Understanding financial advice
Financial life goals
Tools and resources
Products and services
Investing with IOOF
Your retirement goals
Understanding super & money
By Joncarl La Rosa
Joncarl La Rosa is the Head of Advice Innovation for IOOF licensees. He joined IOOF as part of the October 2018 acquisition of ANZ’s Wealth Management Advice licensees. Joncarl has over 20 years’ experience in the financial advice industry across a number of roles ranging from advice, advice technology, practice management, licensee operations and client experience.
During the last few years there has been a lot of commentary in the media and financial trade publications about how robo-advice may ultimately replace human financial advisers. I don’t think this will happen, for reasons I will explain later in this article, but I do expect technology to reduce some of the more burdensome and low value-add activities currently undertaken by advisers and even act as a business differentiator.
Advisers are currently being buffeted from all sides. Regulatory and educational requirements are becoming more demanding in terms of time and money, while the phasing out of commissions has reduced overall income. To thrive in this environment advisers must focus their time on the value-add parts of their role while trying to minimise the time they spend on activities which could be done by someone or something else at a lower cost. This is exactly where prudent investment in specifically-designed technological financial advice solutions could improve the profitability of advice businesses.
My view of technology is that it will not completely change financial advice but rather it will act as an enabler. Clients still generally want to deal with people, especially when they are discussing their personal dreams and financial situation. The interaction between client and adviser is very like the one between a client with their doctor or lawyer in that the relationship is expected to endure for the long term. This is different to a more transactional relationship with, for example, a sales assistant. In some circumstances, the adviser-to-client interaction may be more transactional if the client is looking for specific ‘point in time’ advice. An example of such a scenario could be if someone wanted advice on their super investment choice. Technology may allow advisers to quickly identify clients who only require scaled advice, which an adviser can then deliver via a limited advice SoA at a lower cost than providing holistic advice.
IOOF has created an online tool for its aligned advisers called the ‘Wealth Report’. Clients or prospects can enter information about themselves into the tool in the comfort of their own home and then receive personalised insights rather than simply generic insights. This helps build credibility and in turn helps bolster trust. This is important because trust is probably the most important element in the relationship between a client and their adviser.
The Wealth Report uses a cashflow engine which takes client inputs and converts them into a potential financial journey. Clients are provided with some information about how they are tracking financially compared to the average Australian. The report asks for information on a client’s current financial position, family structure, lifestyle, future goals, income, expenses, insurances, investments, health and provides a home valuation and home equity estimate. Clients can normally input all the required data in under 15 minutes.
The Wealth Report gives prospects and existing clients, who may not be fully engaged, the opportunity to experience a snapshot of the available financial advice services without needing to make any commitment upfront. The Wealth Report provides insights related to the data the client inputs into the tool with the purpose being to prompt the need for advice. The cashflow engine embedded in the Wealth Report can be used during the client’s first appointment to model various scenarios and demonstrate the value which can be added to a client’s situation through the delivery of strategic financial advice. The Wealth Report educates clients, helps prioritise their needs and increases the likelihood they will proceed to obtaining personal financial advice.
Offering clients a technological solution can be valuable as a business differentiator. Younger clients, many of whom use personal finance apps, may expect technology to be used, and its absence may cause them to question the relative quality of the advice business.
The internet is often used by potential clients of all ages to try to determine who can help them with their financial advice needs. Given that most financial advice organisations will say the same thing, such as ‘we are specialists in retirement planning’, a technological offering or fact-finding tool may help demonstrate that the business is committed and competent in its purpose, whereas a business without technological tools may not generate the same level of confidence in the mind of a potential client.
An adviser who uses a technological ‘fact find’, such as the Wealth Report, can swiftly get a good understanding of their client’s situation, giving them more time to uncover, filter and plan for client meetings where they can focus on their goals. Using technology also reduces errors and any potential rework required, this frees up time for the adviser so they can devote more time to the high value-add elements of financial advice.
Technology will not supplant advisers who offer holistic financial advice because clients will not form the same type of empathetic and trusting relationship with a machine. Technology nevertheless does have an important role to play in making advisers more efficient as well as identifying those clients who only require transactional or scaled advice.
Technological innovation is compulsory in financial advice and those advisers who don’t use technology to assist them may find their efficiency and lead generation is reduced to a point where their business struggles to compete.