The advice business of the future will need a clear customer value proposition and brand clarity in order to survive in the new world of advice, a new report highlights.
In response to growing industry concern over regulation and consumer distrust, Deloitte has produced The Advice Based World, a working hypothesis on the future of the financial advice industry. The report argues that advice organisations must develop a culture that is flexible, innovative and nimble in response to ever-changing customer needs and expectations.
A key part of this culture, says Deloitte, will be the ability of all staff to articulate the organisation’s customer value proposition. This will give context to the consumer, so they understand why they need advice, what type of advice would best suit their needs, and where to obtain that advice.
“Customers go looking for things that they understand and have heard about. Which is why brand clarity will become so important in the future,” said Philip Hardy, Partner, Financial Services – Assurance and Advisory.
“Consumer clarity is going to be key to having that pull factor. The ‘what we stand for’ at an organisational level – be it a very serious relationship-based model with high touch advisers, or a business which says it never wants to touch a customer – will be crucial to attracting the right clients, who are willing to pay for advice.”
In its report, Deloitte sets out a number of other considerations for businesses that it says will be critical to helping consumers understand the context of advice in the future:
Psychology infused advice
Advancements in fields like psychology and behavioural science are providing greater insight into human behaviours, observed Deloitte. The advancements will subsequently have an impact on advice services, and enable advisers to influence consumer behaviour.
For example, in the United Kingdom, Nationwide recently published a white paper on ‘Why Financial Planning is Good For You’. The paper cited research from the US and the National Health Service that found that being in control of our finances can make us happier.
Deloitte predicts that the advice business of the future will place a greater focus on nurturing the link between financial health and personal well-being.
Innovative and agile advice service
In order to thrive in the new world, advice businesses will need to be innovative and agile. This means making changes to business operations so that innovation is cultivated and encouraged. Although teams focused on innovation may already exist in businesses today, said Deloitte, in the future innovation will need to be embedded in the organisation’s culture, and each employee should be empowered to put forward new ideas.
‘Financial advice operations have typically involved the need for a high level of manually performed tasks/procedures, either during the provision of advice or through the activities performed by the back and middle office,’ Deloitte said in its report.
‘By reducing the costs and complexities of conducting business, organisations increase their opportunities to be innovative, pass the savings on to customers, to access a wider market, and/or invest in additional services to further enhance the customer experience.’
Innovative and agile approaches to business are also necessary to protect against disrupters. Disruptive business models may appear non-threatening, but there are numerous case studies in which disruptors (such as Uber and Air B&B) evolve to become the new ‘norm’.
Community trust
The current review of the Australian financial system provides the perfect opportunity for the sector to redefine the financial advice industry, Deloitte argued. There has been a significant focus on the need to increase professional standards, for example, and doing so will influence the community perception of the industry.
Another way the industry can improve the trust from consumers is to develop services and products that promote social good. An obvious example, said Deloitte, would be to focus on improving financial education and literacy. Similarly, partnering with organisations that operate for the social good could provide new opportunities for product providers to raise their community profile.
Finally, with advice practices and advisers under the spotlight for bad behaviour, Deloitte recommends organisations adopt and promote their monitoring and supervision of their representatives. This may include benchmarking against peers and regulatory expectations, improving the capabilities of compliance and risk management personnel, and investing in data analytics capabilities to enhance and complement the review of advice files.
These advice trends are part of a wider framework that Deloitte details in it’s The Advice Based World report.
To read about delivering advice at ‘the right time’, click here for the second part in this series.
