A year as chairman of the FPA is a year full of activity. Indeed it is year full of activity, much of which is propelled by change. And it is change that has moved from the peripheral extremities to being in the frontal vision of financial services.
Looking ahead, change continues to be the main game in town. We operate in a world that is typified by rapid and regular change, which sees our operating environment subject to constant alteration. Without question, change is being thrust upon us via the legislative and technology fronts. While the mastheads of change revolve around technology and legislation, the common catalyst remains the resultant consumer benefit.
Yet change brings the need for adaptation and with it, the opportunity to survive.
Legislation in the form of, for example, Interim Policy Statement 146 has permanently altered the landscape. There will be no retreat from the theme of legislation that raises the bar of advice delivery and it is reasonable to expect an escalation of this trend.
At the forefront of the legislation changes is of course the need to establish and lift adviser competencies and while increased compliance is not always welcomed by financial services participants, it is substantially underpinning consumer confidence in financial services.
A consumer empowered with the knowledge that her adviser has met minimum competencies is likely to be more comfortable with the advice that is rendered. Comfortability, otherwise known as trust, in the advice we give to consumers is what underpins the client/adviser relationship.
As the technology wave builds velocity right before our eyes, there lies within it fantastic opportunities for financial services. While we are witnessing increasing numbers of dealers and planners establishing their own Web sites for direct investing on line and or to act as conduits to comprehensive financial planning services, the major opportunity is yet to be broadly identified.
In years to come when the Internet is not new, when it is not the novelty that it currently is, successful financial services organisations that have evolved and adapted with service as the major business platform, will be strategically positioned to capitalise on the fallout from the do it yourself trend.
The modern economy is being driven by service and it is making for successful businesses in everything from lawn mowing to preparation of the evening meal. Casting ahead to a time when a typical week for a typical consumer has seen the provision of services for the garden, the kitchen, the laundry and delivery of the car for its regular service we have to ask why will this consumer want to be troubled by managing their own investments?
Why will this typical consumer want to log on to see how their investment portfolio has performed? Why will this consumer want to bear the inherent emotional commitment that underlies do-it-yourself investment management? Why will this consumer want to be bothered by the prospect of, for example, declining GDP in line with falling consumer confidence and business investment? Quite simply, the ultimate question for the consumer will be: “Why am I doing this myself when I can pay someone to do it for me?”
And therein lies the opportunity for financial services. It is an opportunity that is developing ‘out the back’ and that will be aided by the inevitable market corrections and downturns we will encounter. It is an opportunity that promises most for those who have founded a business platform on regular service rather than transactions.
Transaction-based financial services such as share broking and insurance are already reeling from the effects of the consumer looking for more than a transaction. Their world will never be the same. They are reeling from the reality of the never ending search for the next transaction.
Transaction-based financial services businesses are destined for relegation as bit players in the future environment based on service and is being increasingly demanded by the consumer and for which they are prepared to pay.
So while we continue to be dumped by waves of change predominantly from the legislative and technology arenas, it is change that is accompanied by great opportunity. Those who will make it to the beach will be those who have sighted the bigger wave building in intensity with the eventual do-it-yourself tedium that will beset the otherwise service-hungry consumer. It is a wave that will develop more quickly with the eventual baptism of fire that market corrections and uncertainty will bring for every do-it-yourself investor.
As with all forms of evolution, the survivors of this era of change will be the adapters. Those who have embraced and warmly accepted that the community fundamentally expects basic competencies, as evidenced by education and experience, of any professional adviser. Survivors will also be those who have strategically positioned their business to provide service and who have therefore fortified their capacity to weather the downturns.
