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Brokers rise up! Your challenge, should you accept, is…

27 October 2021 Gareth Stokes

The evolving nature of risk, acceleration of technology adoption and need to integrate corporate social responsibility into your firm’s value proposition are all trends dominating the 21st Century financial services environment. And the challenge facing intermediaries and their financial and risk advice practices, is how to integrate these trends into their product and service offerings, at scale.

Scaling for the future is non-negotiable

“Scaling for the future is relevant in the context of the Discovery brand, and how we think about financial services and the financial services value proposition,” said Hylton Kallner, CEO at Discovery Bank. He told intermediaries at the 2021 FIA Advice Summit that Discovery, which was founded on the simple but profound purpose of making people healthier, had scaled to insure, directly or indirectly, around 41 million lives in 30 global markets. The group is adding to this platform at about 300000 new clients each month. 

The Financial Intermediaries Association of Southern Africa (FIA) is the representative body for South Africa’s financial intermediaries. Its annual intermediary summit focuses on the value of financial advice in the context of prevailing socioeconomic conditions and is held in collaboration with leading intermediated financial product providers and support services in the healthcare, life and non-life insurance sectors. Much of this year’s programme focused on ways for intermediaries to improve their ‘value of advice’ proposition in an increasingly complex financial services world. 

Social context is important

According to Kallner, the true challenge facing financial services providers (FSPs) is how to align with clients in the context of broader society. “The nature of risk in banking or insurance has become fundamentally more behavioural; it is attitudinal, based on how people manage the risk they present in their lives,” he said. FSPs must not only translate this attitude and behaviour, but monetise it by offering better benefits, rewards and value to clients. Of course, this responsibility differs based on one’s discipline. 

Intermediaries have to stay acutely focussed on delivering value through their financial and risk advice, matching the best products on offer to their clients’ needs. Multi-national, multi-discipline financial services giants, in contrast, have enough resources to focus on innovative product design and finding ways to integrate consumer behaviours into product benefits. Discovery is in the enviable position of having terabytes of data that reveal consumer behaviours in the context of their healthcare, life and non-life insurance risk. “There are a finite number of behaviours that we have been able to identify and correlate, using the underlying data, that drive almost all of the risk outcomes we observe,” said Kallner. 

For example, there are four lifestyle-related chronic conditions that contribute to around 60% of all deaths globally; five driver behaviours that contribute to poor insurance claims experiences; and three decisions that severely impact retirement savings outcomes. And similar behaviours can be singled out in the banking and medical schemes environment too. It is common knowledge that your clients’ long-term investment and savings outcomes are affected by how early they start saving, how much of their income they put away, and on preserving their accumulated capital when changing jobs. And one does not need a higher level degree to appreciate that drivers who speed, or brake, or corner and accelerate aggressively, present higher accident risks than those who drive defensively. 

Using disruptive tech to incentivise clients

These behaviour-related factors exist in every vertical within an FSP, wherever you go in the world… The devices needed to measure many of these behaviours have been around for decades, think telematics devices or smart watches; but the difference between today and a decade ago is that financial services firms have access to technology to collect, monitor, store and analyse the reams of data produced by such devices. Kallner said that disruptive technologies were enabling product providers to incentivise consumer behaviours that had a positive effect on the nature of risk. “We are able to measure, at an individual granular level, how people are [reducing this risk] and translate that back to them through the products and advice that we provide,” he said.

 Brokers and financial advisers should pay close attention to five megatrends that are playing out in the technology sphere presently, because these trends will influence both the advice you give to your clients and the products available to you to meet their financial and risk needs. Digital healthcare was first on the list. “Digital healthcare is transforming the entire healthcare system … by, for example, making it possible to manage hospitalisation at home,” said Kallner. The second technology focus is on payments and the so-called payments evolution. “Collecting premiums is one of the most complex parts of any financial services process; but nowadays our payment systems can be fully integrated,” he said. 

Fishing in 50TB data pool

The third technology area centres on new ways to capture and translate data to the benefit of clients. Discovery boasts more than 50 terabytes of data collected across the verticals of banking and health, life and non-life insurance at an individual member level… This includes more than 52 million years of mortality and morbidity data; over 13 billion kilometres of driving data; and more than 100 million workouts with heartrate data! Product providers are now in a position to interrogate this data using a combination of greater computing power, artificial intelligence and machine learning to gain insights that enable better products and advice for clients. “Data closes that loop of the nature of risk, the technology with which to measure it and the rewards and value created for clients at the end of the day,” explained Kallner. 

The fourth trend will resonate with FAnews readers. It involves the application of technology to assist financial and risk advisers in navigating the financial advice journey with their clients. There have already been big wins in eliminating the friction in onboarding and writing new business, with the idea being to create a seamless administrative process for the client and freeing up the adviser to focus on the advice process. In a ‘bold vision for the future of financial advice’, Kallner painted a future where advisers would have wider access to consent-driven consumer information at point of sale, with due adherence to data privacy. All of this will be driven by the fifth technology trend, or the emergence of platform driven ecosystems. 

Ensuring good risk and financial advice outcomes

Combining these five technology megatrends allows the financial services community to create systems that are good for consumers, good for product providers, good for intermediaries and good for society. “Ultimately, our role as an organisation is to scale for the future,” concluded Kallner. “I want to thank the adviser community for their support in building this system with us … it is the result of a back-and-forth between ourselves and yourselves, as our greatest partners and also our greatest critics, in building what we believe is the financial services platform for the future”. 

Writer’s thoughts:
They say the rich get richer, and nowhere is this more evident than in the world of rich client data. In our view, there are only a handful of large, diversified financial services providers that have the capital and resources necessary to create the 50TB data pools mentioned in this article. Do you believe that financial or risk advice practices can compete in the technology space without entering closer, strategic partnerships with product providers? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected]

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