Robo advisors seem to get all the press but they’re just one fish within the digital ocean that financial advisors should be swimming in.
Every advisor should do a comprehensive review of their business and determine how they can improve the overall digital experience of their business both from the client standpoint and from the internal business operations standpoint.
The fact is, technology is advancing so rapidly that no aspect of an advisor’s business will remain untouched over the next few years.
Consumers are getting spoiled with services like Uber, Netflix, and the iPhone and they expect the same level of ease and access when working with an advisor. If you don’t deliver it, you’ll lose clients to advisors who will.
What we know
We know two things right now
1. There are literally millions of working and retired people who need advice but have no trusted adviser
2. They are not going to pay along with the financial service charging model (see Paul Lewis rant)
So what have IFAs got to lose by shifting to Robo-Advice to capture this mid market?
If your cost of sale is £10 and you can charge £20, you are in business. Forget the fact that you are charging £20 for Robo-advice and £2,000 for the face-to-face version. If the £20 service can be served up two hundred times a week you are in business.
That’s what the Pension PlayPen is, except we are not that cheap yet. To get our price down we have to invest in technology.
Invest to get your price down? You must be mad?
But that’s exactly what you have to do. Forget that plate of spaghetti stuck out the back of the hi-fi – this hi-fi adviser’s going wi-fi.
Drop your pants on price
Dropping your pants on price is only an option if you’ve got the balls to be the first mover. If you don’t get yourself to the front of the queue , you will have a low-cost offering which nobody wants. Except you’ll still be paying the development bill to get you there.
There really isn’t any alternative to Robo-ing up. In ten years there will be none of this manual processing – no fact finds , no report writing nothing. The only part of the advisory process which will involve human beings is the explanation of the solution – the Q and A.
Does this worry me?
No it doesn’t.
As I say above, there is a gap in the middle that advisers cannot service. If they can make a couple of quid out of delivering a thousand pounds of value- should that worry them. Do I think I am owed an ad valorem on every sensible decision my clients take?
Of course I don’t!
No time for losers
I’ve had it being nice to dull advisers who refuse to listen. Right now I am in no mood to pander to the mediocrity of yesterday’s aspirations.
We have 1.2 m new workplace pensions to set up, there are 450,00o people qualifying for pension freedoms each year
There are 23,000 advisers and most of them are only interested in advising the top 5% of the nation (the richest 5%).
Let’s make sure we have a solution for the squeezed middle.
Collectively yours
So, then, Mr Tapper, how do we actually do that?
So assume 40 million adults in the UK with 23,000 advisers targetting the top 10% then this equates to 174 key clients per adviser if all the advisers get the whole 10% and nothing else. I’d probably take this.
Or I could spend millions trying to crack the mass market to make £10 a time if I’m lucky and take on how much knows unlimited (in £ and time) liability.
Fairplay to anyone that cracks the mass market but it’s not for me.
Spot on Henry. Even that top end will expect some form of service delivery through technology, so whether it’s a PaaS, SaaS or Iaas it’s time to get heads out of the sand and into the cloud!
Well this really is the crux of the matter isn’t it. I think that people are now looking for technology efficiencies straight up, You have an app for it , or you are crap for it.
Yes, there is value in the long term, but the idea that you can build a practice around a few clients is probably fantasy for most advisers.