Scale plus independence; a win-win for advice practices

29 September 2021 Gareth Stokes

The Holy Grail for an independent advice practice is to build scale to maximise top-line returns without compromising the integrity of the advice process or the client experience. Building scale without losing independence can be challenging; but smaller advice practices can take heart from the fact that the journey has been travelled before. FAnews attended the 2021 Financial Planning Summit, hosted by The Collaborative Exchange, to learn how Warren Ingram, co-founder of Galileo Capital, went about growing his financial planning practice.

Scaling advice through technology

Grant Locke, head of OUTvest, was on hand to grill Ingram about how to grow an advice practice by scaling the advice component through the effective use of technology. His first questions: Why are you such an avid fan of scaling an investment practice? What does scaling mean to you? The why, according to Ingram, stems from a genuine desire to impart useful and valuable advice to all customers seeking it. He was in the enviable position of generating plenty of advice leads thanks to positioning as the ‘go to’ commentator for financial planning through various broadcast and print media outlets. “We had thousands of  people contacting us, desperate for advice; but when you operate a small team of people you only have so many hours in the day,” he said. 

Unfortunately, a common financial advice practice response to having too many clients is to scale product rather than advice. For example, the response to having a throng of new investment clients could be to launch a unit trust and then scale revenue within that environment… “In this construct you are scaling product, you are making yourself much more profitable as an advice business without actually helping more people with financial advice,” said Ingram. His preference was to scale advice, which is seen as a business imperative for the survival of a financial advice practice because it ensures revenue growth without pushing your cost base higher. The cost benefits that attach to scale make it possible for an advice practice to offer more affordable advice solutions. 

Preparing for a deluge of new leads

Ingram conceded that his practice was not prepared for the flood of client enquiries that followed from their early forays into the media. As consumers responded to their views, they received thousands of email requests for financial advice. Responding to this volume of emails proved difficult, especially given the wide divergence in client financial profiles. “In an attempt to try and provide this level of advice, we launched the SmartRand robo-adviser,” said Ingram. This foray into automated advice, one of the first to market in South Africa, was executed poorly due to capital constraints and issues with technology. 

There were some quick wins in the journey to scale. One was the realisation that a paid-for, one-hour consult was in high demand. “People with a small amount of money could still talk to us, we could help them … and they could get objective advice,” said Ingram. The initial administrative issues caused by a surge in consumer demand was easily addressed through automated online scheduling and web-based prepayment facilities. “Another big win was in automating certain communications to our clients, for example, making sure that we could send automated statements rather than using the existing, nightmarish manual process,” he said. The next win came from smart data capture and integration. “The next step was to send a link to a client, once they had scheduled the meeting, to prepopulate certain personal and financial information,” said Ingram. This information could then inform the next steps in the financial planning process. 

Hiring employees to meet growth

Hiring new employees into growth is inevitable; but using technology ensures that these hires make the maximum possible impact in the financial advice practice. “We want to avoid hiring more and more administration people to do more and more mundane data capture tasks, those kinds of things should be completely automated,” he said. “We want to leverage technology to help us understand our clients and improve our communication with clients”. 

Locke pointed out that traditional advice practices had to balance client numbers with the workload imposed by administration and complying with regulations. Nowadays, practices can turn to technology to automate large parts of the administration, compliance and planning function; but this does not mean that the human component of advice is lost. The trick is to focus on hybrid automated / human solutions that not only allow you to cruise through the repetitive admin tasks but also offer holistic, compliant advice solutions for low income clients, at low cost. “A high quality robo-adviser can service a segment of clients at the bottom, proactively and in a regulatory compliant way; you can service them with your brand, with your quality of advice and know that they are going to get the right outcome,” concluded Ingram. 

Three tips to achieve scale

It was left to Locke to summarise the discussion by offering three tips for an advice practice that is keen to scale… First, is to consider adding simple technology to help to reduce some of your admin. This step involves identifying and implementing web-based solutions for appointment setting and pre-payment for appointments, among other productivity gains. Second, you should consider designing offerings that align to your client segmentation… For example, you should create differentiated solutions to service your smaller and larger clients. Third, reduce your appointment and administration time by incorporating some type of robo-advice. 

It seems that the future of advice remains firmly in the hybrid automated / human space, with optimal solutions allowing for face-to-face advice interactions with adviser and client, followed by automation to meet administrative and regulatory requirements, in an interactive way. “The end result of achieving scale is that you see more clients, you service a larger client base and more people benefit from access to quality financial advice,” concluded Locke. “You can grow the revenue in your practice without the infrastructure needed to give financial advice in the traditional way”. 

Writer’s thoughts:
The arguments presented during the 2021 Financial Planning Summit suggest that hybrid human / robo-advice models make scaling an advice practice easy… Have you used technology to improve administrative and compliance functions in your practice. And are you satisfied with the level of scale that this technology has enabled in your practice? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts


Added by Quinten Knox, 29 Sep 2021
- Jean-Jacques Rousseau, Philosopher, 28 June 1712 - 2 July 1778
Does increase or decrease man's independence? Man's freedom? The essence of what it meant to be a warm-blooded Human Being? Is science (technology) making disposable units of production of all of us?
The tail is beginning to wag the dog.
Can advice provided by machines be faulted by clients, courts and ombuds and litigated?
Does 'Wrong' advice generated by a machine leave the FSP accountable? Or will the computer programmers and their employers be the ones who lose their licences, get debarred? (I don't know whether there are similar consequences in the tech world as in the FSP world, but I think you get my point.) Is a machine going to decide whether I have integrity and am of good standing? Is a computer going to decide what an ‘expression of dissatisfaction’ is, and when some action is (un)fair?

All this chitter chatter and propaganda by countless purveyors of 'technology' is scare-based advertising. These are tech companies with stuff to sell. The financial services industry in South Africa is a juicy (and cash-rich) target.

Every man and his dog is promised a Utopian future world where machines do all the work while financial advisers order cocktails on the beach. Financial services will be delivered to happy, smiling humans in milliseconds by machines. Machines cannot make mistakes, so trust is established. Machines "allow you to cruise through the repetitive admin tasks but also offer holistic, compliant advice solutions for low-income clients.

(I have often wondered - what are 'holistic advice solutions'. What is the opposite of a 'holistic advice solution'? Is it the stuff financial professionals have been doing for decades without which there would never have been born, raised, and existed the trillions of Rand insurance industry?)

AI, Big Data, leveraging technology, algorithms, Robo-advice, Scaling advice, Hybrid automated / human space, Data Analytics, Machine learning, Natural language processing, Descriptive analytics, Predictive analytics, Prescriptive analytics, General Data Protection Regulation, Data and Confidential Information and Personal Information access and protection (ECTA, POPIA, PAIA, Cybercrimes Act) blah blah blah blah.

Bring back the good old conversation and friendship building, pencil, and paper for taking notes (they can't be hacked by some script kiddie in Belarus of wherever!), confidence, understanding and empathy, and slow down a bit. Speed will kill you.

The promise of a hyperreal, crime free, cyberspaced-out, idiot-proof world where nobody knows the difference between data, information, knowledge, and wisdom, [ruled and dictated by a handful of tech-billionaires in Silicon Valley], is a lie.

We have been googled-out and googlified, de-faced in a Book about Faces on the world wide web , unLinked and unhinged, Tubed, instantly grammed, treated as Twotters and our every single move in cyberspace (and in the physical world) is stored somewhere as data to be used against us by whoever holds the data and by whoever has bought the data. Including insurance companies.

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