Technology moves quickly and it is the biggest challenge facing brokers these days with younger people starting to look for financial solutions.
This could mean that the more established financial advisory processes may perhaps be less appealing to the average millennial who is more used to mobile apps and online interaction.
Enter the digital native
Currently, legislation is largely geared to an environment where the consumer interacts with a physical person. I have little doubt, however, that an explosion of mobile-platform-based technologies will facilitate new market entrants from a generation who have grown up with said mobile technologies (so called digital natives).
To the average millennial, the days of picking up the phone or going to see someone for a solution are passé or not even a consideration. If this generation has a problem, they either go to Google or the App Store for help.
Terms such as light touch advice, non-advice sale, robo/algorithmic advice - call it what you will - are coming and we are already seeing some of the more innovative product suppliers playing in this space. The challenge will be the compliance around providing advice via these platforms.
Recognise the change
The regulator is going to need to avoid being in a catch up situation and rather be on a more proactive footing recognising that this is coming, or quite frankly that it is already here. It needs to take steps to enhance the current regulatory framework around advice that may not involve a physical person. It will be interesting to see how it all unfolds.
Nothing stands still, and technology and innovation are irresistible forces, particularly for the new market of millennials. The financial services industry must come to terms with the fact that technology will make a huge impact on the way and means that products are designed and sold to their end users.
Viva le revolution
Technology is going to drive a revolution, if you will, in the way that financial services are offered to the public. Opportunities abound for the forward thinkers; those who keep their heads in the sand and avoid the winds of change, may struggle to keep up.
The local industry is of course currently eagerly/fearfully/apprehensively awaiting the Financial Services Board’s (FSB) feedback on the industry’s response to the Retail Distribution Review (RDR) proposals.
To re-cap, the RDR is a bottom-up review of all industry models, with a strong focus on remuneration structures to ensure that fair treatment is applied. However, and equally important, the FSB is seeking to segment intermediaries into very specific categories. The logic of such changes is to help clients understand any conflicts that their financial intermediary may be under at a very early stage in the relationship, which in theory leads to fair treatment.
Bringing it back home
We leave the big picture now, and hone in on the rendering of financial advice; specifically the concept of a so-called advice gap which typically emanates from an RDR process.
The FSB says they do not believe that an advice gap will emerge and have taken steps to try and avoid this. However, the harsh economic reality is that a number of individuals will either not be able to afford one-on-one financial advice or may not be an attractive economic proposition to an advisory firm, leaving many individuals euphemistically termed the wealth poor.
It is of course in everyone's interest that access to advice is made available to anyone needing it; and it should be affordable. Further, it needs to be appropriate for the upcoming, technologically savvy market.
If we are to achieve this goal, then the current advisory models, and more specifically the legislation that governs the rendering of advice, will have to take cognisance of the coming advice revolution that will rely heavily on technology to deliver products to their target market.
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