In this special ifa cover feature, editor Linda Santacruz moderates a roundtable – held in partnership with ANZ Wealth – in which industry experts identify the future strategies, personal qualities and technologies that characterise the game-changers of financial advice.
Deborah Kent - National President, AFA
Gavin Pearce - Managing Director, Insurance, ANZ Wealth
Glen James - Senior Adviser, Fortify Financial
Sacha Loutkovsky - Director, Orion Financial Group
Alexis George - Managing Director, ANZ Wealth
Darren Whereat - General Manager, Aligned Dealer Groups and Advice Standards, ANZ
Linda Santacruz - Editor, ifa (moderator)
LS: I’d like to start by first identifying some of the main opportunities and challenges facing financial advisers today. Can we start with you, Deborah?
DK: I think the main challenge facing advisers is the amount of compliance work that needs to be done. This includes the size of Statements of Advice and getting efficiencies into their practices so they can spend more time with their clients. That seems to be the big one for us. And of course, there is always the big one that sits on top of that – which is that a lot of regulation is going on at the moment.
GP: I think the biggest challenge is communicating to our customers what is really being offered and why it has value. The biggest opportunity is there are so many customers out there with an untapped advice need and as an industry, we need to find a way to make them aware and encourage them to come through the door.
GJ: I believe a really good opportunity lies in the advice space for clients who see the direct channels and know they can’t do it themselves and need some coaching to get through that. So I think that’s actually an opportunity in the direct space at the moment for advisers. It just parts the Red Sea between those who think they can do it themselves and those who might need an adviser.
SL: One challenge is getting the message to the market. I find that one of the tenets of our business is we really want to focus on education and we make a big effort to provide a lot of educational material to our clients. So then, on the flipside, the opportunity right now is with all of the information that is coming out to the general population with articles. That is a really big space to help people stay informed.
AG: Clearly we’re in a space in the industry where there’s incredible scrutiny of us from the media, from the public and from the politicians. And while I think that is a challenge, because most of that media tends to be negative, I think it is a real opportunity. For the first time, people are speaking about insurance and speaking about advice. Now it’s about how to get the message out there about the good that these people can do.
I think we have to embrace technology better. We’re doing a lot of work around Millennials and they’re going to be the biggest economic powerhouse and we know how they work. So, we’re going to have to embrace digital from the end-to-end perspective in the advice industry.
DW: If one in five Australians works with us and gets advice, and let’s say one in five won’t get advice, then there’s 60 per cent in the middle that are waiting to be influenced. I think there’s a huge opportunity for the advice industry to take a leadership position and actually engage with those clients, be it through technology or other means.
Robo-advice – challenge or opportunity?
LS: Some of the companies out there trying to engage those clients are robo-advisers. I’d like us to talk a little bit about that. It’s been argued that some of the newer robo-advice tools can pose a threat to advisers, especially if they’re focused on investments only. Deborah, what do you think about that?
DK: I tend not to call it robo, because I think it is fintech. And it is out there and I do think there is an opportunity for advisers to embrace fintech in the right way. If we can integrate fintech technology into our businesses so we can provide advice to consumers at a low cost, then I think we’re starting to get that middle ground – the ones that are not getting advice.
I don’t think advisers should be frightened of [fintech]. It’s something that we need to integrate into our business. How do we do that? Licensees need to be a part of that. I don’t think they’ve quite embraced it yet. So I see it as an opportunity rather than a challenge.
AG: Don’t you also think it can help with compliance? I hate the word robo as well as I think everyone uses it for different terms. But you just mentioned the burdens around regulation and compliance. I think that’s where technology can help.
DW: There are different interpretations of robo-advice. I think we need to be clear as to what this technology tool can do and I’m an advocate for technology as part of the advice process. I think we need to embrace technology to bring the cost of providing advice down. The sooner we can do that as an industry, the better we will be since it will make advice more accessible to others who potentially aren’t getting advice.
GP: I think that’s the opportunity. Plus, a lot of customers want to engage in some ways digitally. So build that into the advice model and give the client the chance to engage in that way – to feed stuff in. Ultimately, a large amount of the advice that is given will be human-led, supported by technology.
GJ: I believe that as a business owner – and there are many advisers that are – we really need to embrace this technology because it’s so scalable and the efficiencies that you can get can set you apart from everybody else. I believe if you’re not in the next three years really getting on this curve, you might have a really hard time attracting and maintaining clients.
DK: Online technology won’t address strategy. It won’t address the differences between body language. I do believe there is always going to be that human contact that you’ll need that the computer won’t have. I guess where my concerns lie is with advisers who run very simple solutions. The simple solution in the future will go to technology if they’re not careful.
That’s why I talk about complexity. Start having the conversations around the wider things of estate planning, the risk, the insurance. There is a whole raft of things that advisers should be looking at as an overall package for their clients.
SL: That in itself is a total opportunity. Maybe three or four years ago when direct insurance was just becoming the big disrupter, a lot of people were very concerned about that. Now, we’ve totally been able to differentiate our service offer. It’s an opportunity because people are now talking and thinking about insurance.
So the robo-advice, the fintech, the online platforms – I think there is 100 per cent an opportunity to diversify our business for our clients. People want a simple, scalable solution.
Technology and client engagement
DW: There’s another opportunity for the use of technology. If we put ourselves into the shoes of the consumer, I think many customers find that that engagement piece at the moment is a little bit scary. We can use technology to make that experience better and much more positive because they can access it in the medium that they choose, rather than one we’ve forced upon them.
DK: Think about technology and think about what’s the one thing that all advisers, including me: Statements of Advice – the 80-page documents that are not meaningful to the person sitting next to you. The person sitting next to you wants to know ‘Are you going to be able to allow me to meet my dream in life?’ What if technology could change how we do that?
SL: Well, I think that’s sort of where we’re getting at here. We’ve got two types of technology: we’ve got fintech from a product provider, product solution point of view for clients, which is getting people interested in investing and insurance. Then, you’ve got technology solutions directly for us to provide to our clients.
So when Deborah mentions there’s got to be potentially other ways technology can help us with SoAs, in our business already we send videos to our clients of SoAs. It’s been an incredibly powerful tool for us to help our clients understand what they're doing at the review process.
GJ: I’m in a similar situation. I’ve got a whiteboard in the meeting room and a tripod in there. I draw the strategy on the whiteboard, record it and send it to the client. It’s just a really powerful way.
DK: We've just reengineered our whole business over the last two years and we've brought in a lot of digital capabilities into the business and I've got to say the client engagement has gone through the roof.
We do a lot of videos, and ours is just done with an iPhone or an iPad, a mic and we've got the lights to make sure the lighting is right. So at any time, we can go, ‘bang - let's do a video and pump it out’. It has changed client engagement.
DW: There is a high degree of flexibility in there as well. I’ll watch the video on my time when I’m ready. I think there are a couple of great examples there of just removing what I call the ‘spooky magic’ around financial services.
LS: There’s obviously many benefits to bringing technology into firms – what would you say is the hardest part about this?
DK: Making the decision is the main thing – which is what we went through. We just decided that the business we had for 20 years is a great business, it’s doing great things, but it had kind of fallen flat. That’s why we decided to bring in all of the technology – so we completely rebooted the business.
GP: I agree with Deborah. Getting started, recognising that the world is changed and staying up with the pace of change [is the hardest part]. Customers are rapidly changing as they experience new things. This goes across all generations.
SL: It is about taking the step but it’s also about understanding that there a lot of tools out there and a lot of advisers who have made changes before you. So it doesn’t have to be a scary ‘where do I start?’. It doesn’t have to be expensive. You just have to put the questions out there. I found advisers are willing to help and very willing to provide solutions.
GJ: I believe that if you’re an adviser who is struggling to get your head around [new technology], the first thing to do is find somebody who is already doing it and maybe you can pick up one thing from each person and start the journey.
AG: It’s got to be part of the business as well. You can’t just do it as something on the side; it’s got to be integrated and part of the solution. I think that’s pretty scary if you’ve been a traditional adviser.
Digital strategies – do you really need one?
LS: There are some advisers who believe that they don't actually need a digital strategy. What do you guys have to say about that? How important is it for advice firms today to have a digital strategy?
DK: We made a decision that we'd have a proper strategy. So it's not about, 'Oh, let's give this a go and I might write a blog for six months’. We have a documented strategy as to how we go about it. Who does what, how many times, what's the engagement, what are the messages that we want to send for the different mediums. As I said, Facebook is more for the happy snaps and things like that. I do think if you're going to do it, you need to be serious about it and you need to form a strategy. We did engage someone to help us with that, but basically we've done all the work ourselves and with very little cost.
DW: I think good advice firms will continue to exist without digital strategies. I think the more successful firms for tomorrow and the next 10 to 15 years, who want to appeal to a greater segment of the population, will absolutely need a digital strategy.
That will be how they acquire clients, how they service clients and, more importantly, how they communicate with clients. We just need to get better as an industry in helping people understand the value of advice. I think digital plays a big role in that. My view would be that they would still be successful people, but I think practices will be more successful and appeal to more people with a good digital strategy.
We're talking about a complementary strategy rather than a replacement strategy, so I think firms will evolve their offers and that will bring digital in. But the key elements of what made them successful in the past will still be there. They're just going to use that technology to broaden their appeal but also to bring down those costs.
GP: It depends on who your target customers are. Even with that, I think some people might believe their target customers won’t value it, but I think you’ll probably find that they will.
SL: With digital marketing, there is a lot of opportunity. There are so many different ways to engage with clients. Targeting is absolutely key to a clear digital marketing strategy. Don’t cast the net wide; decide what you want out of a strategy, decide what your end game is and just go for that. It's got to be clear, precise and targeted.
DK: I would agree with Darren. I think there will be those businesses that will continue to succeed in the way they’ve always operated because they have a particular way that they do. But looking at the successful businesses that I see, those larger practices that are doing really well do have digital strategies in there.
AG: Look at the Millennial generation – or digital natives, if you like – who are born into a generation where everything is on tablets and phones. I understand if you say for the next 10 years you might be successful, but I can’t see if you want to serve customers how you could not have a digital engagement strategy.
They’ve got devices of every shape and size, either reading, watching movies, on Facebook or Twitter – whatever.
GJ: I’ve taken a different view, particularly with social media. It’s a long game and just basically about having a presence in the community for when that trigger point comes up in someone's mind. My Facebook strategy is not to get new clients; just to be a presence for existing clients, have a bit of fun and just communicate.
The move to financial therapists
LS: I’d like to move on now to this movement of financial advisers becoming coaches or ‘financial therapists’, if you will. What does that mean exactly and what is the difference between that and what advisers have been historically?
DW: When I think of a financial coach I'm thinking of much more than an adviser. I think of a strategist, a confidant. They're probably providing both from cash flow right through to wealth accumulation and protection needs right through to estate planning. They're really becoming the centre of the universe for their client as that one-stop shop. Information is everywhere – anyone can get information – and what a coach is about is grabbing that information, distilling it, making it personal and relevant for the individual, and then putting in strategies around the outside.
So, it's about helping them go from A to B and then just showing them what they need to do along the way. It's a hell of a lot more than just that narrow definition of financial adviser.
AG: We're moving into a phase where a portion of the population is moving into retirement. I see the role of a planner being much more than just about ‘how much money am I going to get in retirement?’. It's a whole confronting exercise, this moving into retirement. I think that financial planners are at the centre of that.
I'll sum it up: I have a 21-year-old and I said to her, ‘what on earth would you do if I died?’ and she said to me, ‘I'd ring Paul’ (who is our financial adviser). I thought, that's a good definition of a financial coach to me because he's such a trusted part. It's not just about my retirement, it's about the whole ecosystem of our family.
SL: It’s all about the relationship. I think Alexis highlighted it quite well. If you think about the larger financial professional space, including accountants and estate planning lawyers, I've traditionally seen them as providing a very good technical service. But who is there to hold [the client’s] hand and be the relationship manager? I really think that's where financial advisers, financial coaches, financial therapists, are going to sit.
GJ: I believe more so that the adviser is sitting in that space between the big scary financial world and the complex needs of a client and is then bringing them together as a linchpin. The actual difference I guess that I see between the financial coach is they don't necessarily need to be licensed if they're not providing product advice.
I personally see a cash flow coach. I know all of the technical things and I know all of the products. [But] I need that third-party accountability, much like I go to the personal trainer once a week. We all know what to do to lose weight – eat less, exercise – but we're creatures of habit and we need the accountability. I am more so moving into the project manager role for my clients.
DK: I just want to touch on what you said about therapists because I've been advising now for 28 years and I think there are two parts to advice. I do see a lot of advisers caught in solution mode: they see a client, they go straight into a solution. But they haven't actually gotten to know the client.
I say to clients that when you're coming in to see an adviser, you are actually going to lay yourself bare. You are going to strip everything down in your life and you are going to put it on the table. The adviser needs to have that emotional intelligence. Good advisers now are embracing that and realising that they are actually like psychologists.
Technology to better meet clients’ needs
LS: I want to take the conversation back to technology and just talk about the different ways in which you can service your clients.
What technologies are available to advisers to help them better meet their clients' needs? – for example, some advisers out there are meeting their clients on Skype. Could you talk about that for a little bit?
DK: Technology like Skype and GoToMeetings is really good if you've got clients in different regional areas. I think other good technology [includes] some of the apps that are around, like the savings calculators. I like a lot of the stuff on ASIC's MoneySmart website. There are those sorts of applications that you can use with a client to help them track their spending and all that. Video technology is great. You can send an email with a video embedded into it and the client can listen to somebody speak about what's relevant. Even when markets get a bit wobbly, it's a great way to communicate because they are actually listening and watching someone rather than reading through it.
SL: There is so much in the technology space that an adviser could potentially utilise in their business. One of my clients is a law firm and they have this amazing whizz-bang whiteboard that cost them like $10,000 which hooks directly into your phone or your iPad. You can be in your home and they will broadcast everything that's going onto the whiteboard in real time with this magic marker. It's incredible.
But you've got to sort of sit down and make it relevant to your digital marketing strategy, and make it relevant to your wish list. You could spend a lot of money and have all these different types of technology but not really utilise them properly.
DK: Just quickly on that, one thing that we built into our business was smart pens. We use smart pens now in all of our client interviews. The good thing about that is that it's increased our efficiencies in our back-end because the pen will record the conversation.
GJ: With some clients I'll use a spreadsheet and they can have a look through Google Docs. It's a live spreadsheet between our office and the client. Some of the clients have been using Moneysoft, which is really good. It's Australia-based so that's been amazing. Today I've been working out of North Sydney. I had a Google Hangout this morning with my team. So there were four live videos on one screen – we just had a bit of a chat.
So there's a variety of technology but I think it's about working out what your clients need and what you can plug in that will suit them.
DW: My view on technology is that you also have to be very clear in the purpose that you're using it for. So am I using it for just one-way communication, which means it needs to be timely, or am I using it to have a conversation in a different medium, in which case it's got to be easy to use at the other end so that your client understands what it's doing.
AG: I think there is so much available to advisers from product providers, from their dealer groups, from the broader community. If you don't have a strategy, you'll be completely overwhelmed by what's available.
Improving financial literacy
LS: What about using technology to improve financial literacy for clients? What are some of the options there?
SL: l don't think it's particularly any different from the options we've already discussed because whether we're increasing financial literacy one-on-one during a discovery meeting or review meeting, you can then push that information out to your wider client base with videos, newsletters, social media pieces – being actively engaged in the community. I don't see anything particularly ground-breaking or different between dealing one-on-one with a couple and with a couple in the wider space.
AG: The only thing I think is that you can touch more people. Financial literacy is something I'm really passionate about but we've struggled with financial education in this country for years and years and years. I do think that unless we get it back into the school system, we'll struggle for decades and decades and decades.
GP: If you look at the number of kids coming out of school with a low level of financial literacy, that's got to get back into the schools. The one thing I would say is a lot of adults are quite comfortable to watch videos so if you've got simple videos explaining simple things, they can play them one, two, three times and they are a lot more comfortable doing it there than in any other environment.
DK: I think we've got the best opportunity that we've ever had with technology to get financial education out there. I tend to change the words these days to education rather than literacy because I think literacy doesn't necessarily resonate with the average person out there. But if you think about videos, you've got the medium of Twitter, you've got LinkedIn, you've got Facebook, you've got all of these mediums. But I think it's actually up to us, advisers, to do it – don't leave it to ASIC or to somebody else.
DW: I think the other thing it's forcing us to do is, because of the medium, you've got to make your point in a relatively short period of time. It actually makes us think about the way that we communicate too many times. I've read through something that's pages and pages in length, but if you're on video, you're on the spot. You've got 10 seconds to capture their attention or they're going to switch off. It forces us to get very synced with the message and I think that's a good thing.
DK: Three-minute videos – that's all you need.
GJ: I would also add that one of the roadblocks in my mind with communicating to my client base – even via email – is 'Oh, I don't know what to say'. But I just realised, 'Hey, I'm going to find some cool articles and cool infographics'. This is the way technology really helps.
I do this all the time and it's kind of fun. I'll write the email: 'Hey. I'm still at the office at 6 pm. How are you? Thought you might find this interesting'. Insert short link, send to 300 people. I get all of these replies because it's personable, I've used technology and scale to actually do bulk personal emails, and it's had a great response.
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