Why advisers must embrace technology
IFAs should be focusing more on technology in the run up to the RDR
It feels like the RDR has been dominating everyone’s thoughts. That’s probably because it has been.
Whether the relevant firms are fully geared up, almost good to go or in various stages of unreadiness, all minds have been on these three letters for a while. While of course it is vital that those planning to remain in the advice, investment or platform industries are fully RDR-enabled come January 1 next year, I wonder if our focus on regulation may be creating oversights elsewhere.
One could argue that the biggest single issue facing the retail savings industry today is not regulatory change but the effect of technology. No matter the role we all play in trying to deliver great outcomes for clients, the life-changing technology advances of recent years don’t really seem to have hit our sector yet. Whether that relates to platforms seeking to squeeze profit margin out of the back office, advisers fighting off the impending threat from DIY or execution-only investments, or fund managers seeking to defend increasingly transparent and often mediocre performance, things are about to get a whole lot harder.
If one consider the impact of Amazon on book, CD or DVD retailing (or indeed any one of the other hundreds of markets now served by the logistics giant) or stops to ponder what iTunes did to the music industry and then applies some of that radical thought to retail financial services, it is not hard to visualise a very different world emerging. These companies have focused relentlessly on creating excellent experiences for users and constantly eliminating intermediaries who do not add value for customers or destroy it, creating new business models which in some cases bear little relation to what went before.
How many of the current participants in the industry would consider their business model to be resilient from assault from someone with similar drive? How many life insurers believe their high costs can possibly survive in a more transparent world? How many fund managers can genuinely claim to add value for their fees? How many platforms believe they have an operating model that allows them to generate sustainable profits, and how many financial advisers are comfortable with the challenges technology might lay at their door?
In the latter category, well run, high-quality advisers have the least to fear. For many clients, technology may never be able to fully overcome the attraction of the personal touch. Adviser firms will need to use technology more effectively, but given the UK’s hideously complex fiscal and pension systems it is easy to see why people might want someone to talk to if they have anything other than very straightforward affairs. It’s also much easier for generally small businesses to be more responsive. If an adviser really needs to change or raise its game it can usually do that pretty quickly. A 150-year-old institution employing 500 staff might find things a little harder. Check out Waterstones, HMV and the like to see what can happen when you call the strategy wrong and find yourself on the back foot. As the consumer navigates from being sold a product to buying advice, our world is changing too. I can’t help but think the ramifications are going to be huge.