7 tech trends for planners

11 August 2017

Chris Wrightson CFP®

Chris has enjoyed a rewarding 30-year journey in the financial planning industry, since his start in 1987 as a self-employed adviser. He is now the Director and Chief Executive Officer of Centurion Market Makers.

As the classic saying goes, if you’re not green and growing, you’re dead and dying.

In an age where disruption is the new ‘black’, financial planners who are not embracing innovation may find themselves a step behind the bold and disruptive players.

With fintech businesses and new software applications on the rise, the financial planning profession is facing a number of technological advancements, from artificial intelligence and ‘robo-advice’, to predictive analytics and blockchain technology.

I believe the following are the top seven tech trends that financial planners need to be aware of over the next 12 months.

1. Growth of the fintech sector

According to a 2016 Pricewaterhouse Coopers (PwC) survey, “…the digital revolution is transforming the way customers access financial products and services”.

A disrupting force in the financial services sector, fintech is described as the “dynamic segment at the intersection of the financial services and technology sectors, where technology-focused start-ups and new market entrants innovate
the products and services currently provided by the traditional financial services industry”.

As the young ‘cashed up’ millennials (aged 18 to 34) demand faster and more efficient services driven by new digital technologies, the sector is set to grow exponentially.

The PwC report notes that within the next three to five years, cumulative investment in the global fintech sector could exceed $150 billion.

A further report by research and consulting company, Frost & Sullivan (Fintech in Australia – Trends, Forecasts and Analysis 2015-2020), reports that the Australian fintech sector alone will grow at a compound annual growth rate of 76.36 per cent and reach A$4.2 billion by 2020.
So, watch out for more news and growth in this sector in 2017 – from digital payments to data analysis algorithms, and more. Importantly, be aware of how these technologies and businesses can enhance your current advice practice.

2. Sophisticated data analytics

The emergence of new ways to store and capture data is one of this year’s biggest tech trends in the industry.

According to PwC, new uses of data analytics span the entire financial spectrum, from institutional trading and risk management to small notional retail wealth management.

Risk management approaches, such as behavioural algorithms and predictive analytics, allow real time analysis of transactions, as well as the chance to increase customer satisfaction and reduce and streamline costs.

Australia is charging ahead, with many start-ups moving into the data space.

As reported in news website, Business Insider, the international venture capital firm, Sapien Ventures, has led a $1.5 million series A funding round for Australian fintech start-up, Investfit.

Using sophisticated predictive analytics, the software is designed to help financial planners (as well as consumers without access to professional advice) make ‘billions’ of calculations in real time to simulate someone’s financial future and predict variability in market returns.

The new software is also aimed at solving the issue faced by many retirees: lack of funds resulting from the wrong financial strategy.

“Investfit solves this problem through technology that helps advisers and their clients make better informed decisions along the way”, says Investfit co-founder, Ed de Salis. “For those who don’t currently use an adviser, Investfit can show the very real benefits of getting advice.”

Stay tuned for more growth in predictive analytics and data management tools in 2017.

3. The rise and rise of mobile

The way we access information and make payments has radically changed over the last five years.

According to the UK’s Adviser Business Review, the rise of mobile is one of the six key trends in financial planning, with today’s ‘mobile-first consumers’ expecting security, immediacy and convenience all at once.

Throughout 2017, we are continuing to see the rise of tablet and smartphone use, with more and more clients using mobile devices to browse information, analyse data and transfer funds.

Research and consulting firm, Frost & Sullivan, predict that from 2016, digital payments will have steady revenue growth, with the segment forecast to be worth A$1.8 billion by 2020.

Mobile payments are also expected to take off in 12 to 18 months. With digital payments now available through smartphones, tablets and web-based tools, your clients can exchange currencies, trade funds or make credit card payments instantly. It’s the era of global digital banks – no physical branch required.

Recent entrants into the digital payment sector include Apple Pay and Google Play, with PayPal, Square Register, Woolworths Money and After Pay all vying for market share.

4. AI, robo-advisers and algo-banking

Artificial intelligence (AI) is no longer a fancy new technology reserved for science fiction films: it’s here to stay.

Primed to have a major impact on the financial services industry, AI developments will continue throughout this year and beyond.

Expect the rise of the ‘robo-adviser’
(think automated or digital investment advice) to continue, with a strong push
into the superannuation sector and high-
net-wealth arena. As noted in a 2016 report by Deloitte, robo-advice is not just for those who can’t afford financial planning help. Even the more affluent consumers (who already have access to financial advice) will start experimenting with this new advisory model and some will shift over a portion of their financial assets to this automated offering.

Self-learning AI tools will continue to pop-up, aimed at analysing customer behaviour for everything, ranging from fraud or financial crimes, to investment opportunities and saving methods.

Algo-banking is another new trend to hit the wealth management space. Algorithm-based banking (algo-banking) will allow for advice based on customised algorithms, structured data and a thorough analysis of your financial details to recommend the best investment and saving methods.

Here’s a few examples of AI in the global financial planning industry right now:

  • SuiteBox is using AI by converting video content to text and developing facial recognition technology, which allows it to offer analysis tools around meeting content.
  • In August 2016, Equip MyMoney launched its robo investment service for the Australian superannuation industry.
  • Popular robo-adviser start-up, Wealthfront, raised $64 million in venture capital funding and is reported to have over $2 billion in assets under management.
  • US startup, Clinc (University of Michigan), is using deep learning technologies to deliver AI tools that will enable consumers to use natural language interaction with their banking and financial services providers.

The key advantages of AI are less labour costs, and reduced investment and financial planning costs for clients. Businesses should be actively researching new technologies in this space to see how they can improve their service offerings and stay competitive.

Just remember, when it comes to managing money and securing your clients’ financial futures, clients still put a high priority on human interaction and value professional relationships. As such, there’s definitely room for collaboration between AI and humans, so we’re not redundant (yet!).

5. APIs and the cloud marketplace

APIs (Application Programming Interface) are like the ‘plug and cable’ of new technology.

An API allows two different programs to talk to each other and send data back and forth between different systems.

With ‘specialist’ platforms and tools on the rise, API technology means that financial planners, as well as other professionals, will be able to offer a more seamless client experience by integrating their existing platforms with external plug-ins to provide customised solutions for their clients.

Already, we are seeing more API-integrated apps plugging into CRM software in the financial planning space, from virtual meeting rooms to robo-advice to insurance comparisons, cash flow analysis and more.

6. Video and virtual meeting rooms

Video may have killed the radio star but it’s not killing the wealth management sector; in fact, it’s reviving and changing entire industries worldwide.

Global fintech marketing and events company, Finovate, recently placed virtual meeting rooms at the top of wealth technology trends for 2017.

Companies, like SuiteBox, that aim to transform client engagement with intuitive video, document collaboration, selective recording and real-time digital signing, are going to feature more prominently in the profession over the next 12 months.

Think about how to use video and virtual meetings in your financial planning practice: you can deliver significant business benefits and an improved client experience by jumping on board with the video trend.

7. Blockchain: an untapped technology

Blockchain is a distributed database of computers that maintains records and manages transactions (basically, a secure and distributed ‘ledger’).

As explained by Professor Wind of the Wharton Research Fellows and his colleagues, Libert and Beck, “rather than having a central authority (such as a bank), blockchain uses the network to approve ‘blocks’ or transactions, which are then added to the ‘chain’ of computer code. Cryptography keeps transactions secure and the distributed nature of transaction approval makes the system harder to tamper with”.

It might be a bamboozling tech concept (with a number of adoption barriers to date), but PwC has reported that this technology is the next big evolutionary jump in business process optimisation technology. Watch this space.

In summary

Given that wealth managers have a multi-trillion dollar opportunity to capitalise on the massive wealth transfer between baby boomers and millennials, technology advancements can’t be ignored. Get ready for modern day, tech-savvy clients: they’re demanding a greater sense of control over their finances, advanced digital technology services, social media awareness and financial coaching, instead of just ‘advice’.

They are highly likely to be time poor (like many of your current prospects) and the ability to meet, communicate and respond on their terms, will be very attractive to them.

However, rather than feeling threatened by new tech waves, the ones who will succeed are the ones who see the fintech movement as a chance to nurture client relationships and improve and augment their financial planning services.

Take a moment to think about what an advice business of the future might look like, what will it need to do for clients and importantly, how will it be delivered to clients.

The chances are the changes in the next five to 10 years will be far greater than we have seen over the last 30.

For a strong market advantage, you need a strategy to integrate new software solutions into your existing platforms, incorporate automated advisory tools where necessary, revise your core competencies and digitise your practice, in order to stay relevant into the 21st century.

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