Social media networks have gone from strength to strength and we are now faced with even more choice on how to communicate with each other. Mobile apps have transformed the way we make purchases, talk to each other and advertise products and services. These changes have also been replicated in the financial advice industry in the last few years, and there is no doubt that the industry is going to have to change.
So with advances in technology and changes in the way clients and advisers interact, what will the future of financial advice actually look like?
The rise of robo-technology
Our continued internet dependency has led to the majority of consumers, especially younger generations, seeking out product information and making purchases online. This, coupled with the Retail Distribution Review leading to people being caught in the “advice gap”, has left a big hole in the market for an alternative to the traditional advice route.
This is where the idea of quality online advice or “robo-advice” has been developed.
What is ‘robo-advice’?
Robo-advice is the use of advanced computer technology, also known as algorithms, designed to help people handle their money based on questions they answer whilst online. Robo-advice has the potential to become a quicker way for people to access advice, at a significant fraction of the cost.
The introduction of robo-advice could lead to a number of changes in the industry. The value of face to face financial advice could decrease dramatically, smaller firms could struggle to keep up with the expensive technology changes and software companies with no prior experience of the industry could begin to dominate the financial advice market.
Money on Toast and Wealth Horizon are some of the first online wealth management companies to offer ’robo-advice’. Their average investment totals (between £12,000 and £17,000) are more or less reflective of the type of clients that are using robo-advice at the moment, low to medium net worth clients who are not looking for complex investments.
High net worth clients are still choosing traditional, face-to-face advice to discuss their complex needs, so there is still room in the market for growth.
Client and adviser interactions
Technology
As the growing trend of robo-advice continues, the traditional ways of offering advice could be on the decline as;
• The popularity of video callsincreases and could end up replacing meeting clients in person, meaning much less travel for financial advisers.
• People begin to use apps for everything from banking to ordering their shopping. There are already many apps on the market that claim to help with pension planning, investment tracking and mortgage applications to name a few, so perhaps it won’t be long until we see the majority of financial adviser services offered through apps.
• Tablet computing becomes even more popular within the financial advice market
Business development
In the past, financial advisers mainly gained clients through traditional business development methods such as word of mouth, the yellow pages and newspaper advertising.The internet now provides financial advisers with a whole new set of accessible tools to promote their business; however now the conversation isn’t just one way. Consumers now have more ways than ever to spread the word if they have had a positive experience. Just like restaurants, doctors and teachers, financial advisers can now be rated online by their clients. If you are a good financial adviser with wonderful customer service, you may reap the benefits of online reviews, but there can be a dark side to it. Advisers sometimes have no control over a client’s money once it has been invested etc., and occasionally a client might see a loss. Even if an adviser has done everything right, there will be nothing to stop a disgruntled client leaving a really harsh review- possibly putting future clients off.
Adapting to social media
Some financial advisers and financial firms have taken to social media enthusiastically, while others have still not adapted, which could be to their detriment.
There are now over 2.206 billion active social media users in the world and in the last year the number of social media users rose by 176 million. Research from LinkedIn has reported that more than five million investors use social media to research their investment decisions.
Many financial advisers are currently using social media to network with their industry peers, but most are missing out on potential client contact opportunities and advertising space. Social media is no longer a fleeting trend, it is now a marketing and advertising force with an interactivity potential we have never seen before. This is only set to grow, as social media advertising revenue is set to hit $12 billion by 2018. The future of financial advice will no doubt be closely linked with social media, as most markets will, and as people continue to use it in more aspects of their day to day lives.
The future
Wendy Baker-Rees, operations director at Financial Advice Network, said:
“We can never be fully certain of the future, but the rise of the internet and online communications has changed the industry already, and will continue to affect it for years to come. In these changing times it is important to regularly monitor technological trends to ensure your business is up to date.
“Taking simple steps to adapt to technology and embracing changes to the industry could be the key to moving financial advice forward into the digital age.”
Financial advisers must, where possible, try to keep up and adapt with technology changes as they come across them. This could be by having a regular social media presence, looking into app development options or introducing video calls.
