How to embrace technology

How to embrace technology

The idea that technology can replace a financial adviser is nothing new. 

In a world of autonomous vehicles and artificial intelligence that can defeat the Chinese Go Grandmaster, surely a computer can understand a person’s financial circumstances and concoct a reasonable set of recommendations?

But none of the original financial planning solutions, like Moneyvista, or financial aggregators, like Moneydashboard (the UK’s alternative to Mint in the US), broke through into mainstream usage.

So-called robo-advisers, such as Moneyfarm, Nutmeg and Scalable Capital, are gaining some traction through the integration of human advice with their robots, but they have by no means cracked the market. 

These newcomers tend to focus on aligning an individual to the right fund or portfolio based on risk appetite.

In general, they do not look to offer the financial advice that many people need, particularly as they approach retirement. This later stage of life poses a fundamentally complex challenge that needs extensive data gathering and an assessment of future intentions.

The most valuable asset that incumbents have is the set of soon-to-be retirees on their books, each with reasonable sums of money spread haphazardly across multiple pension policies.

These retirees will need help. So, if those firms can find a seamless solution to understand their clients, give incisive advice and act to their clients’ satisfaction, then they will delight their shareholders in the process.

The challenge is, therefore, one of combining innovation with scale.

Key Points

  • Questions arise over whether a computer can have a comprehensive understanding of an individual's circumstances
  • It is important to keep customers at the centre of one's universe
  • Technology should look to behavioural science to understand  the quick satisfaction that people crave

Start-ups do not have the volume to cut a decent profit on technology investment, while incumbent pension providers and advice firms, for all the rhetoric, have struggled to transform themselves into the Amazons of financial services. 

Based on observations of firms across the sector, and the relative success and failure of those firms, four actions stand out as ways to deliver successful technology innovation:

• Understand that your customers are at the centre of their universe, not yours.

As the retailing of household products and digital media coalesces around an ever-smaller number of platforms (Amazon had 33.5 per cent of all UK online spend in 2017), so inevitably will financial services.

Realistically, many advisers and providers would be better off embracing this future rather than fighting it. This means thinking about who your customers are, what life outcomes they are trying to achieve and the physical and digital environments where they like spending their time. 

This is the age of ‘Customer 4.0’, where a complex network of friends, family and media influence people more than traditional marketing.

Understanding this customer universe and building partnerships to break into it is, therefore, vital. Rather than simply thinking about the opportunities presented by the pensions dashboard and open banking, or even ‘open finance’, innovation should consider ‘open life’.

• Discover what drives savings and replicate that within an inherently long-term product.