Andrew Storey, Group Innovation Director at EV
We don’t have to remind advice and planning professionals about the fundamentals of good practice – knowing your client, doing the fact-finding, learning what they want from you, probing and taking account of what-if scenarios, running cashflow projections, producing a suitability report, and recommending the mix of investments most likely to generate good outcomes over the long term.
What we do need to discuss and pin down across the sector is how much technology can facilitate advisory businesses to do the right thing at the right time for every client (and for even more clients too), as well as confirm where the human element is still very much required as part of the equation.
Admittedly, there’s plenty of friction and stress surrounding the application of tech, much of which centres on the frustrating disconnect between different bits of kit that firms wish to use. Better integration between the systems advisers use is regularly promised yet slow to appear. But let’s park that for now, and focus instead on the advent of digital technology that is already changing the fundamentals of financial planning from the ground up.
Let’s talk about possibilities, not anxieties
Instead of being sidetracked by another debate on whether artificial intelligence is a future threat or an opportunity for advisory businesses, I prefer to look at growing digitisation as a spectrum of useful possibilities for a firm. A chart comes in handy to explain what I believe the near future holds for the professional advice sector in general… following the lead of those already embracing change.
Overlaid on this spread of options from fully digital processes through to human interactions is an arc extending from simple guidance (self-serve education and nudges) across to full traditional advice (regulated suitability-based adviser recommendations). The colours identify how much digital or human interaction is involved in each of these areas. You can see that the application of digital, online or app-based solutions gradually morphs into traditional advice, depending on which activity is involved.
Moving on from generally understood no-recommendation guidance (albeit the boundary with regulated advice is fuzzy and currently the subject of an FCA review), what I mean by digital advice is where there’s no human intervention. All the advice here has a digital fact find, the recommendation is algorithm-driven and the explanation is all done online. This is the arena initially given the moniker ‘robo advice’, on the basis that regulated advice is being given here in an automated manner.
Going hybrid keeps people at the centre
Where hybrid advice enters the picture is when the advice provided by firms is digitally enhanced. An online digital fact find removes a significant administrative burden from the firm’s staff, with clients entering the required data at their convenience. Depending on the complexity of client needs found, algorithms begin to generate recommendations of where the client’s money should be placed. It’s at this point that the human element comes into play, with the financial planner reviewing the recommendations, revising them or adding to them as appropriate, and undertaking the explanation phase – the heart of the customer service provided by the firm.
In this manner, human intervention enters where this provides the most value to the client. With digital assistance taking over the repetitive manual tasks, the planner can focus on building the relationship with the client. Indeed, financial planners are freed to become relationship managers, interacting with clients on a regular basis to keep tabs on changing needs, tweaking investments where necessary, and remaining available in turbulent times to reassure the client they’re on track to achieve their financial goals.
Human plus machine equals efficiency
I believe firms currently providing traditional financial planning, with all elements of the client journey from fact find to discussion of recommendations performed by people (of course supported by their back office system), are missing out on the benefits of the business efficiencies now available from the latest technology designed to make planners’ and clients’ lives easier.
Hybrid advice is more likely to capture the interest of larger advice firms focused on improving their service and reducing the cost per client to deliver advice. It may be harder for small firms to commit the spend needed to introduce digital tech that liberates them to concentrate on what only humans can do – be the friendly face who reassures clients that their best interests are in good hands come what may in the markets. But firms of all sizes will know that whether it’s next week, next month or next year, there’s no doubt that using smart technology to take on the important but mundane, repetitive tasks associated with the client journey will become indispensable to operate efficiently and remain competitive.
