Major economic, regulatory and technological forces are driving change throughout the advice market. But as we hear from David Tiller, Head of UK Propositions Standard Life Aberdeen, by embracing the latest innovations in automation and customisation, advisers can still have a strong competitive advantage and work towards better financial outcomes for their clients.
David explains what Standard Life is doing to help advisers achieve that, including working with them to develop and test their latest platform technology.
1. What do you view as the biggest opportunities for advisers?
Demand for advice has never been higher or more vital. As a result of global economic conditions, increasing regulation and consumer protection, and advancements in technology, more people need and expect access to good advice.
Many face the complex investment challenge of funding a longer retirement, with no option of an affordable guarantee. Linked to that is an increasing need for intergenerational planning to help families protect their financial futures in the most tax-efficient ways. So now, more than ever, individuals and families need advice.
This is a huge opportunity – and a collective social responsibility - for providers and advisers to work together, to exploit technological advances to give more people the chance to improve their financial outcomes.
With technology advancing to a liberating level, services previously restricted to the very wealthy are becoming accessible to all. So, as well as using technological innovations to improve services to existing clients, advisers can use them to gain new clients without compromising quality. For example, technology may allow them to consider options like reducing minimum investment levels.
2. Will competition chase this demand?
Yes, several regulatory initiatives are accelerating price competition. Many financial businesses realise they can’t afford to miss out on the advice market. And they’re not fellow advisory firms; they’re banks, wealth managers and investment houses – those under pressure and looking for other sources of income. They’ll enter the market with their best ideas around digitisation and automation.
The most simple robo-models will set a tough precedent for fees, so we all need to accept that some clients won’t be willing to pay as much. Advisers don’t need to match robo-pricing, but do need to embrace efficiencies to make the premium they charge– for the value they add – acceptable. And to justify a higher price, it is essential to make value clear to clients on an ongoing basis.
3. What can advisers do to make sure they stand out?
Advisers already have a huge competitive advantage: their deep knowledge of and strong relationships with their clients. Most of the competition is unlikely to have the same depth of customer insight, so demonstrating value and trust is rooted in the human adviser-client relationship. The understanding that comes from this relationship is what gives advisers the opportunity to more accurately match their services to what clients are trying to achieve – more so than a simple robo-solution could hope to achieve.
But, as we’ve seen in the US, the risk from the new competition arises when advisers fail to reflect their advantageous knowledge in their client solutions. There, broker-dealers lost clients as they could not justify why they were levying a higher fee for a solution they could get with a low-cost robo.
Advisers need to use the insight they have to better match solutions to clients’ goals. Doing this, they’ll increase the chance of a successful outcome for their clients – and protect their business from price-led competition.
4. What will help advisers add value?
The good news is that the most progressive platforms are developing technology that can help advisers differentiate in a much more scalable way. This means advisers can pass on lower costs to their clients without compromising on the service they give.
Enabling clients to carry out some tasks themselves may remove some cost from an adviser’s business. It also satisfies changing client demands in a world where we all expect more control and interaction with the services we use. However, advisers need to keep control of self-service options so a client can’t unwittingly make changes that will have an adverse impact on their plan.
Mass customisation is perhaps the single biggest opportunity for advisers and their clients. While each client’s circumstances are unique, in truth, the vast majority of individual requirements are variations on a series of themes. As long as controls are in place to reflect client requirements, advisers can combine targeted interventions with automated processes and algorithms to deliver a scalable solution in a way that’s cost-effective for them and their clients.
For example, advisers could benefit from putting drawdown management on rails. Systemised monitoring with automated interventions and alerts allow plans to be run dynamically, with direct intervention only if the plan veers off course. Review documentation could also be automatically generated, saving time and creating capacity.
Similarly, advisers should consider pre-programme investment monitoring and actions to ensure client portfolios stay within their risk targets. And assets can be automatically moved across multi-goal strategies reflecting, for example, the differing timescales in a drawdown solution. Requirements that would have previously demanded individual interventions will soon be automated, including unique client requirements such as asset substitutions or executing a capital gains tax harvesting strategy.
Technology is transformational when advisers employ it across their most resource-intensive processes. Advisers will still be able to provide truly individual solutions that reflect client goals. In turn, this will help them from the cost-efficiencies and scalable models being pursued by the robos, while focusing on what clients value most.
5. What support can advisers expect from platform providers?
Implementing technology can be disruptive, and platforms are highly complicated, integrated systems that advisers depend upon to deliver their client propositions. So it’s crucial that providers understand how to implement changes, while continuing to communicate and deliver the functionality and service advisers expect. For me, reliability is the most important thing advisers need from us.
Advisers should expect platform providers to invest the time and expertise to securely embed technology into adviser businesses, to help their people confidently take advantage of the new automation available.
At Standard Life, we’ve been prioritising developments to help advisers operate key processes in a much more scalable manner, while still retaining their unique propositions to clients. To do that successfully, we’ve had to re-think how we look at things like platform investments and ongoing suitability processes, and how these interact with each other.
6. How are you working with advisers to improve efficiencies and scalability?
We’re improving two-way engagement. So we’re asking for advisers’ views and experiences during calls, meetings, events and introductory or review visits to our head office, and through our new quarterly satisfaction survey. We’re recording and analysing what advisers tell us – and using insight to inform our strategic planning. We’re then using meetings and events to share our analysis and thought leadership to help advisers prepare for the future.
We’re also collaborating with advisers to develop platform functionality. For example, to improve client reporting on Wrap, we’re testing prototypes and reviewing ideas with advisers. Their insights are shaping the new capability we’re developing that will allow them to customise and personalise clear and visual reports for their clients. It’s a genuine partnership to understand and deliver what advisers need to improve client understanding and engagement with their life savings, and ultimately achieve better outcomes.
Similarly, we’ve engaged closely with advisers on the development of our new Wrap Professional Portfolio Manager functionality. As a result, advisers can access a centralised and consistent process to create and manage client portfolios at scale, while reducing cost and risk in their processes.
Developments like these show how much we can achieve when we move from a transactional environment to a collaborative one. And it goes back to providers and advisers working together to give more people access to the advice they need.
7. Which developments and opportunities are you most excited about over the coming year?
It’s really the technological advancements I mentioned earlier. Using mass customisation and automation, and facilitating client self-service can give advisers the potential to deliver truly individual solutions to their clients that don’t require constant intervention. Think of the benefits to advisers and ultimately to their clients of being able to improve how they deliver their centralised investment propositions, and of making multi-tax wrapper drawdown a reliable and efficient process. And while adding an element of client self-service can reduce administrative strain, it’s also a valuable way to engage clients, particularly younger generations, with how their life savings are managed.
It’s an exciting, transformational time in the history of advice. Huge demand is here, waiting on solutions and guidance. Sophisticated investments and technology are here, waiting on the right deployment. It’s now up to providers and advisers to bring the two together in the most effective, efficient and reliable ways. Then advisers can fulfil their competitive advantage: offering tailored, affordable solutions that target better outcomes for more people.
The value of investments can go down as well as up, and could be worth less than originally paid in.
Standard Life accepts no responsibility for advice that may be forumulated on the basis of this information.
Read more on how you can make a difference for your clients on standardlifeadviser.co.uk/future
This article is intended for investment professionals only and must not be relied upon by anyone else.
Standard Life Savings Limited is provider of the Wrap Platform, Wrap Personal Portfolio and Wrap ISA is registered in Scotland (SC180203) at 1 George Street, Edinburgh, EH2 2LL. Standard Life Savings Limited is authorised and regulated by the Financial Conduct Authority.
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