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The future is bright for financial advice
3 June 2015: If the financial advice industry resolves the demand for trusted advice with its supply, then there is an optimistic future for the industry, says professional services firm Deloitte.
With research obtained over the past 12 months from practitioners, the industry, global and local innovators, Deloitte has developed a new report on opportunities for an Advice Based World in Australia.
“As Australians dream of a better future the industry needs to take the opportunity to build on the growing demand for trusted advice,” said Phil Hardy, a financial services leader at Deloitte, and one of the report’s key authors.
“Our report identifies three major consumer needs and outlines nine levers to meet them,” Hardy explained. “It would be too easy to look at the financial advice industry today, and be pessimistic about its future. As the demand for trusted advice grows, confidence in the supply of trusted advisers has waned.
“However, Deloitte sees an optimistic future for those with the foresight and determination to resolve this mismatch and transform their business models to tap into what is a considerable opportunity for the future.”
Hardy said that the regulatory framework has forced the industry to consider the current situation – but it has done so in order to create a better future. And it is in this context his team developed the Deloitte report - to look at what that future might look like in an increasingly disrupted digital world.
“There is, and will continue to be, a critical role for effective regulators to oversee the industry. But its future will be dependent on stakeholders adopting more customer-centric business processes.
“The changes ahead are as exciting as they appear daunting,” Hardy said.
Co-author and Deloitte Assurance & Advisory partner elect, Andy Abeya said: “In The Advice Based World we provide a working hypothesis of a future for the financial advice industry. We start by examining the growing demand for advice and consider nine levers that we believe will meet Australians’ needs for the right advice, at the right time and in the right context.
“Some of these trends are already being seen in small pockets of the industry both here and internationally, which in some respects, signals that the future is already here.
“The opportunity now is for players to look at the total picture to really move the dial,” Abeya said.
“We call this future The Advice Based World, and for those organisations embarking on a transition to this world, we have developed a plan for action.”
Abeya and co-author Michi Chan, Deloitte Assurance & Advisory Director detail each lever, outlining some of the steps to consider.
1. Adviser match-making:
- Use behavioural assessment tools to better match customers and advisers.
- Retain talent by creating an inspired employee and adviser network.
2. Customer-led models:
- Understand the initial triggers which generate the need for advice through customer insight workshops and data analytics, overlaid with the latest customer behaviour research.
- Research and understand the financial needs of the 90% of Australians who do not have a financial plan.
- Develop a ‘whole of life’ customer model by evaluating behavioural patterns and usage trends over time.
- Optimise and personalise the experience by introducing new technologies.
3. A new meaning of holistic advice:
- Expand services to consider the customer’s situation beyond traditional retirement planning, insurance & investment needs, especially for potential high net-worth customers.
- Evolve and encourage eco-systems.
- Explore strategic partnering models to provide an easier path to the wide range of advice anticipated in the Advice Based World.
4. Self-service facilitation:
- Develop self-service models; aka self-managed super funds (SMSFs) which have highlighted the growing desire for some Australians to take more control of their retirement finances.
5. Digitally enabled advice:
- A well-executed digital strategy is a prerequisite for any successful organisation regardless of whether advice is delivered in-person or through digital channels.
- Digital and data analytics will strengthen risk management and compliance
- Data analytics capabilities can identify potential high risk behaviours and unusual patterns in risk profiles.
- Digital can also develop security protocols.
6. Social advice:
- Customers are part of a web of families, friends and colleagues and listen to their recommendations.
- Grow social platforms for customers to network, share ideas, rate advisers and form affinity groups.
- Use social platforms to attract customers and increase customer engagement.
- Find ways to gather and analyse data on the advice needs of certain communities.
7. Psychology infused advice:
- Advancements in psychology, behavioural science and neuroscience provide greater insight into human behaviours which will impact advisory services of the future.
- Recognise the link between financial health, mental health and happiness.
8. Innovative and agile advice services:
- Enable the capabilities and talent of the financial advice industry to grow, particularly in Asia.
- Optimise business operations and simplify processes.
- Reduce costs and complexities and pass the savings on to customers.
- Access a wider market and/or invest in additional services to further enhance the customer experience.
9. Community trust:
- Redefine the meaning and value of financial advice and set out to rebuild trust.
- Use a multi-faceted approach including performance management, planner professionalism and ethics, coupled with re-positioning the industry as a positive contributor to society.
Download a copy of The Advice Based World Report here.
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