Using tech to drive client goals

technology features tech practice management financial planning

24 August 2018
| By Anastasia Santoreneos |
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The financial planning industry is in a state of transformation following revelations from the Banking Royal Commission and reviews by the Australian Securities and Investments Commission (ASIC). 

Fees-for-no-service and regulatory negligence will be rightly replaced by goals-based, client-centric advice, and technology will work as a driver. 

Tech has already infiltrated the industry, evidenced by large Australian planning firms and fund managers integrating their services with platforms and apps, and simplifying claims processes through online applications.

And, while industry experts note the entire backbone of financial planning is archaic technology, they’re confident the world of application programming interfaces (APIs) will completely reform the advice and practice management processes. 

Investment Trends research director, Recep Peker, says over the last four years, fewer and fewer advisers have said their practice profitability improved, which means technology has its work cut out for it in terms of solving practice challenges.  

“In the last year the average adviser added 20 new clients, but they lost 35 active relationships,” he says. 

“They’re seeing an outflow in clients, and it’s not so much that the client is leaving the adviser, it’s the fact that the inefficiencies in their business aren’t giving them the time to be able to get to all of their clients.”

What’s causing the tech-lag?

Peker pointed to the Future of Financial Advice (FoFA) as a culprit, given an outcome has been that over the last five to six years, advisers have focussed on higher-value clients, which tend to a be “a little more high-touch”, and it’s taking valuable time away from other clients. 

“Business efficiency is a bit of a challenge, which is getting in the way of not just acquiring new clients but retaining existing relationships.”

Peker added that on top of FoFA, increased compliance burdens are placing more pressures on planners, which means it’s becoming harder for them to adopt new technologies in their business.

“They’re too busy trying to stay afloat to adopt these things,” he says. 

Where Australian planners used to lead their UK peers, who have had to adapt to similar regulatory changes, their rate of adoption of digital methods now trails behind. 

Peker says even younger advisers, although equally keen to be using certain technologies, actually adopt new technology at a lower rate than their UK peers.  

“This is interesting because before FoFA, Australian financial planners were ahead of their UK counterparts,” he says. 

Peker added that only 13 to 14 per cent of planners use digital signature tools and any form of aggregation, budgeting or cashflow management software like MyProsperity. 

And while advisers are engaging clients with things like regular newsletters, only 35 per cent give clients the access to view their position online, and only six per cent give clients the ability to use modelling tools online or access investment research.

This is contrary to the 85 per cent of clients that expect greater online access to see how they’re progressing towards their goals. 

But, while there’s a clear lag in tech adoption, an extremely high percentage of planners want to increase the range of digital methods through which they engage their clients, and it’s being driven by millennial advisers. 

“Eighty-eight per cent of them want to expand the range of digital methods through which they engage their clients,” says Peker. “They want online client access, but even online client meetings are something that advisers are really keen for, especially the younger advisers, with about 45 per cent of millennial advisers (those ages under 34) conducting online client meetings.”

Peker says over 55s have fallen behind in this department, with only 22 per cent conducting online client meetings, and he warned tech innovators who fail to futureproof the functionality and tools they deliver will suffer.  

“Any platform or planning software provider who wants to service this market or wants to stay relevant to financial planners needs to deliver the digital client engagement that the next generation of financial planners expects.”

Chief executive of Advice Intelligence, Jacqui Henderson, says there’s no question there’s been a lack of client engagement tools that enable advisers to create statements of advice (SoAs) collaboratively, and hit the goals-based-advice nail on the head. 

“I think that planners have been desperate to start seeing better tools and better ways to engage their consumers, both from a marketing aspect, because it’s about getting consumers to follow a process that they want to actually pursue.”

Henderson says at the moment, technology has brought planners into a “back office” world of paraplanning, but, in the new world, planners and clients will work collaboratively, and the paraplanning function will become obsolete.

“Research shows that consumers are demanding both a tech and a goals-based financial planning experience. We’ll see the planning industry evolve rapidly into this hybrid of tech-base and coach-style profession,” she says. 

“So, those that choose not to adapt into this next evolution will find growth and consumer engagement and, actually competing, challenging.”

While there have been significant developments in fintech for the financial planning world, there’s no one platform that integrates them all.

“There are all these different silo systems that don’t talk to each other,” says Henderson. “And, in the world of API’s, I think that’s now changing, and having an open architecture that can plug all these tools together is really fundamental.”

This is mirrored in practice too, with Matt Swieconek, managing partner of financial planning at Findex, citing silo technology as a big disadvantage, especially when trying to create goals-based advice. 

“The software solutions that we’ve got to be able to undertake a lot of our goals-based modelling and advice, you’re trying to pull together from multiple different sources,” he says. 

Swieconek says while the XPLANs and Coin programs have cashflow modelling ability and projection analysis tools, they still don’t give planners the full ability to run the goal-based advice that they’d like to. 

Tech innovations taking the industry forward

CEO of Ignition Wealth, Manish Prasad, is certain the digital age will see an increased appetite for serving up high-quality advice in bite-sized pieces, and all planners should adapt or risk getting left behind. 

Prasad likened the new-age financial planning industry to going to the doctor and says the days of getting a full physical for a common cold are over. 

“That works for some people, but it doesn’t really work for most people,” he says. “And, it doesn’t really work for people that are busy, and it doesn’t work in a world which is becoming more and more incremental as opposed to taking big moments in time to make big decisions.”

The solution, Prasad says, is digitalised solutions that use push notifications, tracking, wellness and scoring to help clients figure out a path and stay on it.

Prasad says most people are on a reasonably standardised path, and where they fit the mould, a fully-digitalised solution or experience can meet their needs.

Where the client needs guidance outside the means of the robo-adviser, technology is used to triage out the request to phone centres, phone-based advice teams, chatbots or, at the full extent, a fully-qualified human.

“When we look at those pieces of data [data fed into the system from other data sources, and data that’s taken from the user as part of the experience] and feed it into our rules-based algorithm, where the data conflicts with the algorithmic process, then the engine says this person is actually better off sitting in front of an adviser.”

Swieconek says while Findex isn’t on the digitalised-solution train yet, he won’t rule out buying a ticket in the future.

“There’s no doubt about the fact that this is something that’s going to become a much more prominent feature on our landscape in terms of messaging services and chatbots with clients.”

On a macro-scale, Henderson says data will be used to automate repetitive admin tasks and data duplications, so initiatives like open banking standards will allow clients to have more control over their data and automate their data collection process.

Data and artificial intelligence would also drive costs down and separate advice into two models: the “do with” model, which involves a collaborative client and planner model, and the “do it yourself” model, which provides the client with the technology to manage their own advice with some automated guidance. 

Big data to drive client goals

Wayne Wilson, CEO of KnowIT Group, says big data can be extremely helpful in honing in on client needs and desires based on consumption patterns and digital engagement, but despite the benefits, it’s not being used to its full potential. 

“No, it’s certainly not,” he says. “There’s literally as many ideas as you can think of, and there’s ways to use the data. And it’s very, very powerful.”

Wilson says the future for big data in terms of planners will be extrapolating from trends and applying it down to the individual, and while it’s not common in Australia, it will be. 

Henderson agrees, and modelling the client’s household will soon involve using real data in the place of assumptions.

“Machines will be able to more accurately project future client scenarios, and therefore better predict the most optimal advice strategies and deliver the best outcome for the client,” she says.

“I call this ‘data driven financial advice’, and this will assist financial advice to increase capability, engagement and efficiency.”

Prasad says while clients often know what they want, they don’t really know how to articulate their goals, but big data gives planners the construct to think about goals. 

“It gives a more meaningful point for either the robo-digitised advice or the human adviser to have a good conversation with the client about what is possible for them and then build a plan around what they can do and how they can maximise their personal outcome,” he says. 

“The more informed the scenario is by data, the better the construct of advice can be and the outcomes for the individual.”

Henderson says the future would see an evolution of financial planning as an innovative, tech-based experience. 

“Ninety-nine per cent of consumers now have a smartphone or smart device, so the way in which financial planning needs to be delivered is in the same way that consumers interact, which is via mobile technology,” she says.

“It’s about bringing them on the journey and bringing them the tools to empower them, to track their advice in line with what matters most to them - everything’s in line with what they want to achieve.”

Can compliance challenges be solved?

Henderson is confident data could help solve the many compliance challenges financial planners have faced, in particular, the consistency and quality of advice that’s coming out of the woodwork. 

She says advice suitability monitoring and tracking could provide real-time analytics that help compliance managers proactively manage compliance at scale. 

“Current technology doesn’t have this,” she says. “There’s no quality assurance that’s actually done upstream before the advice is delivered to the customer.”

Henderson says having compliance built in to the customer experience introduces a co-responsibility, and the client and the adviser work together, with the client agreeing on the advice before the plan is produced.

Regtech was raised as the industry’s next “big thing,” which is regulatory technology that aids planners in keeping up-to-date with the latest reforms and regulatory changes, and ensuring they remain compliant. 

“That’s where I think that this proactive compliance aspect can solve a lot of the issues that we’ve seen in the Royal Commission.” 

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