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Future fit, today and in the future - Part 1

27 March 2018Myra Knoesen

Kobus Kleyn, a Financial Services Professional (FSP), highlights that it is crucial for financial professionals to be aware of the ‘big picture’ developments and disruptors within their areas of specialisation. “Failure to do so compromises the hard work that we have done towards gaining recognition for the advice profession and sustaining our practices and client bases.”

Developments and disruptors

Kleyn highlights eight trends. In part one of this article, we will cover the first four developments and disruptors, and in part two, the last four trends. The trends are:

  1. Robo-advice & FinTech - As this type of advice gains in popularity your challenge will be to make it work for you rather than against you. Remember – your value proposition cannot be automated and neither can your ability to develop face-to-face relationships. Financial advisers certainly have the edge in this regards because they can rely on their human touch to understand their clients’ dreams and aspirations. They also have the empathy necessary to interact with their clients at crucial financial decision points throughout their life stages. According to Kleyn financial advisers will have to incorporate and embrace robo-advice/online into their practice-building to ensure long term sustainability. By embracing robo-advice, financial advice practices should therefore be able to reduce costs and operate more effectively. The bottom line is that robo-advice is better than no advice. 
  2. Social media and communication -Financial professionals must not only anticipate technology changes but remain innovative in how they engage with tech-savvy consumers. You have to embrace FinTech advances in all its formats and maximise each available communication methodology in order to meet your clients’ demands and differentiate yourself. One of the major advantages of social media is that it allows financial advisers to build a personal brand and global presence at very little cost through Thought Leadership and becoming the "Go to Person" within your industry/profession. It also provides you with immediate feedback on the new marketing approaches you try.
  3. The regulatory tsunami -Financial advisers face a host of new regulations and we are battling to manage our practices against a backdrop of a regulatory tsunami. There is little doubt these changes will impact on adviser profitability as compliance cannot be achieved without associated costs and it will lead to both an adviser- and advice gap. You will have to develop alternative remuneration models and perhaps expand your product universe to fund this ‘game changing’Add to this the robo-advice trend – a development that enables the consumer to access financial products without paying commissions (another step towards disintermediation) – and you can understand why quick action is required from financial advisers to ward off this threat. A major concern is that the financial adviser will focus only on consumers who can afford advice with the unintended consequence of increased regulation being that financial advice becomes a luxury commodity and therefore the threat of an advice gap is pertinent as we have already seen in the UK. 
  4. Technology, cloud computing and big data -Technology has become a critical aspect to drive your practice forward. The way in which financial advisers engage with their clients and prospects – including the ability to process data relating to clients and prospective clients – will determine each practice’s operational efficiency and cost effectiveness. Cloud computing and big data will have to form part of your practice strategy going forward. I fear that utilising this technology may be problematic for IFAs due to the cost implications, while major financial institutions are already geared to take advantage of their scale and systems, thereby offering tied advisers a ‘systems and technology’ edge going forward.
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