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File Image: IOL

Advisers falling behind on tech curve

By Martin Hesse Time of article published Mar 24, 2020

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A large majority of financial advisers in South Africa have yet to come to grips with recent technological advances, still see technology as a grudge purchase, and have not succeeded in effectively harnessing technology to truly benefit you, the client.

This is according to Jen McKay, a founding director of Linktank, a consultancy providing fintech solutions to the financial services industry. She was speaking at last week’s Insurtech 2020 Conference at the Cape Town International Convention Centre.

“Over the past five or six years, my business has worked with corporate and independent advice firms, platforms, product providers, industry bodies and software providers. This has exposed us to the operations of more than 6500 financial advisers tied to large financial companies and more than 2500 independent advisers. We’ve also performed many surveys, with insights from more than 3500 financial advisers across the tied-independent spectrum and probably about the same number of people in administrative or operational functions directly connected with financial advice.”

McKay said advisers and product providers were using technology to make things easier for themselves, such as for back-office administrative functions. But not a single adviser Linktank had come across had in place a successful technology-driven adviser-client interface that was truly focused on the needs of clients and, importantly, let the client take ownership of his or her personal data.

She said such a client-centric model should give the client choice, incorporate analytics, and provide some degree of automation.

“It is about placing the client in the driving seat and enabling them to choose whom they engage with, in what format or via what channels, how frequently and at which points. It involves analytics of client data to be able to offer quality advice to more people and uses automation wisely, for behind-the-scenes functions, but keeps the relationship personal. It’s about enabling self-service in areas where it’s valuable, guided service in areas where that’s valuable; and direct, human service where it matters most - which, I’m sure you’ll agree, is not in the area of filling in forms.”

McKay said positive drivers included the fact that there was amazing technology available, regulators were encouraging financial literacy and inclusion, and consumer demand for technology-based services was high. But the industry’s appetite to embrace technology was low - advisers were “hamstrung by fragmented data and systems”.

She said advisers had to accept that the demand for traditional advice models was declining. A new generation of consumers wanted technology-based financial advice platforms that were accessible, relatively easy to use and affordable. However, research in the US among millennials and younger generations showed that two-thirds of them still wanted the human touch when it came to making important financial decisions.

Then there's the huge advice gap in South Africa. Financial advisers serve only the top one or two percent of the population, leaving about 26million adults under-served. “If there’s a legislative drive towards financial inclusion and there’s consumer need, and we are capable of penetrating the gap with the help of technology, why is the advice industry not jumping on board?”

McKay said her company had seen no evidence that advisers were rising to meet these challenges and opportunities. Why was this? She said reasons included the following:

* Financial advice software was still largely aimed at advisers, not at clients.

* There was a lack of integration between various systems in use by advisers.

* Advisers still saw technology as a grudge purchase, with little perception of its value other than for administrative or compliance purposes. McKay said tech spend had not increased in line with revenue in 10 years.

* Data distribution was all wrong. The perceived owner of client data was still the adviser, not the consumer.

* Advisers didn't trust their data integrity enough to allow clients an unmediated view, largely because much data was still manually captured.

* Many advice businesses were still battling with rudimentary issues and had not fully migrated to digital from a paper-based environment. Digitisation of even internal processes remained low, never mind consumer engagement.

* Product providers were not helping to improve the customer experience, using technology instead to help drive the flow of money towards themselves.

“Smart straight-through processing or servicing technology initiatives are largely aimed at locking advisers into one product provider or another, not at creating a client experience that might encompass multiple institutions,” McKay said.

PERSONAL FINANCE 

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