Just a tech guy hanging around in the industry. Not an expert, nor a financial adviser.
We’ve seen great progress in financial advice in the last 10-20 years in the UK, moving from “analogue” to “digital”. And it’s great. There is more efficiency, transparency, and clients have an easier way to access their valuations, plans, fees, and statements.
Sometimes, these changes were driven by firms wanting to provide better service and value to their clients. Other times, they were dragged kicking and screaming by a competitor or a regulator in the worst-case scenario.
We are in times when we talk about “digital”. How much of the client journey is done online, and how important is face-to-face contact? We can’t forget about “hybrid advice” and revolutionizing the industry with AI.
We talk about how to move more clients online. It’s at a client’s fingertips, there is clarity about what is happening, it’s more secure, faster, and we don’t send paper around. At least not as much as we used to.
We are thrilled that people log into client portals frequently, maybe even a few times a week. It’s great; we are building tools, and people are using them.
Why are they logging in every week though? To check the valuation of their pension? To check when their monthly income is supposed to arrive? To approve a change in their contract or fees?
If you are a client and you have ongoing advice, which you pay for, what makes you log in every other day to check your pension valuation? Do you not trust your adviser? Do you double-check the plan or the fees? What triggers the compulsion to check it?
If you are a firm with a well-designed client portal with all your information available and your clients are not logging in, does it mean you’ve done something badly or well? If they are asking you all the same basic questions they can find there, then probably not. If they just live their lives, then you’ve done well.
One of the elements of paying for advice is that, as a client, I don’t want to think about my finances. I know we have our plan, I just stick to it and ask you for help if something out of the ordinary happens. It would be great to get to the point where we can just do it and trust the system.
It’s difficult when we’ve seen the industry messing up, clients getting scammed, and we are just now moving towards transparency, but I believe we will get there.
We will get to a point where clients have incredibly easy access to all information, but because they know they have it, they don’t need to look at it. They don’t need to think about it. Transparency is a great self-control mechanism, albeit not perfect.
So we all know that we will build better client portals where we will be able to do more, systems will be more integrated, and everything will have a convenient app. What is next?
The good financial advice system of the future will be fairly simple from the outside and very different from the client portals of these days.
As a client, you will go through the initial onboarding, planning, and setup, and then you just turn your brain off, so to speak. You don’t think about your finances until something happens, and then you ask.
Scenario 1: Are you retired and want to spend £6000 on a trip to Japan you’ve always wanted to go on? When you start to think about it, you will be able to ask.
Client: “Hey, we’re thinking about spending £6000 this year, can we afford it and how will it affect next year?”
Adviser: “Yes, no problem, we will decrease your income for next year, but you will be fine. You still spend less. Go for it, and we will pick it up in a few months.”
Scenario 2: Your partner lost their job, and you are worried about your financial situation, thinking they might not find a job for a while.
Adviser: “Hey, thanks for the message. The best thing to do is to pause ISA/Roth contributions until they get back on their feet. Don’t worry, if you continue spending as you do now, you will set yourself back only a few months in your retirement plan, but it’s not a problem. Here is what it will look like (gestures broadly online in charts). See, nothing to worry about. Let’s focus on getting a job and not worry about finances.”
Scenario 3: Your child goes to university abroad, and it will cost you a minimum of £10k extra a year than what you were planning.
Adviser: “Hey, that’s great. You really wanted to retire at 60, and that’s what we’ve planned for, but if you stay for a year longer, it won’t impact your spending in retirement. Otherwise, this is what your retirement income would look like. It’s an easy bridge to cross when we get there. We will stop your contributions, withdraw monthly, and you can send the money to your child. You will still accumulate contributions in your pension.”
The point is that we will move from “checking on your adviser” to being there when and how you need them. And for this to be doable and scalable, we will need technology, which we don’t really have now. All the adviser answers above will be automatable. It won’t be over the next few years, but it will happen before I retire.
We will see the steps in this process though. We will see AI being used for advice and planning oversight, then we will move to simple cases and cover small D2C clients (i.e., what the promise of robo-advice was) and then increase its capabilities as technologies and practices evolve.
It will require much better systems integration, data management, AI, and a much deeper understanding of how these systems work.
We will see regulators stepping in with new regulations on the transparency of the system, quality assurance of data going in, and correctness of the output. I believe that we will see in every communication a tag that says “generated by AI”, “generated by AI and verified by an adviser”, or “human interaction”.
Unfortunately, there will be a hump on the way. With digital tools nowadays, we build transparency and trust with our clients, which we will lose again when we use AI and pretend it’s human interaction.
Just above average 