Time for the iPhone moment in Financial Services (Part 1/6)
Mik Cons, CEO of moneyinfo Limited
Since I left school in 1983, I’ve been involved with financial advisers and FS technology. Now affectionately known as FinTech. I’ve seen lots of change in the industry; polarisation, de-polarisation, commission disclosure, FIMBRA, FSA, FCA, RDR, Auto Enrolment etc.
All of which was going to spell the end for the financial adviser.
Yet the market dynamics are:
- We all want advice. The majority of us aren’t comfortable doing this ourselves or will we be prepared to trust our life-savings to a robo-adviser.
- We all need advice more than ever. Financial Services is complex especially given the new pensions freedoms.
- In the last 15 years some 10,000+ advisers have left the industry and there are simply not enough advisers to service everyone that needs advice.
In the 30 years I’ve been involved in the industry, I would say there has never been a better time to be an adviser.
BUT and there is a but… Our industry is ripe for change . Our costs are too high, our processes grossly inefficient and our use of technology particularly digital technology lagging way behind user’s expectations with the possible exception of personal banking.
Let’s just take a very simple example. How easy is it to buy a book on Amazon or order a cab on Uber compared with putting some money into a pension to help save for your retirement? Yet these things are many times more complicated to achieve technically given the fulfilment requirements of each.
We all know saving for your retirement is a good thing to do so why is it so complicated that the only way we can get people to save is to force them to do it through Auto-enrolment? And then, we’re failing in most cases to get employees to look at their investment strategy or encouraged to save more than the minimums. Because it’s all too complicated.
It’s not just pensions, even simple stuff like life assurance and income protection isn’t getting sold anymore unless it’s part of a mortgage or mis-sold via card protection schemes. Yet isn’t this stuff a sensible thing for most people to have?
Even when it’s simple like Nutmeg etc, it’s too complicated and what’s more they are not even offering to confirm that what you’ve selected is a good idea. It’s up to the consumer with no knowledge of investment management to decide on their long-term savings strategy.
In some ways this is a strong argument for bringing back with profits or the managed fund. Take the choice away and just encourage people to put money aside for their retirement showing the benefits of long-term compound interest. The answer isn’t lifetime funds unless you solve the problem that being 100% in cash for a client’s retirement date is probably no-longer the best course of action.
But even if you do this the complexity of the decision if you want to simply confirm that this option is right for the consumer means gathering all sorts of hard and soft facts that have very little to do with pension planning and lead most people to give up before they get through the process.
A robo example we’ve seen requires 45 inputs to top up an ISA under so called guided-advice. Really, is this the best we can do?
All the basic elements are available for the entry of disruptive technology into financial services as has been seen in other markets like retail with Amazon, Uber with taxis, food-shopping, Music, Video etc.
But don’t be put off, we’re not here to tell you that the end of the world is nigh.
In my next article, I’ll explain how digital technology and robo-advice is going to be great for advisers…
Mik Cons - CEO
moneyinfo Limited
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