An increasing consumer demand for online advisory services will be a key driver of change in the next decade, Deloitte has predicted.
In its report, The Advice Based World, Deloitte provides a working hypothesis of a future for the financial advice industry. The report argues that, in order for advice businesses to survive and thrive, they will need to deliver advice ‘on demand’, when it best suits the needs of the customer.
In addition, increasing regulation is driving up the cost to deliver advice. While Deloitte believes there is a critical role for effective regulators to oversee the industry, a model which simply loads up the costs of compliance on top of the existing cost to serve is not a sustainable solution.
“The way that advice is currently paid for now will change,” said Andy Abeya, Deloitte Director, Financial Services – Assurance and Advisory. “The thing that will also change is the perceived value of advice. Yes, in the current structure, people aren’t necessarily willing to pay for advice, but as a result of redefining what financial advice and what holistic advice means, organisations should be able to find some sort of service that they can provide that customers are willing to pay for. Digital will help reduce the cost of that offering.
Deloitte has identified three approaches that advice businesses can use to leverage technology and provide digital solutions:
1. Self-service facilitation
According to Deloitte, the growth in self-managed super funds highlights the growing desire for some Australians to take greater control of their finances. Combined with the government’s increasing focus on financial literacy, Deloitte predicts tomorrow’s financial advice customers will be more knowledgeable and more involved in their finances than today’s.
Advisers will need to identify how they can accommodate this ‘self-service’ need, while still acknowledging that not all customers will want to ‘do it themselves’. It will be up to the organisation to determine whether it will specialise in self-service advice, traditional face-to-face advice, or a combination of these.
Deloitte suggests advisers:
- Deconstruct those parts of the advice value chain that are conducive to self-service
- Segment customers based on the level of service required
- Price for those parts of the value chain that are deliverable on demand
- Find ways to connect with customers at times outside the usual hours
2. Digital enabled advice
‘We have already seen the emergence of simple advice models where financial advice is delivered online without the need for a personal adviser,’ Deloitte said in its report. ‘In future, the algorithms behind the digital advice channels will improve, leading to more complex advice strategies being constructed without the need for human intervention.’
The researcher believes that digital strategies will become absolutely critical to the sustainable success of financial advice businesses. These strategies should not be focused solely on marketing activities, but should also contribute to enhancing the overall advice experience, through tactics such as data collection and aggregation, disclosures and/or customer education.
Deloitte recommends advisers review their existing digital interactions to identify opportunities to enhance the customer experience. Another opportunity is to utilise digital alerts that respond to advice triggers in the customer life-cycle, prompting advisers to offer a new service or solution.
However, given that trust is crucial to the adviser-customer relationship, Deloitte notes that digital security protocols to protect sensitive consumer information must be considered a top priority for advice businesses.
3. Social advice
Today’s consumers seek advice from multiple sources, not just their own financial adviser, observes Deloitte. Word of mouth is amplified by social media, and the sharing trend will likely continue.
‘As participation in social networks increases,’ said Deloitte, ‘financial advice organisations need to understand how to incorporate and leverage social media strategies for a wide range of purposes, including research on customers, brand management and business development.’
Deloitte recommends:
- Using social media as a marketing tool, for both the individual adviser and the wider financial advice industry
- Encouraging direct feedback from existing and potential clients via social media
- Using social media to strengthen connectivity between members of the advice industry, ie: peer to peer learning and sharing feedback
- Creating a message for advice business employees to safely promote the organisation in social settings
‘Social advice may not be for everyone, however by 202, the youngest of the baby boomers will be 56 and as digitally savvy as they were in their early thirties when the internet went mainstream.’
These advice trends are part of a wider framework that Deloitte details in it’s The Advice Based World report.
To read about delivering ‘the right advice’, click here for the first part in this series.
Next week, riskinfo will cover the final piece of the framework: ‘the right context’.
