It’s that time of the year when predictions for what lies ahead are in full swing. Where will the key areas of focus be for 2016 — what will be taking up the column inches, where will the next lot of market disruption come from, and what should people be allocating to spend their budget on. There are subject matters that we know for certain are going to be important this year, with the outcome of the FAMR set to be announced in April to align with the 2016 Budget, but what else should financial advisers be aware of as we settle into 2016 and prepare for the year ahead?
Living in a connected world
There continues to be much talk of big data, the connected home and the Internet of Things. A Strategy Analytics survey last year stated how the average person owns 1.7 internet devices, and it’s predicted that this number will rise to 4.3 per person by 2020. The level of customer expectation this generates puts mounting pressure on the financial services industry to join the digital revolution and offer a more online service. Banks have set a precedent that consumers can do their banking without leaving the comfort of their armchair through the use of online services and apps, so it leaves them asking why they aren’t online for their financial advice too.
Additionally, the increasing proliferation of smart devices, wearable technology and sensors — Gartner estimates there will be 26 billion connected sensors (excluding PCs, tablets and smartphones) by 2020 — has led to a massive explosion of data. Whilst for some it seems a little 1984, it’s important to remember Albert Einstein’s quote that ‘information is not knowledge’ and that the key to unlocking the power of data is understanding how to use it to make informed choices for your customers to help them achieve their business goals.
Financial advisers in particular produce and manage some of the most valuable information in existence, but far too often the data is disjointed and stored across multiple media and across systems. This results in financial advisers often using data for backward-looking reporting, producing basic reports from these systems to aid compliance or operations. While historically this has been acceptable, omni-channel distribution and digital-savvy consumers who are embracing the digital revolution across their landscape will demand more.
Gartner highlighted the link between the digital revolution and data utilisation following a survey of IT professionals carried out in 2014. It asked the survey participants to rate eight digital capabilities in terms of importance, and then summarised the top two responses, where interviewees ranked a digital capability as very or extremely important. The top performing capability was ‘Leveraging data in real time to improve operations’, which was deemed as very or extremely important by 73% of respondents. Other high-scoring capabilities included: ‘Moving from paper to electronic communications’, ‘Building and strengthening electronic channels’ and ‘Modernising existing IT systems.’ All these capabilities reflect the challenges facing financial advisers in an effort to keep up with their competitors and meet the customer expectations set by millennials, alongside the more future-forward tech-savvy industries.
So how can data be used for the benefit of the customer? Perhaps the answer to this, or at least one way of working towards answering this, is data enrichment.
Enriched data is an enabler, giving financial adviser firms the starting point of working out the journey the customer needs to take to achieve their goals. Enrichment is the difference between data for the sake of data, and prescriptive analytics that can be used to be proactive rather than reactive and facilitate intelligent decisions. These decisions can influence how the organisation engages with the customer to proactively understand the assets at risk of failure.
Harnessing the power of digital
Accessibility is essential for the current market, with today’s consumers wanting 24/7 service capability and expecting to get it for free. Once deemed as important merely as a box-ticking exercise, just because everyone else was doing it, integrating digital channels is now a must-have for any business, and financial advice is no different. Building an omni-channel customer journey is one way to respond to this, and is proving to be an essential for future-proofing and sustaining growth. However, this must come with a caveat that all activity costs money, and part of the challenge of incorporating digital channels into a financial adviser's strategy is empowering customers to accept this cost. In return, the onus is on advisers to truly get under the skin of their clients to ensure the service provided is bespoke and delivers value for money. More importantly the engagement with the customer has to be appropriate and enhance their experience.
Know your customer
Something that has always been a driver for businesses, but has recently grown in prominence, is the importance of knowing your customer. The retail industry pumps millions of pounds into trying to understand its customers and hone in on the true value of their client base, with other industries such as travel and insurance following closely behind. From a financial advice perspective, this is especially important because the key to profitability is understanding the true value of the customer base so that time can be applied accordingly.
Robo-advice is another emerging area closely linked to client profitability and will in time become part of a wider digital engagement model, but in the adviser landscape, it is again just another part of an omni-channel strategy. Experimenting with new channels should not come at the cost of a firm losing sight of its core proposition. Far too often interactions are designed on the basis of how a firm would like to interact with the customer, not how the customer would like to interact with the firm.
In order to make the transition to proactive analytics, financial advisers will have to take a lead from other industries and work much harder at managing data within and across their core systems, and integrating systems much more efficiently. Decisions on technology can no longer be binary, they have to take into account the wider eco-system within which they need to operate and how the data they create will be managed. At the heart of most financial adviser firms lies the Client Management System and this has to play a pivotal role in any omni-channel engagement with customers.
About the AuthorFollow on Twitter Follow on Linkedin Visit Website More content by SSP Limited