Digital disruption is a trend that’s here to stay and no industry is safe. Traditional industries like manufacturing, transport, retail, tourism and hospitality, print media and entertainment may have been hit first, and hit hard, but it’s only a matter of time before others, including the advice industry, feel the heat.
The banking and finance industry could lose almost a quarter of its revenue to fintech disrupters by 2021, based on a new report by PricewaterhouseCoopers.
The report, ‘Blurred lines: How Fintech is shaping financial services’, says the disruption of the financial sector is already underway. It’s currently reshaping the nature of consumer banking and payments, and a second wave of disruption is making inroads in insurance and wealth management.
According to PwC, the key to survival for businesses faced with disruptive technologies is to find a way to incorporate them into their practices.
It’s therefore critical for advice businesses, including dealer groups, to embrace change and aggressively seek out technology-based solutions that will make them more efficient, reduce costs and improve the client experience.
The next advice industry disruptor
Over the years, many solutions and ideas have been touted as the industry’s next major disruptor, including discretionary managed accounts, scaled advice, robo advice, Bitcoin and Blockchain.
Whether it’s one of those or something new, it’s clear that current advice models need to evolve in order to stay relevant and survive.
Some advisers still spend hours – and in complex cases, days – producing a Statement of Advice (SoA). Technology must play a bigger role in every aspect of how practices are run.
While younger advisers who have grown up with technology and don’t know ‘how things have always been done’ may be at an advantage when it comes to adopting new technology, age isn’t an inhibitor.
Neither is money.
It all boils down to a willingness to find better ways to do business, expand the reach of advice and transform how advice is delivered and experienced.
In the same way, Airbnb and Uber didn’t require enormous capital and infrastructure to disrupt the hotel and taxi industry, advisers don’t need a big IT budget.
Those capable of leading change in financial advice aren’t limited to large organisations, according to a new report by Deloitte.
While giant retail and industry super funds will be among the industry’s biggest disruptors in advice “using their enormous resources and scale to develop and deliver innovative, low-cost solutions to seemingly low-value customers before marching them up the value curve”, any business that can “anticipate and identify unmet customer needs, as well as rapidly and courageously embrace new technologies and techniques will be the leaders of the pack”, said the Deloitte report, The Advice Based World.
It concluded that “customer centricity is fuelling disruption” and successful players will be able to deliver a simplified, streamlined “renewed digital customer experience” and develop “new methods to reach, engage and retain customers”.
While the advice industry hasn’t historically been good at enacting client-led change, instead relying on regulatory reform, the imminent threat of digital disruption means advisers must be more proactive.
What’s at stake?
There’s a lot at stake, ask any stockbroker, print journalist, hotelier, taxi driver and record company.
The growth of the sharing economy, epitomised by Airbnb, Uber and SocietyOne, has destroyed the value of traditional businesses and wiped out thousands of jobs.
Closer to home, the introduction of the internet and online trading in the 1990s sparked a DIY revolution, disintermediated stockbrokers and eroded their profit margins.
Ultimately, any business model that’s intermediated, high cost and transactional in nature is ripe for digital disruption.
The advice industry’s tireless efforts to become a professional services industry and add greater value, albeit driven by regulatory reform, has made it infinitely harder for robo advice platforms to undermine the adviser’s role in the same way Amazon disintermediated bookshops and Uber has disenfranchised taxi drivers.
However, the imminent threat of digital disruption means the industry can’t sit back and wait for the regulators to force change this time.
