Why technology is key to future growth for financial advisors (and how you can prepare today)
Technology is turning the financial services sector upside down.
In this highly regulated market, which for so long resisted new ways of doing business, around one in five wealth management, asset management and insurance firms will see their core business model at risk as a result of technology by next year.
This was the prediction PWC made a couple of years back in its report, Financial Services Technology 2020 and Beyond, and the swathes of fast-growing new businesses which have emerged into the sector in recent years are clear evidence no firm in the sector can rest on its laurels, providing the same old customer service.
The changing (and challenging) consumer
The defining challenge for any financial services service business is how to win and retain a viable client-base.
By 2020, over half of the workforce will be the generation born between 1980 and 2000.
The so-called millennial cohort is the force that drives demand for financial services and their influence will only grow. This generation, which has grown up with search engines and social media, has very different expectations around the services they will pay for and the kind of business they want to do business with.
Because they are digitally self-sufficient, they are happy with self-service, placing less of an emphasis on the need for human interaction or traditional ways of doing business.
The way they look for financial services is different. Instead of asking family and friends for advice, more millennials are looking to influencers on social channels and online reviews to inform their choices.
With barriers to signing up and switching service providers lower than before, they are less loyal and also less forgiving of what they perceive to be poor service.
And it goes without saying that the phone is the device which is at the centre of their world: the home to their wallet, their bank and all of the apps which help plan and manage their lives. Mobility and multi-channel consumption is a given.
Technology gives a competitive edge
The firms that are doing well in this new market are the ones who understand how these expectations set the agenda for the financial service firms and deploy technology to do things differently, meeting their expectations. For example:
- Starling bank lets you sign up for an account with a video and a copy of your ID and through open API, it encourages others to develop complementary services for its customers which can access them through its app marketplace.
- On revolut, you can sign up either to be an influencer or an affiliate, so powering its social marketing strategy while being paid.
- The financial advice firm Hatch uses financial planning technology to reduce the cost of financial advice.
- A growing number of so-called HR tech start-ups are targeting consumers through their employers, offering loans, financial education and other services.
This is just a handful of examples and there are many more firms like these. Taken together, with customer bases stretching into the millions – and growing – these are no longer small players with niche services but the ones directing the future for the sector, setting the standards for customer service and the use of tech.
The tech tidal wave is coming
The thing is, we are only really at the beginning of this shift to new delivery models for financial services. Beyond 2020 industry watchers predict:
- The rise of open banking – the proliferation of new businesses which use open banking data to help consumers find financial products and services which are best suited to their needs.
- The mainstreaming of AI and robotics – technology will allow for greater task automation, financial modelling and assisted financial advice as more sophisticated tools emerge.
- The rise of new service channels – in the same way you can book and connect to medical advice with services like netdoctor, you will be able to get live financial advice and support instead via video. Remoting browsing will allow banks and advisers to help you fill forms and share planning tools.
- “Pick and mix” consumption – instead of using one provider for all their products, consumers will aggregate and switch between different financial service providers for different services with little regard for established brands.
As a result of all this change, today and in the future, the combination of good financial knowledge and high-quality service is no longer enough to compete effectively for customers. Every firm must become a business which understands and has a plan for how they will deploy technology.
A tech platform for growth
The first priority for every financial services firm is to ensure that it has a technology platform which will allow it to deliver the new generation of services that tech-savvy millennials and their increasingly sophisticated elders expect.
In its Financial Services Technology Report, PwC said that cloud computing would become the dominant IT infrastructure in the sector by 2020, this prediction which has quickly come to pass.
For data, the public cloud is now trusted as the place to keep records and stay in line with changing security and data protection regulation like GDPR.
Cloud software now allows firms and clients to share data, forms and manage their affairs remotely and securely, wherever they are.
Cloud technology is the platform that underpins the new ecosystem of financial tech services and apps. It is also what powers and connects most the sales, marketing and CRM tools you need to win and retain customers.
Tech strategy is a business strategy
The reality for financial services is that technology has to be as much more than something which gives you the tools to help your business run smoothly. Going forward, your technology strategy and your business strategy are fully intertwined.
- The tech operating model you choose – the software and services consume – will be critical to accessing the AI and robot services and tools which you will need to offer in the future, if you aren’t already offering them today.
- Your legacy IT systems and the decisions you make to maintain, simplify or them will directly shape your cost base and therefore your competitiveness.
- The extent to which you invest in developing and testing new fin tech products will define your ability to win your share of the newly tech-savvy mass market.
- The skills and knowledge you have today and the capability you need to succeed in a digital-first sector need to be identified and addressed.
In our experience, few mid-sized financial services firms will have the knowledge and skills in-house to map out their path from their current IT infrastructure to the cloud.
This is where the skills of a specialist company like CloudDirect comes into play.
We can work seamlessly with the leaders of the business and the in-house IT team to identify the changes you need to make and the technical skills to get you there. We can help you with the migration and then with as little or as much support as you need to manage costs, performance and security.
Be leaving the technology to us, you can focus on shaping your firm so it is ready for the exciting opportunities that lie ahead in financial services.
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