only difference is the adviser’s personality and their ability to engage with clients. If you are designing a website start with your advice and business strategy first and design it around that or you will end up with something that does not meet your goal of getting a new client to come and meet you.

AM: This shift applies to risk advisers as much as any financial adviser and they can have an advanced value proposition, even for risk transactions, that is more than rudimentary questions or simple software tools.

Depending on personal circumstances underwriting and claims tools can be used and technology allows for the delivery of personal advice that may not have been affordable in the past unless there was some way to save time along the way, and that can’t be done unless advisers make changes to their services.

As an insurer we have looked at how far technology can go but advisers have resisted that push as they still regard themselves as the guardians of advice and the advice process, so changes are made in baby steps instead.

RI: Can you briefly name one or two areas of an advice business that could be replaced by technology?

SC: Information inputs can be slow, such as in an insurance application, so automatic data feeds with the permission of clients would be good to see in the future.

FJ: Most stuff in an adviser’s business is there because of compliance so removing it requires care. Many systems, processes and pieces of technology are getting out of date but can be dynamically replaced with online services with email having replaced the fax and video calls now replacing the telephone.

AM: Anything that simplifies the review process. Setting up a portal for advice reviews is a possibility and as long as the adviser facilitates the process they can retain their value and use technology to enhance the process of client engagement.

DK: Possibly the delivery of advice SOA presented by video conferencing, investment using robo-advice simple strategies. The simpler and more efficient we make it the more engaged consumers will be, also allowing these efficiencies to drive down the cost of advice.
RI: Does robo-advice/fintech have an advantage in educating consumers in that it can be mass market and easily deliverable, and is this lack of specifivity a disadvantage in its use and adoption?

DK: I believe it is perfectly placed to bridge the gap in financial literacy that we have in this country and be an easily deliverable way to reach the broader population but consumers will always want to see a human for advice at some stage. What these technology solutions bring is education and research and once consumers realise they can be self-directed to a point, complexities will still happen where they need to seek advice and confirmation that they are on the right pathway.

Clients want us to take over their financial lives for them as they are busy living their lives

SC: Fintech broadens the reach to an audience that is not ready for advice and provides financial literacy that may move them to action but it starts with giving people an education and an understanding around what is possible for them. In that way it actually provides a social good for those needing more financial literacy, such as women, or those in remote communities, because it is free and accessible.

PF: You would think that robo-advice or fintech would have an advantage but consumers are already getting gun-shy of the video marketing revolution. At the same time my understanding is that no computer can yet understand nuance, irony, fear and so on. They have some brilliant algorithms that can provide general guidance but the intuitive piece of understanding and empathy that comes from being human is going to be very hard to replace.

Clients want us to take over their financial lives for them as they are busy living their lives. Burt Bachrach is a big believer we are consultants, not educators, not psychologists, not ‘friends’ – we are hired to do a job and while they need us to establish credentials – they then want to move on to something they enjoy while we do what we are paid to do.

RI: Are advisers seeing robo-advice/fintech as a tool in which they can be educated about consumer needs and demands for advice?

SC: As with all technology this is an evolutionary process and it depends on consumer preferences. Necessity will drive people to use more online tools and more will be provided over time but at present it is still a niche area.

Some advisers are seeing the value of the human advice component and are using fintech to move clients online or to move into intergenerational wealth advice, or aged care or even budgeting services for Gen X and Y clients and are adding to their service offering by engaging with more areas of their client’s lives.

AM: At present financial literacy and education is pretty dull and monotonous but if it was combined with social networks it would take off. Financial advisers should be thinking about providing tools that are tied to aspirations and goals and which make the adviser the person they can go to when they reach the limits of those tools. Consumers can engage with the tools, the type of advice they might receive and the advice practice well before their advice needs kick in.

PF: I think advisers see it as a tool and the big data behind it will help us understand trends and demands but I don’t know if robo-advice will provide the creative juices we need to work out what clients want before they know themselves.

The old Henry Ford line about if he had done what his clients wanted he would have built faster horses speaks to the rule that clients know what they want when they see it but can’t tell us and I think data will help but the intuitive leaps will still come from humans.