Guide to technology
MARCH 2020
technology | MAR 2020
overview
Cherry Reynard on making the most of transformative technologies and why implementation is the key
revolution ready
Novia explains how platform technology is taking financial services to the next level
intelligent machines
Artificial intelligence is no longer the stuff of science fiction, says Praemium. Are you ready for it?
a friend, not a foe
Quilter International on reaping the rewards of change within financial services operations
the future is now
The right tech tools will future-proof an advisory business. There’s no time to waste, warns Trove
| the future is now
Contents
The tech effect
To make the most of transformative technologies advisers must focus less on what they have and more on how they use it
By Cherry Reynard
Most advisers now recognise that technology is a necessary tool in helping them scale their business. From client and investment management to compliance, the tools exist for advisers to build the business they want. The challenge from here, as US businesswomen Sophia Amoruso puts it: “It’s not what you have; it’s what you do with what you have.” According to Chris Jones, proposition director at Dynamic Planner, most advisers now recognise technology should not replace their relationship with the client but enhance it. “Advice is a fundamentally personal matter that relies on trust, expertise and effective communication,” he says. “An adviser may have evolved from a quill and abacus to a calculator and a ballpoint pen and now to a device and software, but this must improve the advice, not replace it. A professional craftsman will always take advantage of the most effective tools.” He is clear that technology adoption is not enough in itself. “Too much technology is built for its own sake and not because it helps the professional adviser give advice.” Technology must be carefully selected and implemented for it to be effective.
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Rubbish in, rubbish out
Central to an effective use of technology is the ‘rubbish in, rubbish out’ principle. Good data is vital to making a success of technology adoption. In a recent blog, Nicola Reynolds, marketing manager at Intelliflo, put the cost of bad quality data as high as 30% of a firm’s revenue, because financial advisers handle so much sensitive information. Keeping it up-to-date and accessible is key. Reynolds says: “Accurate data makes a huge difference to how your firm operates. If your data is reliable you can automate processes such as income matching and valuations. In the long term, this improves efficiency, saving staff hours and reducing costs.” Also from accurate data comes ‘customer intelligence’. PWC recently identified this as the most important indicator of revenue growth and profitability for financial advice firms today. It says customer intelligence was previously based on relatively simple heuristics, from focus groups and surveys, producing hazy results. Technology advances have given businesses access to vastly more data about what users do and want.
After years of working with clients, advisers may argue they understand what they want. However, people aren’t always honest, particularly in established relationships. Technology can provide a means to get honest feedback and can help give customers what they really want, rather than what they say they want. There are risks in using technology badly. Chief among them is the security threat, which is becoming more widespread as the use of third-party vendors increases, technology becomes more complex and customers use more mobile technology. It is difficult to underestimate the potential damage from a security breach, both in terms of the financial risk to clients and to a firm’s reputation. Analysis from NextWealth, on behalf of FundsNetwork in 2019, revealed that planners are still primarily concerned with compliance and changing regulation. Only a small minority worry about attacks on their systems or other security problems. Vigilance does not necessarily mean expensive software but can be as simple as ensuring staff recognise phishing scams and hacks. For most companies, employees remain the biggest cyber security risk.
Hitting the mark and dodging risk
It’s all in the implementation
Poor processes may not reveal themselves day-to-day but can be exposed by issues such as re-platforming. According to the FCA: “Insufficient investment processes and resources for technology and operations can lead to business continuity issues with services to customers and advisers being unavailable, intermittent or restricted. Poorly planned and executed technology migrations and upgrade programmes exacerbate this issue.” It adds: “Change programmes should be adequately planned and tested, with clear responsibilities defined upfront between your firm and any third parties to ensure quick resolution of any issues. We expect you to have clear contractual arrangements and plans in place with outsourcers, eg documenting responsibility and actions for incident management, outages and potential wind-down.” A recent McKinsey Global Survey on digital transformations shows 80% of companies undertook a digital transformation in the past five years. However, it also found companies struggled to ensure digitisation improved performance and then sustained it. The key to success, according to the McKinsey Global Institute, is in the implementation process: making sure transformative technologies are used to best effect. Advisers may need to focus less on what they have and more on how they use it.
‘Technology can help give customers what they really want, rather than what they say they want’
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Cost of bad quality data to a firm’s revenue.
30%
Source: Intelliflo
Firms that have digitally transformed in the past five years.
Source: McKinsey
80%
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Revolution ready
Using platforms to automate and streamline day-to-day processes is stepping financial services up to the next level
In association with
As we enter a new decade it is not unreasonable to suggest that the 2020s will herald an unprecedented era for clients when it comes to financial services and technology. Over the coming years we will see advisers and adviser businesses alike adopting new online processes as part of their daily routines like never before. One sector of the international advice process that looks set to expand as part of this digital revolution is that of global, multi-currency investment platforms. A way that advisers can streamline their business is by using a platform to automate their day-to-day processes and thus remove the manual tasks and delays that can be associated with international financial services. All client data can be held securely online with administrative support staff using the platform to access it in order to deliver a range of functionality and processes expedited by the use of this technology. Therefore, it is important to view the platform more as a way of delivering the total wealth management service proposition to clients in a cost-effective way, as opposed to just another financial product.
Automated efficiency
Another major benefit of an online platform is a reduction in the need for paperwork. Important documentation such as contract notes and valuations are stored online in the client document library and can easily be downloaded and shared with professional advisers if required. This lack of paperwork also extends to the platform providers, especially where they have an extended provision by way of offering tax wrappers in addition to the standard general investment account. For example, at Novia Global we recently launched an online application process for the Novia International Sipp that eliminated the need for an eight-page form. Via this new functionality, a defined contribution scheme transfer can be completed via the Origo Pension Transfer service, eliminating reams of paperwork. What was previously a process that could take between four and six weeks can now be wrapped up in less than two weeks, resulting in substantial time and cost savings for both advisers and their clients.
Paperless trail
‘Substantial cost savings are being passed on to advisers where research tools are available as part of the platform infrastructure’
‘Novia Global launched an online application process for a Sipp that eliminated the need for an eight-page form’
The Novia International SIPP is a transfer only Personal Pension Plan provided by Novia Financial Plc and distributed exclusively by Novia Global Ltd. Its value and returns will depend on the performance of the underlying investments and is not guaranteed. The value may fall and you may get back less than your original investment. Novia Global Limited is registered in England & Wales. Register Number: 9042249. Registered office, Cambridge House, Henry Street, Bath, BA1 1JS. Novia Global Limited is authorised and regulated by the Financial Conduct Authority. Register Number: 653661.
Novia Global offers an international multi-currency investment platform that allows investments in six currencies into a general investment account for personal and third-party trusee investments, as well as a competitively priced International Sipp scheme. Full details are available via www.novia-global.com
Summary
Some of the key benefits achieved by advisers and their clients when adopting platform technology to support the advice proposition will be:
Time and money cost reductions through efficiencies of process.
3. Efficiency
Consistency of the client investment advice process across the business, together with other tasks such as risk profiling, client reports and reviews.
2. Consistency
Reliable delivery of the adviser proposition, eliminating the errors that typically might otherwise happen in manual processes.
1. Reliability
Process efficiencies are achieved where client portfolios are reviewed and updated using automated tools, such as for rebalancing purposes. What might usually involve spreadsheets and manual requests is replaced by the click of just a few buttons. Switching and report production processes are also transformed with the adoption of technology, which will seamlessly work in conjunction with an adviser’s existing back-office software. Indeed, substantial cost savings are already being passed on to advisers where research tools are integrated and available as part of the platform infrastructure, instead of them having to purchase these tools separately via a paid-for licence. The provision of information like this to clients is a great example of cost reduction for the business. If all client information is held online then it is much easier to answer any queries regarding their investments. The number of inbound queries will also be reduced if clients have online access to their pension and investment data. Many clients already have online access to banking, utilities etc, and therefore the consolidation of their assets and having access to them online 24/7 is seen as a valuable yet expected benefit.
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The machines are learning
Artificial intelligence is no longer the stuff of science fiction and it’s transforming financial services. Are you ready?
It wasn’t too long ago that artificial intelligence and machine learning (AI/ML) belonged in the realm of science fiction. The idea that a machine was not only capable of making our lives more convenient but smart enough to make the right suggestions, too, was a fiction that becomes more real and prevalent each day. When it’s hot, our air conditioners ask if they should activate an hour before we come home; our coffee machines ask us if we want a cup when we wake up; and our watches tell us not to stress so much. No matter where we look, there is some form of AI giving us a helping hand in our daily lives. We are seeing more and more examples of AI in the world of financial services, too.
How does it work?
Some AI/ML systems are quite complex, relying on sophisticated algorithms to deliver accurate results. However, in the simplest sense, AI/ML formulates ideas based on patterns in historical data. If something occurs more frequently in a data set, the system can make recommendations based on it. Most adviser businesses would be familiar with employing automation within their business, creating workflows or reminders of certain events. The automation reacts to a piece of data and creates a task or an alert. A common example is many CRM systems can inform an adviser of a client’s birthday or even email the client automatically. Therefore, automation can take information and act on it. What it can’t do is learn from it, recalibrate and improve. AI/ML looks at previous information, interprets it to find an improved process to suggest or automate. By interpreting previous birthday messages sent to the client, AI can determine that making phone calls yielded a more positive result – and therefore suggest a phone call would yield greater appreciation from the client.
The most obvious place where AI is emerging is in risk protection. Medical data helps insurers assess the likelihood of a person contracting an illness. It makes a risk assessment based on previous cases, matches the conditions and defines the most likely outcome. This will demonstrate the probable needs of an individual. If most people who are overweight are likely to get heart disease by their mid-50s, and the average claim is $150,000, AI can suggest that a person should be looking to take suitable cover. Family history can make this information even more accurate. In wealth management, Praemium has released its new Insights module that prompts advisers to better understand and engage with their clients. By providing investors and advisers with digital portals to engage, Praemium is able to track the patterns of the investor and alert the adviser if something is unusual. This could help an adviser know of an investor’s change in circumstances or inform them if market volatility is causing undue stress.
How has AI emerged in financial services today?
Should I be worried or excited about AI?
Some people are fearful as to how far AI will go. Will it take our jobs and replace the need for the adviser? Rest assured the answer is most likely no. When robo-advice was announced, many feared it spelled the end of the adviser market. Evidence shows that robo-advice platforms struggle to gain or maintain traction, further demonstrating the value advisers bring by providing personalised service and guidance to investors. AI/ML will take this a step further, helping advisers give a better service and allowing you to know your client even more. Over time, AI should reduce the administrative burden of servicing a client, leaving more time to have more clients and provide investors with what they value the most – personalised time and engagement, as well as interesting insights on their financial situation. This will empower advisers and investors to have greater knowledge through the journey, creating an even more rewarding experience – both in service and hopefully financially, too.
‘AI/ML looks at historical information and interprets it to find an improved process’
‘AI will empower advisers and investors to have greater knowledge through the journey, creating an even more rewarding experience’
‘Praemium is able track the patterns of the investor and alert the adviser if something is unusual’
As mentioned previously, AI is built on the data it studies and learns from. The more data you can capture about your business or your client, the more informative and accurate your AI can be. If you conduct a service with paper, all the valuable information from which AI lives and learns is lost. It can’t participate or learn how both the adviser and investor interacted. It can’t add any efficiency as it is offline. To capture these data points, you must have an end-to-end digital process for your business. Engage your clients through digital fact-finding and risk-profiling questionnaires, service and communicate with them through online investor portals and provide/execute advice on paperless platforms. Each step of the financial planning journey can now be achieved digitally, which can provide valuable insights on both your business and your clients – and as with most technologies, we’ll end up wondering how we ever lived without it.
How can I embrace AI within my business?
‘The more data you can capture about your business or client, the more informative and the more accurate your AI can be’
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Make tech your friend
Technology can be massively beneficial, reports Karen Blatchford, and nowhere is this more evident than in financial services operations
For us in the financial world, technology is using the latest scientific and technical knowledge to improve operational efficiency for advisers and, ultimately, the outcomes for clients around the world. Sounds simple. Modern day life is now inextricably linked to technology, so much so that screen time limits are being put in place by parents the world over to encourage children to ditch the tech and find other pursuits. However, there is no doubt technology can be massively beneficial to all ages. This is well documented in the international advice space, in which advisers enjoy a much-improved experience as a result of the industry’s technological advancements. The nature of financial advice has evolved dramatically with this progression. In the past, it was often purely transactional, but there is a discernible shift towards repeatable advice, with clients now benefiting from years of regular holistic advice, as opposed to one-off product sales. This shift is down to lots of factors but technological advancements have played a significant part. Improvements in platform technology have enabled advisers to flex how they run their business to move towards this new iteration of financial advice.
In numbers
Statistics show that platforms are now becoming the norm – the way to transact business and interact with providers and your clients. Processing online means information is checked and validated as it’s keyed in, vastly reducing the need to contact you for missing information and avoiding delays. Plus you can build, monitor and adjust your range of investment portfolios ensuring they are compliant and consistent. And it doesn’t just improve the way business is processed; it can help to reduce the risk to you and your business, too. Platforms, such as our Wealth Interactive system, can make it easier for you to adapt to the never-ending stream of regulatory change. For example, you can ensure clients who are classed as retail investors only have access to retail assets – so you don’t fall foul of the Isle of Man Insurance Conduct of Business regulations. You can also access all the required regulatory documents for both products and funds in one place to satisfy the Packaged Retail and Insurance-based Investment Products regulation – all with an instant audit trail for your compliance records.
Safe, secure, efficient ...
Putting you in control
Post-sale, technology helps you provide the level of ongoing support your clients will expect. From requesting valuations or switching funds, to initiating withdrawals – all at the touch of a button, without reams of paperwork to complete. But it’s not just for advisers. Research in 2018 from the banking world, commissioned by Deloitte, found that 73% of respondents globally use online banking at least once a month. Therefore, technology is no longer the preserve of finance professionals but is part and parcel of everyone’s financial services experience. As well as bank accounts, platforms can allow clients to look up the value of their investments, approve transactions that you send them, or access their correspondence at a time that suits them, wherever they are in the world.
‘Technology is part and parcel of everyone’s financial services experience’
‘Platforms are now becoming the norm – the way to transact business and interact with providers and your clients’
Naturally, technology is simply one element of the advice process, and face-to-face advice should simply be complemented by technology and certainly not replaced by it. The lack of large players in the robo-advice sphere is a good illustration of why technology and face-to-face advice must work in handshake rather than independently. Technology streamlines the advice process, helping to speed up identifying client objectives, performing risk profiling and suitability assessments, researching and selecting products, and executing transactions. While platforms will continue to aid, augment and improve financial advice, they will never be able to replicate many of the skills essential to the financial advice profession. For more information about Wealth Interactive, please click here to visit our website.
Aid, augment, improve
‘Face-to-face advice and technology work in handshake rather than independently’
Advisers that thought technology made it more efficient to manage clients on a daily basis.
69%
Advisers that said online platforms made business processes quicker with less errors and delays.
67%
Advisers that said technology made it easier to manage investment portfolios.
63%
The benefits of technology were well illustrated when Quilter International asked 180 financial advisers from across Asia, the UK, Europe and the Middle East about the key ways in which technology on provider platforms can help their business. The results showed that advisers have an acute understanding of the advantages of online platforms. Source Quilter International adviser survey November 2019.
Advisers surveyed that said they believed technology did not help their business.
4%
Advisers that felt the amount of business placed online with a provider's platform would be the same, or more, in 12 months.
96%
The future is now
The right tech tools will elevate client interaction and future-proof an advisory business. There’s no time to waste
Technology can deliver solutions we only previously dreamed of. Revolut, Monzo and Starling have changed banking and FX forever. Client experience, flexibility, transparency and service is at the heart of the revolution. Advisers and wealth managers should seriously question why this will not also happen in investment and financial planning. Most people are at least comfortable using the internet. Many government organisations now compel individuals to complete applications online. It goes to show how fundamental the worldwide web has become to daily life. The real challenge for you as advisers is to not stick your heads in the sand and pretend otherwise. This raises the question of how advisers can get ahead and ensure they deliver value within the new relationship the client has with technology. Before embarking on a technological revolution, advisers must do one important thing first: speak to their clients to understand what should be considered. Let’s be honest, advisers would love to spend less time and reduce costs in areas that hold no obvious value to clients or the business. The ideal future technology increases efficiency, future-proofs business and enables clients to work at their own pace, allowing business to offer and clients to receive their preferred level of service. Technology lies at the heart of that.
Tools of the trade
The right tools will elevate client interaction, eliminate most paperwork, retain business and help compliance with regulation. For those with international clients or operating cross-border, tools will allow assets to be recorded in various currencies, which can be changed at the discretion of the client. These tools will assist with back-office functions, CRM, communications and manage regulatory changes and reporting requirements; such as Mifid, Priips and GDPR. Annual reporting is a case in point. Hours can be spent doing manual reports on excel spreadsheets or using a single platform to generate financial calculations before an adviser then must perform risk and objective updates, either online or face to face. If there are more than two platforms or two providers involved, simply preparing for a meeting can take up to four hours. This is a perfect example of where the adviser spends considerable time and effort completing a task the client doesn’t understand or even know about. But advisers who believe solely in the concept of meetings, and fail to adapt to the technological revolution, are putting their livelihoods at risk; as are those who deploy half-hearted in-house tech solutions that do not involve the client.
My other half tells me the job of adviser will not exist 20 years from now and my arguments for why she is wrong diminish every year. However, she accepts empathy will always have a place alongside automation. A tool that has an interactive element for the client, where they input their own data and update it, keeping them involved and engaged in their own financial journey, is essential. A client portal can provide access to investment information, which can reduce time spent chasing the adviser or their company for answers. When the client has a more significant question, only then will they want advice, which demonstrates adviser value. Connecting this with a back-office system means no repetitive re-keying, client communications can remain secure, digital signatures can be obtained in real time and period reports, such as a Mifid procedure, can be automated. Complaints or transparency issues can be handled quickly and efficiently. Correspondence, notes and agreement, and instructions can be recorded securely and in a GDPR-compliant manner. A system should offer scalability, saving advisers time on compliant reporting, reducing the need for administrators and unnecessary meetings, and making them more profitable and productive.
Process of engagement
Quality without compromise
To meet challenges within my own business we set about building a system that works for clients and advisers alike. It meets their immediate need for information and support when they need it, rather than being ruled by dictat and providing unnecessary meetings. For advisers and businesses, our system also lowers the intrinsic costs in the delivery and timing of services to clients without any compromise on quality. It assists and frees up advisers to focus on what they do well: namely, provide financial advice.
‘Advisers who fail to adapt to the technological revolution are putting their livelihoods at risk’
‘Technology will enable clients to work at their own pace’
‘A tool that has an interactive element for the client, keeping them involved and engaged in their own financial journey, is essential’