The future of advice remains deeply human
Financial services providers need to think about the future differently and embrace emerging technology to keep up with clients’ needs. This was among the powerful messages delivered during the two-day-long PSG Financial Services Annual Conference, held at Sun City.
Advisers central to insurer-client discussions
“Financial advisers must look to partner with firms who use technology to make your lives easier … and help you to scale your advice offering so that you can access [more] clients who are in desperate need of financial advice,’ said Jeanette Marais, Group CEO at Momentum Metropolitan Holdings.
Marais explained that from Momentum’s perspective, any discussion about the client of the future went hand-in-hand with a discussion about the adviser.
“Every financial adviser in this room is uniquely placed at the intersection of what is changing and what will stay exactly the same,” Marais said, before offering a client-centric overview of the domestic financial planning landscape. First and foremost, all financial advising stakeholders must be aware of South Africa’s unique challenges. One standout observation is that your local clients do not benefit from the social security safety nets that their peers in other Western economies do.
The presenter noted that your clients have to plan for their futures in a more risk aware way: they cannot rely on the state for an old age pension, or for healthcare, or for safety and security etc. Despite this reality, your clients remain ill-prepared for the financial risks they may face. “We know that South Africans are underinsured by at least R2.4 million rand per income earner, according to the 2022 Association for Savings and Investment South Africa (ASISA) Insurance Gap Study,” Marais said.
Personalisation over one-size-fits-all solutions
Underinsured or not, your clients are deeply aspirational, opening opportunities for you to build towards and protect their financial dreams in partnership with leading financial services brands. Marais reminded the audience that there was no such thing as a one-size-fits-all financial solution. “Your clients are diverse, they are complex, they have different income levels, different cultural contexts, and different advice needs; there really is no such thing as an ‘average’ South African client,” she said.
In practice, financial advisers and planners need to guide individuals and households that span the demographic divide, from Baby Boomers to Gen X to Gen Z and younger. You have to tailor your financial advising approach to suit clients who prefer face-to-face advice from a trusted adviser all the way through to the younger set who are comfortable trawling the internet and social media for information about financial products and services. According to Marais, the future of financial advice is increasingly skewed by South Africa’s demographics, with a high percentage of citizens in the Gen Z and younger segments.
Poor financial literacy and poverty present additional challenges for advisers to navigate. The presenter cited a recent study by Standard & Poor’s which reflects that around 70% of citizens in Nordic countries are financially literate; falling to around 55% for Europe, UK, and the United States (US); and a paltry 30% for South Africa. This literacy rate is reasonably correlated with income levels; but independent financial literacy research conducted by Momentum suggests that poor financial literacy persists in households earning more than R125000 per month.
An amazing opportunity for financial advising
You can process this shocking news in one of two ways. One is to simply shrug your shoulders and service your existing client base. The other, as Marais suggested, is to view it as an amazing opportunity for financial advising in South Africa. “There is a vast gap that we need to fill, and we need to plan on how we are going to fill that,” she said. The statistic to chip away at is that only 9% of South African households have a financial adviser compared to around 35% in the US.
The remainder of the presentation sought to answer how financial advisers could improve on this advice penetration figure and guide more clients towards financial success. New and emerging technologies, including those being developed under the broad artificial intelligence (AI) banner, will help advisers to offer the efficiency and personalisation that future clients expect. The potential of AI and related technologies is on display in Momentum’s Fast Track solution, which enables fully digital onboarding and underwriting using your client’s smartphone camera and sensors to give instant feedback on blood pressure, BMI, and cholesterol levels.
The hope is that technology-backed innovation will make advice affordable and accessible to more people. “Technology can enable advisers to serve more clients. We know that Robo advice never really worked to attract clients, nor did it take your jobs away; but Robo advice in a different form can help you to deliver an excellent service to your clients at scale,” Marais said. She argued that simpler solutions combined with tools and technology could expand advisers’ reach.
AI need not decimate advice roles
There is, however, a growing concern about the impact of widespread AI adoption on jobs, including in the financial advising realm. Marais felt that AI would empower advisers to focus on human skills while allowing for extensive automation across a wide range of advice and product provider functions.
For example, it could reduce the robotic work done by an insurer’s administration personnel, freeing them up to be human and empathetic in client-facing roles. The same goes for financial advisers and planners: you should leverage AI and automation to spend more time building true connections with your clients. “The future is not just digital it is deeply human, and your advantage will not derive from being able to use the best technology; but from how you show up, using technology, with deeper feeling,” Marais said.
She went on to share some real-world AI experimentation, saying that Momentum had begun using an AI empathy tracker to monitor client interactions. The firm uses AI to monitor contact centre calls and emails and highlight any potential shortcomings. This allows the insurer to step in proactively before a mistake in the client-insurer interaction compounds.
Some behaviour-linked observations
Another standout innovation is the Momentum Investments Certified Behavioural Adviser imitative. “By using more than 20 million observations daily, by the minute, our AI will predict the most important factors in behavioural tax, looking at the behaviour of clients across all of the data points we have.
The aim is to help you to proactively help your clients not to switch, and not to lose money through emotional behaviour,” Marais said. She briefly mentioned that emerging tech could offer more accurate predictions of clients’ life expectancies for application in the retirement planning process.
The future financial planner will have access to AI-backed personality diagnosis tools that will help with psychological and social aspects such as behaviour finance and tackling loneliness in retirement, allowing you to flesh out your holistic financial planning offering. “Humans will never want less empathy, and they will never want less of a relationship, particularly when it comes to complex matters where the stakes are high,” Marais said, reinforcing the point.
Your clients need your help in answering questions like: Am I planning well enough for my retirement? Will my family be okay if something happens to me? And will I be okay if I suffer a major setback such as losing my job or suffering a health setback? Marais encouraged the financial advisers in the audience to imaging how AI could help them to personalise their services at scale, drastically reducing the time spent on non-financial planning functions and freeing them up to have more meaningful conversations with clients.
The intersection of machine intelligence and human heart
Her dream is twofold. First, for the real benefit of AI to develop out of machine intelligence meeting human heart. And second, for every South African to have access to a financial adviser and benefit from having a basic financial plan to work towards.
Writer’s thoughts:
AI-backed technology will help you to serve more clients, but empathy and personal connection remain standout components of adviser value. How are you preparing to combine AI with human advice in your practice? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
