This article is part of our special focus on the use of technology in financial planning
Technology is driving change in financial planning. Zahid Bilgrami, CEO, Defaqto summarises why he believes that with disruption comes opportunity
Technological advancement, automation and digitalisation are buzz words that have been around for some time. Especially within the financial industry. But, are all financial advisers about to be replaced by digital solutions powered by Artificial Intelligence (AI) and algorithms? The short answer is, no.
The Amazons of this world have arguably redefined how we view technology and how willing we are to accept it into our personal and professional lives. These rising levels of acceptance are transitioning into an expectation that is driving change across all industries. Consumers have come to expect a transactional experience that provides a seamless journey whether they’re accessing services and goods online, through an app or in person.
With a lot of advisers at least looking into the application of more innovative technology, the question is, where do they start? This article will look at the best ways for an adviser to introduce technology into the financial planning process and the key considerations to take when selecting a technology partner.
An evolving client demand
Technology is affecting the way advisers work and how their clients expect to work with them. Technological advancement within the financial planning industry is being driven by clients and investors who are increasingly becoming more tech-savvy and demanding visibility and transparency throughout their entire advice journey.
Technology has the potential to enhance the customer journey and create a competitive advantage for financial advisers. But before investing in customer-facing solutions and apps, advisers need to ensure they’re investing in robust financial planning systems first. Without an efficient, compliant and scalable financial planning tool, client facing technology, fundamentally, won’t be able to provide any value add.
Forward-thinking financial advisers have already embraced more flexible processes and technology to meet the needs of their clients and enhance their working processes. Those advisers who are investing in technology are seizing the opportunity to better serve their clients, drive efficiencies and increase their earnings.
Traditionally, financial planning has been carried out in a very static format with rigid and time-consuming processes. Financial advice is, after all, a complex service to provide – with constant changes to regulation it is crucial for an adviser to always have their finger on the pulse to ensure compliance and accuracy.
However, there are many different parts to the advice process where digitisation and automation can reduce complexity whilst ensuring compliance, such as research, report production and product sourcing.
Technology has the ability to support the delivery of services to many more people, in an engaging and more affordable way. Traditional advisory firms should work to utilise technology to enhance their existing offering and open up services to a wider customer base.
In order to meet evolving client demand, technology should be introduced to complement and enhance traditional financial planning advice, rather than replace it.
Accessing information from anywhere at any time is an expectation not only in the consumer space but also in business. Data sharing is essential in the digital transformation of the financial advice industry.
An adviser should look to implement a solution that arms them with the ability to access and analyse real-time data. With this capability, advisers can significantly reduce administration time and ultimately reduce costs.
Take, for example, research. Whether a client is building their wealth, planning for retirement, looking to withdraw an income or protect their family. The financial planning tool will provide a research workflow with access to accurate, whole of market data allowing the execution of research across funds, products and platforms. In addition, the adviser should then be able to translate this into an engaging report to present to the client without having to leave the solution.
The integration of data, updated in real-time and the use of innovative software solutions will enable financial advisers to automate previously time-consuming processes, freeing up more time to focus on their face-to-face offering.
Choosing a technology partner
Two key questions advisers should always ask when implementing any digital solution are can this process be automated? And, importantly, should this process be automated? Firms and advisers don’t want or need to overhaul the way they currently work and introduce technology for technology’s sake.
Instead, they need to strike the right balance for themselves and their clients. Current processes will need to be reviewed and assessed to identify where the introduction of new technology will create the most value and drive the most efficiencies.
Other key considerations to take, include:
Does the solution ensure compliance? The right software tool should create an automated audit trail which evidences that due diligence has been performed and that suitable advice has been given. In addition, it should allow for adherence to current and future regulatory considerations e.g. MiFID II.
- Back-office integration
With the implementation of any new software tool, a key consideration is whether or not it has the capability to integrate with existing systems. Is it easy to migrate existing data? Can you carry out an entire task without switching systems? It is all well and good implementing the latest software tool but time efficiencies can’t be realised if advisers have to re-key data. During the selection process, advisers need to ensure they explore how well the new system will fit with their existing systems. Failure to do so could cost time and money.
The ability to future-proof is a key component for successful and sustainable business growth. It is imperative that the financial planning tools put in place are scalable and grow with the business. Advisers need to select technology partners which provide solutions that scale over time with the option to add extended functionality as and when it’s required.
- Training and support
Training and support are key when selecting any new technology. More often than not, as the least glamorous part of a shiny new piece of software (or hardware), it can be overlooked. Advisers should partner with an organisation that not only provides in depth training sessions at the implementation stage but also ongoing, accessible support.
In the long run, it pays to take a step back and scope out the project to establish its purpose. Advisers should look at the potential return on investment (ROI) – how much time will the new technology save, what revenue will it generate, or what business opportunities will it open up? Without a clear idea of what the purpose and value is, implementations are more likely to fail – or at least, create a major expense.
Risk and security
Week to week, there are stories of data leaks released all around the globe. With the introduction of newer, more advanced technology and the increased use of data sharing, there’s no hiding from the growing challenge of cybersecurity. This challenge requires advisers to manage a whole new set of risks around financial data, customer data, and even employee data.
Risk and cybersecurity shouldn’t be overlooked. As with anything, many risks can’t be eliminated entirely. Therefore, businesses need to be vigilant and realistic about their appetite for accepting specific risks.
The best way for advisers to prevent attacks is to put processes in place to mitigate risk and limit any potential damage. The same is true for your technology partners. Any organisation that provides software-as-a-service should also have robust processes in place. For example, a policy on how to manage and store data, who can download it and how it is transferred etc.
When selecting a new technology partner, advisers are well within their rights to ask questions relating to the company’s data policies, processes, accreditations and security. A good organisation will be open and transparent about how it handles data and what it’s doing to protect it.
End-to-end financial planning software that supports the advice process
Technology can go a long way to support an adviser’s current advice process. A good end-to-end financial planning tool will offer a variety of workflows tailored to meet the needs of specific groups of clients.
Consumer web behaviour has no doubt re-defined how we access financial advice and pushed Fintech development further than ever before. However, regardless of whether your client is a baby boomer or a digitally native millennial, investing is a highly emotive and complex task. A task that will always benefit from a trusted and qualified human interaction. The integration of data and the use of innovative software won’t work to replace financial advisers but rather work alongside them to support the work they already do.
By implementing the right technology, where it makes the most impact and drives the most efficiencies, time-consuming processes will be streamlined giving financial advisers back the time they need to do what they do best (advise).
Ultimately, by taking steps to implement the right financial planning tool from the outset advisers are laying the foundations, putting them in a better position to introduce more innovative client-facing digital solutions, such as AI and machine learning.
About Zahid Bilgrami
Zahid was appointed Chief Executive of Defaqto in 2012. Previously, he was a Senior Manager in Andersen’s Business Consulting division, where he was responsible in leading strategy, merger integration and turnaround initiatives with global blue chip clients.
Subsequently, he joined Balfour Beatty as the Business Transformation Director responsible for improving operational performance in problem operating companies. Following successful transformations, Zahid moved into Balfour Beatty’s corporate planning and strategy group at head office. Here, he was responsible for helping the board shape group strategy, and for leading and managing acquisitions and divestments.
Zahid qualified as a Chartered Accountant and is a Fellow of the Institute of Chartered Accountants in England and Wales. He holds a BSc Hons in Economics with Statistics from Bristol University and an MBA with distinction from London Business School. Zahid also holds a Masters in Wealth Management and is a member of the CISI. He is a skier and a casual golfer.