Advice on the way from abroad

An exciting suite of new technologies currently being implemented in financial services businesses offshore have the potential to transform the Australian financial advice industry.

From artificial intelligence technologies like ‘chat-bots’ to automated client onboarding, these new technologies look set to create valuable opportunities to streamline internal processes and improve profitability for the advice firms that embrace them.

As the 2018 Macquarie Accounting and Financial Services Benchmarking Report noted, 78% of top performing – or benchmark – firms (compared to 66% of all firms) believe improved efficiencies through better use of technology is the most effective strategy for their firm to improve profitability in the current market. For 72% of benchmark firms (55% of all firms), the second most important strategy is optimised processes and office efficiency.

Facing the future: better systems and technology

These views are common across the financial services industry, with global spending on advanced technology rising from US$114 billion (25% of total) in 2015, to a predicted US $142.5 billion (30% of total) in 2020.

Research by UK-based Altus Consulting notes: “The most progressive advisory firms will look at how AI technology can extend their brand and reach among their ideal clients. This includes technologies that help advisers to communicate more efficiently and in a more targeted way, use social media to build engagement, and capture leads more effectively.”

So what should advice firms look out for? Here’s a round-up of some of the key technology trends coming soon to an advisory firm near you:

1. Cloud-hosting grows

Although the cloud is already being embraced by Australian advisers, overseas its use is rapidly expanding to produce greater cost efficiencies and a simplified IT infrastructure for advice practices.

Top performing practices are increasingly seeking to host more of their business operations and applications on the cloud, removing the need for significant expenditure on hosting, maintaining and backing up the firm’s IT environment.

2. Embracing emerging technologies

Internationally, the wealth management industry is increasingly applying emerging technologies such as cognitive computing, machine learning and artificial intelligence (AI), machine learning and next best action (NBA).

Tools using AI are increasingly appearing in the financial services industry.

Machine learning tools can produce recommendations based on customised algorithms, structured data and a thorough analysis of a client’s financial position. These technologies are being used in acquisition and onboarding, customer service and engagement, portfolio and risk management, and customer segmentation and targeting.

Next best action engines are being developed to use predictive analytics to identify patterns and create one-to-one personalised customer solutions to suit a customer’s need exactly (the ‘next best offer’).

3. Mobile is king

Consumers today expect to access information and analysis about their finances and financial options digitally, online and mobile. With more Internet connections now made via mobile devices than browsers, overseas advisers are increasingly embracing the trend towards ‘mobile-first’ clients who expect to interact this way.

With mobile payments via smartphones and tablets increasingly common, advisers are seeking to adapt their service offer to cater for this trend. Firms are also investing in technology to enhance client loyalty and provide consistent messaging across their business.

4. Next-gen client segmentaton

According to Capgemini, new digital tools and technologies are making it possible for wealth advisers to service investment segments that were previously economically unattractive. Overseas firms are increasingly analysing their client base to identify unserved or underserved segments and introduce differentiated offerings suited to these groups.

More personalised solutions are also catering to niche segments. They also serve as a client acquisition tool to attract younger, less affluent prospects.

5. Digital advice functionality

New digital tools are also appearing offering advice firms improved advice and client engagement functionality. According to Aite Group, tools to facilitate time-consuming tasks such as client onboarding, asset allocation mapping, e-signatures/contracts, anti-money laundering/Know Your Customer tools, and goal-based financial plans are increasingly available.

6. Robotic Process Automation (RPA)

Although local advice firms have begun introducing some level of automation, the trend overseas is more advanced, particularly in relation to regulation, financial risk and compliance. RPA allows time-consuming tasks to be completed quickly and cheaply, allowing advisers to add value in other areas.

RPA is being used to automate client onboarding and due diligence processes, and improve efficiency in back office operations. It is also ushering in chatbots and conversational interfaces to answer FAQs and repetitive queries. Research by Altus found 18% of UK consumers are already using chatbot adviser technologies.

7. Adoption of API and blockchain

Wealth management firms overseas are increasingly exploring the use of Application Programming Interfaces (API) and blockchain messaging technologies. API allows different programs to talk to each other and send data back and forth, which will allow financial advisers to offer a seamless customer experience. Examples include plugging the practice’s CRM software into virtual meeting rooms, cash flow analysis and robo-advice tools.

Blockchain messaging is also growing. This technology creates a distributed database of computers that maintains records and manages transactions, in turn helping with optimisation of the practice’s business processes.

8. Emphasis on cyber-security

Cyber-security and personal privacy are growing issues, with a report by the FPA Research and Practice Institute finding cyber-security is a high priority for 81% of financial advisers. Advice firms are under increasing pressure to protect the information clients share with them, resulting in significant investment in new technologies and robust internal processes.

Intense focus by international regulators and introduction of stricter regulations such as the EU’s General Data Protection Regulation (GDPR) are also forcing firms to implement stronger data protection measures.

While trends like cloud-hosting are more advanced in advice firms than cutting edge developments like robotic process automation, local advice businesses have a great opportunity to observe and learn from what is happening overseas. To capitalise on the potential benefits for your firm, consider signing up to test or trial new technologies as they become available to Australian firms.

Download your copy of the Accounting and Financial Services Benchmarking Report.

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