Winds of change impacting the intermediary

The winds of change sweeping across the financial services landscape have thrown our industry into a state of flux. Although experienced throughout the full spectrum of the business, these changes are particularly evident for those occupying client-facing roles, such as brokers and advisers.

The current economic turbulence plays a massive role in our shifting landscape, while changes to the legislative environment not only impact the way we interact with our clients, but are also driving consumer behavioural change.

The forecast

As an industry, it is critical for us to understand what is causing this climate change, so that we can customise our products, solutions and processes to better service the needs of our increasingly discerning clients.

What can those in client-facing roles expect? And how do we best equip ourselves to weather the storm?

Market conduct proposals, including the Retail Distribution Review (RDR) and the Treating Customers Fairly (TCF) principles, aim to ensure that customers receive fair outcomes when purchasing financial products. These proposals encourage clearer communication with members, allowing them to make better informed financial decisions. In addition, National Treasury is proposing a legislative requirement stipulating that defaults are implemented for investment choices, insurance arrangements, preservation options and annuity options, forcing members to more effectively preserve their savings.

Abruptly swept away

As a result, products are becoming far less complex. Margin charges will become transparent, putting advisers under pressure as consumers increasingly question fees. This simplification will also lead to customers becoming less reliant on professional advice, and in some cases even foregoing consultation with a financial adviser or broker altogether as seeking advice becomes the preserve of the wealthy. Together, these factors will lead to an increase in the cost of financial services, as providers seek to compensate for the business they have lost by driving up fees for those who can afford it.

Instant gratification

The proliferation of technology has also become a catalyst for behavioural change in the consumer. We are now moving into the digitalised landscape where social media has created the desire for instant gratification – we want better returns, quicker turnaround and immediate answers. Through the power of the internet, we can swiftly ask for advice, compare and review. This in turn results in the disappearance of face to face interaction.

We are exposed to a range of options and alternatives. The client is becoming more sophisticated, with emerging middle classes seeking more financial options and increased personalisation. However, sometimes this increased access to information can be overwhelming, which is where the personal consultation service offered by a financial adviser or broker can regain lost ground.

The result of this is that honesty, trust, reliability and performance becomes more important than ever, as the adviser-client relationship faces increased scrutiny and pressure.

Climate control

Brokers typically earn their commissions by securing the best possible rate from an insurer. In the future world this fee becomes more difficult to justify. Research conducted locally has revealed that clients see the most value in the interpretation of the policy terms and conditions, and understanding how these apply to their own unique circumstances (which is where TCF comes to the fore). Through establishing a better understanding of a client’s unique circumstances, brokers will be able to advise clients how to secure cheaper insurance through appropriate risk management.

We need to apply the segmentation and insights from our retail divisions to better understand our clients and adjust our products and service accordingly, to better cater to our clients’ changing needs. With appropriate segmentation, we can understand needs at a more homogeneous level, understand how to better communicate and service more effectively, as well as how to better engage with the member.