Advisers are about to be hit by a steamroller of disruption

Some surgeons adapted and flourished, while others were left behind. The overall surgical pie greatly expanded to new areas over time.

The year was 1988, and I was a delegate at the largest professional conference ever held in the southern hemisphere. With over 8,000 surgeons and gastroenterologists attending, we were about to witness the total transformation of surgical procedures.

Scattered throughout Darling Harbour exhibition halls were screens showing laparoscopic (keyhole) surgery – a groundbreaking development for the profession.

At the time, only 60 keyhole surgeries had been performed worldwide. There were groups of 20 or more specialists gathered around TVs to marvel at what was obviously game-changing technology. The buzz words soon became, “be part of the steamroller or part of the road”.

Surgeons are thoughtful and conservative, much like financial advisers. At the time, the younger age group of surgeons rushed to learn laparoscopic gall bladder removal. Many of the older group, the leaders of the profession, were cautious and wanted to analyse outcomes to see if this was more than a passing fad. For many, it was too difficult to learn something new. Those who adapted remained competitive in the surgical profession as technology changed the future of surgical procedures forever. A number of early Australian adopters became world leading surgical innovators.

The rest, as they say, is history, and within a few years, open surgery was dead, taking with it the private practices of the complacent old guard. Patients demanded laparoscopic surgery with its obvious benefits. Because of the new technology, over time many new surgical operations were performed, and new career paths developed.

The future for financial advisers is undoubtedly similar. However, surgeons were not facing additional legislative, educational and cost pressures.

Evolving changes

In the last decade, advisory technology changes have been focused on improving back office functions and enhancing client experience and engagement. Meanwhile, client’s preferences and demography have been changing.

In our tech savvy world, clients now expect easy access, low cost and some degree of control. They research and gain information online and are prepared to do some data input themselves. Technology is used in all aspects of their life and they don’t expect any difference for financial advice. They will use automated advice to some extent but still want human contact. The preferred option for many other services is subscription based or rent when needed, instead of buying.

Up till now, changes in financial planning and advice technology has evolved at a relatively slow pace. Cloud-based software has replaced in-house platforms and IT departments. One change was the introduction of robo-advisers. Then there was zero cost ETF platforms by Fidelity etc. The latest is online subscription-based advice based around life events as recently introduced by Charles Schwab.

The watershed game changer is artificial intelligence, which is being introduced by large firms in order to predict future client intentions and offer services as life event and lifestyle coaches. Only major institutions can afford the cost of AI to predict client needs and goals. Think about AI. It is using computer data mining, learning and algorithms to analyse a client’s entire digital life to decide what he is most likely to do or what he needs.

Old fashioned face-to-face advice is expensive, prohibiting access for large segments of the population. The planning process is too time consuming and inconvenient for clients. Information is often not presented in an easy to understand format.

The steamroller is about to hit.

The combination of game changing technology with AI empowering existing or new large players together with overwhelming consumer preferences will impact financial advisers swiftly.

Adapt or disappear

In any profession, the well-established, complacent old guard don’t think change will impact their loyal client base, at least until they retire. To remain competitive, one must adapt. All industry advice says you should utilise technology to enhance practice efficiency and strengthen relationships with existing and new clients.

The adviser’s greatest strength is his human face. Even current clients, who can afford adviser fees, want an alternative engagement experience that provides clients with greater autonomy and a better understanding of their financial position. The younger generation most certainly doesn’t like the model of the statement of advice (SOA) being the end goal. They find the advisory process somewhat intimidating. For them it is not about lump sums but advisers helping to achieve lifestyle goals.

Where to begin?

All advisers know that we are in the middle of intense technology and consumer upheaval. And the industry thought leaders are all giving fairly similar messages on trends and what actions advisers should introduce. Technology consultants to advisers have sprung up to assist in the technology choices and implement the change process.

Your new software must do what AI promises to do for large institutions. It should tell the adviser what the client plans to do in the near and distant future. It should show when goals or circumstances change, and what may be the outcomes.

New technology must enhance efficiency in onboarding, explanations, documentation and demonstrate advice is in clients’ best interests. Planning time and practice costs should be greatly reduced.

And importantly, new technology should not be difficult for advisers to learn and use. It should not require sudden practice upheaval. It should readily integrate with your existing systems. It should allow the adviser to become comfortable with usage and shift clients gradually to the new software tool.

Technology must have good client connectivity and usability to build accessibility, collaboration and trust. Good technology should allow scalable, affordable advice online.

I believe that Financial Mappers provides new opportunities for advisers.

Dr David Phillips is the CEO of Financial Mappers.