How has FinTech evolved to better meet the needs of financial advice professionals and clients? Ben Marshan CFP® Head of Policy, Strategy and Innovation at the FPA talks about the state of play with technology in financial planning.

Compared with the picture presented in the 2017 FPA report Mapping FinTech to the Financial Advice Process: why FinTech is not a threat, FinTech products are increasing in quality and ease-of-use. There are also fewer gaps to fill in supporting the entire advice journey. But perhaps the most encouraging change is the interest shown by financial planners in adopting these solutions for their business and their clients’ advice experience.

For many planners, fintech and robo-advice are thought of as confusing and something to fear. This was a clear message in 2017 report narrative, which was created, in part, to educate financial planners about the extensive role FinTech can play in delivering more efficient, compliant and cost-effective financial advice. In 2021, I’m happy to report a shift in perspective across the profession as we see many more financial planners looking to integrate technology as part of their advice process.

Transformation triggers

In some cases this has come from necessity with the social distancing restrictions of recent times. This has required financial planners to improve their interactive approach to video meetings and create digital content to better explain products or parts of the advice process. But they are also becoming much more educated and knowledgeable about what’s available from advice-specific technologies. This means our professional community are better able to support each other in assessing and selecting solutions best suited to how they run their businesses.

In fact, the FPA Innovation in Advice award was introduced for 2020 because of the widespread implementation of new technology and digital advice delivery we’ve been seeing. In recognising the achievements of award winner Corey Wastle CFP® CEO and Founder of Verse Wealth we’re also getting the word out about the mindset and habits that go hand in hand with a technology-enabled approach to advice. Corey takes time out on a weekly basis to give thought to what he and the Verse Wealth team can save time on and FinTech will often be part of the solutions they’re putting in place.

A more refined offer

Although the increase in demand from many financial planners may have been led by the circumstances of COVID-19, this widespread adoption is also due to the market doing a better job of meeting financial planners’ FinTech needs. Four years ago, we saw a lot of ideas on the table seeking to solve particular pain points or parts of the advice process. There were a great many products to support fact-finding and administering client data, for example. We’re now seeing a product range that is narrower, yet more refined. Many solutions have disappeared and the ones that have stayed are enabling financial planners to take advantage of digital in dealing with broader set of issues.

As well as product suites that are getting closer to a one-stop shop for the whole advice journey, there are now a better range of tools on offer for the constituent parts of the process. The quality and choice in customer relationship management (CRM) solutions has advanced and we now have more in the way of implementation tools giving financial planners and their clients a far better user experience (UX) in managing investments and reporting on results. The majority of these solutions are platform driven, but we’ve seen improvements across the board with UX design and functionality for FinTech

Greater trust in technology

Another benefit of this rationalisation and maturity in the FinTech market is the acquisition of successful products by larger product providers. This, in turn, gives rise to better integration between products which has gone some way to solving two major issues with FinTech, one with adoption and another with implementation.

Privacy and cybersecurity are always there as risks associated with adoption of new technology. Financial planning businesses taking on many different niche technology solutions and stitching them together compounded the risk factors. This was a major and justified concern for licensees and played a part in their prescriptive approach to FinTech. With better integration, these risks are more limited and licensees are now more inclined to allow financial planners to choose their own solutions.

While trusting technology not to compromise their business or clients has always been important, implementation of so many different FinTech solutions was perhaps a greater hurdle for financial planners. Having to move data manually from one system to the next was difficult, diluting much of the efficiency advantage of FinTech as well as introducing more margin for error.

The ideal scenario

While the overall FinTech offer is now far comprehensive and more easily integrated, there are still parts of the advice process yet to be mapped to solutions. We’ve come a long way since the days of a technology enhanced advice experience mostly consisting of calculators, but strategy development tools are still lacking.

More products to support  planners and clients in defining goals and objectives, scoping their engagement and tracking goals and financial positions would go a long way to streamlining financial advice business administration as well as delivering a better customer experience. Another win would be new technology to track how clients have been progressing over the entire relationship, giving financial planners an easy way to track and present a point-in-time assessment for annual reviews and other client engagements.

With the gradual introduction of the Consumer Data Right (CDR) we can glimpse the next phase of FinTech for financial advice. This would bring together these strategic and reporting tools with instant access to critical client data from bank accounts, Centrelink, the ATO and more. This opens the door to a live-in-your-pocket financial plan, tracking progress on the basis of live data feeds for the benefit of planner and client. It’s getting close but we’re not there just yet.

Support for compliance

There are also a number of areas where a FinTech solution could better support financial planners with compliance, both directly and indirectly. Financial planners still need to use their product knowledge to make a recommendation around implementation of advice. This responsibility and process carries with it a significant risk in selecting the ‘wrong’ product when there are literally thousands to choose from. So far there are no tools available to optimise that process. It’s a challenging area for FinTech to tackle with so much data to collect, map and maintain, but a company offering the ‘Spotify’ of product selection to financial planners could definitely expect strong demand.

A more direct, but equally challenging compliance solution would be using technology to evidence and record that a client has understood advice and recommendations provided. This is required by standard 5 in the FASEA code. With technology already available to help planners meet each other standard, it follows that FinTech providers will soon be coming forward with a solution for this new requirement.

This missing piece of the standards puzzle will also support a wholly digital approach to delivering Statements of Advice (SoA). This has been a focus for the FPA for some time now and we are currently developing additional support and resources to follow on from the Future of the SoA interactive guide launched in 2020.

Making a start

Although FinTech has become far more popular among FPA members and our wider community, many have yet to take advantage of the improvements to efficiency and engagement technology offers. With financial planners swamped with regulatory burden and busy providing advice and doing exams, this is hardly surprising. Plus, there are the challenges of determining which pieces of FinTech best fit with their way of delivering advice.

Focussed thought is certainly needed to tackle technology selection and implementation. I would encourage any financial planner to spend time once a week and figuring out their advice process, what drives the best engagement and advice outcomes and considering how technology could enable this to happen more efficiently. The tools available through the FinTech hub on the FPA website https://fpa.com.au/fintech/ can provide you with best-practice guidance and support for this process.