Are new technologies going to threaten independent advice? Not according to Bob Clark’s great ThinkAdvisor piece, Technology will Continue to Transform Independent Advice and Advisors. As he says, “History shows us that technology empowers independent advice.” And he’s bang on:
In the 80’s ubiquitous and inexpensive desktop computers replaced room-sized IBMs, allowing independents to get in the game previously dominated by institutions
In the 90’s the internet created an explosion of access to information and services—a data jailbreak that changed the channel landscape
Post-2000, smart phones and the proliferation of apps have given consumers anywhere-anytime access to the channel and now the channel must deliver
Going forward, Clark expects this trend to continue. “Independent advisors will continue to increase their independence by affiliating with platforms that provide the broadest access to the growing number of new technologies.” He sees technology as a win/win/win for the independent advisory industry.
I wholeheartedly agree. Though when I look at where the channel is today and what changes new technology will bring, it’s clear that not everyone in the channel is positioned to take advantage of the opportunities.
Ostriches or opportunity-seekers?
Right now the channel is a bit stuck. We’ve got an industry largely selling the commodity end of its product shelf to clients the same age as advisors (59), and unfortunately the statistics we see show that the advisor client relationship is (on average) only slightly above 1 product deep. And many players in the channel are in denial. They’re content with the status quo—reluctant to adopt new technology because they don’t trust it or don’t see the value.
Trouble is, technologically driven change will break the status quo. Technology will empower innovators and those parties open to developing new models, but, for those who stick their head in the sand waiting for things to blow over, it’s going to be a rough ride.
Consider what’s coming down the pipe.
What will automated distribution bring?
We’re already seeing that technology is helping carriers and distributors to automate distribution. E-Apps and data interchange are starting to address our industry’s biggest area of waste—applications not filled out properly, or ‘not in good order’. The seamless delivery of structured data to the carriers through e-apps moves us toward more automated underwriting and a faster turnaround.
That’s a step in the right direction, but these are really fulfillment solutions—inside-the-box ways of finding efficiencies within the current model. And automation has the potential to blow that current model apart.
We know the public is underserved, and the advisors out there that are going to sit across the kitchen table to sell someone one product are not showing high specialism, or a high amount of planning and insight. They are performing the very behavior you’d hope to be able to scan and replicate through the web, through the call centres, and other channels. How bright is the future for that type of advisor when their role can be taken over by automated fulfillment?
What will the migration of expertise from the professional to the consumer mean?
Automation isn’t the only near-term landmine for those content with the status quo.
Information is starting to appear in public places that exist between the professional and the consumer. The next generation of consumers will expect to learn anything they need through their own efforts. For instance, when I think about what I use the internet for—I can find a video on how to replace a clutch, and next thing you know I’ve dropped the gearbox out of the car. A few grease stains and a creative curse or two later, I’ve avoided a trip to the mechanic.
That DIY ethic and the expectation that I can find a solution to any problem through my own efforts will only grow stronger. Expertise is migrating from a public used to dealing with a professional who has access to specialist knowledge, to a more educated consumer who will be empowered to get information so that they don’t need the guidance of a specialist.
At the same time compliance and legislation are increasing in every jurisdiction around the world in financial services, which is driving complete transparency around commissions. The consumer expectation that they know where their money’s going is, thankfully, increasing.
But what happens when you have an educated consumer base, who can fulfill their own needs and who understand what they are paying for advice? You get a pinch point for the channel—how do we demonstrate value?
What can we do?
Financial services consumers will always be dealing with a complex set of scenarios. To demonstrate the value advisors bring distributors, institutions and partners will need to find ways to harness technology to shift from transactional to advice based selling. I see part of our role (as technology providers to this channel) is to give the sales force the catalyst to get to the client at the right time with the right offer in an auditable, compliant way. Technology will also help provide the collaborative middle ground around which information and insights are shared and enable today and tomorrow’s consumer reach their buying decision.
Once consumers reach their readiness to buy, we’ve got to work to make sure we don’t miss any opportunities to richen our relationship with them. Automation must ensure our channel is, connecting with them at meaningful times in meaningful ways delivering what they need, when they need it.
How can we survive and thrive after the coming ‘Concorde Moment’?
The near term disruptions (automation, expertise migration, transparency) that technology will bring will be significant but I can’t help but think that our current struggle within the status quo and focus on inside-the-box solutions leaves us vulnerable to a coming ‘Concorde Moment.’
In the late sixties, when the best a stylish transatlantic traveler could do was a six or seven hour trek between Cosmo NY and Swinging London—British Airways suddenly and radically changed the industry and the lives of its passengers by building Concorde. New ETA? Door to door service from JFK to Heathrow in well under three hours—suddenly it was possible to breakfast at Tiffany’s and comfortably jet for lunch at the Savoy…
That’s not an evolution of service, it’s the revolution of an industry…
And similar step-change is coming to the independent channel. The danger is that while we’re all paying attention to finding efficiencies within the existing model, a ‘Concorde Moment’ will up-end the entire channel and we’ll get our doors blown off.
The key to thriving post-‘Concorde Moment’ will be the groundwork we lay today—driving to get data moving and embracing technology in ways which will maximize our ability to get in front of clients at the right time with the right advice and the right solutions.
Bob Clark is right that technology created by institutions and vendor/partners will improve advisors’ businesses. And successful advisors will increase their independence by seeking out platforms that give them the broadest access to new technology. Our collective challenge is to turn from the status quo and embrace innovation: broaden the value proposition of distributors and exploit the technological footing being established so we don’t watch a faster competitor come past us.