PRESENTER: Consensus is growing that the wealth management industry is on the cusp of a digital transformation. After years of mounting geopolitical uncertainty, volatile markets, regulatory upheaval and continued margin erosion, the digital age could usher in significant opportunities, but how can firms utilise technology? In this Akademia unit we’re going to be looking in more detail at this with Nick Eatock, Executive Chairman, Intelliflo. There are three key learning outcomes: the main benefits of implementing technology for advisers, how technology is helping advice firms meet regulatory challenges and why technology implementation might fail, and how to avoid this. But first Nick introduces the Intelliflo eAdviser Index and highlights the key findings from the report.
NICK EATOCK: So our eAdviser Index has given a fascinating insight into how wealth management and advisory firms are using technology to change the way in which they delivery their services, by improving client experiences, delivering efficiencies into their business, buying back time and creating great revenue opportunities. So, to start if we look at client experience and outcomes, clients are expecting to be serviced in all manners of life in a different way from how things used to be. They expect an online offering with immediate 24/7 access to their financial portfolio and valuation. In fact we introduced our client portal, our digital technology back in August 2015, and since that point in just over three years we’ve seen the adoption through adviser businesses grow at an incredible rate. In fact today just over half the users of our overall technology are already client portal users, with a 68% increase in firm adoption just last year alone. This is making a huge difference to how clients and advisers engage.
For example we’re seeing a huge difference in the way in which clients engage with advisers and the frequency with which they do so. So we measured again through our eAdviser Index how frequently advisers were communicating and engaging with their clients, or vice versa, before the adoption of the client portal technology and after, and the changes were dramatic. In fact it went from just 3% per month up to 58% engagement across all of those clients, quite stunning. The next part that the e-adviser survey has understood in the eAdviser Index is the efficiency that the technology can drive into the advice process, and reducing friction in what is typically a very frictional process itself. So, by pulling disparate systems together and integrating them, ensuring that there is less need to rekey the data, you create greater efficiencies. And that reuse of data by eliminating error but also increasing output is a key outcome.
So what all of this technology does is bring you back time, even just the automation of processes such as valuation. So if we look at the time spent by our users today manually reconciling valuations, rather than doing it electronically as the software allows, there would be a saving across our users of 77 manual years every single year, incredible. Use the software to automatically value, automatically reconcile income, and you’re buying back time into your business, which you can spend on client generating activities, or value added part of the client operation, or if you’re operating a lifestyle business to just bring you back time itself. This is particularly relevant at a time in which regulation is driving further work into your businesses, whether that’s GDPR or MiFID II. Use the technology to buy you back time.
Finally, how does this make a difference to the revenue that an adviser business can generate; whether that’s delivered through providing advice services to more clients, or delivering more time for your existing clients? Well we’ve seen some fascinating information here from the eAdviser Index. In fact the advisers who use our technology to its greatest extent, the e-adviser champions, have delivered 83% more revenue than the others, 33% more recurring revenue than the others, all through the adoption of the technology. And at a time when more poor people need advice than the industry can possibly provide in a traditional measure, use the technology to e-enable your business.
PRESENTER: Well let’s start with the role that technology typically plays in the wealth management industry, describe that for me, and also how do you think it’s changing?
NICK EATOCK: I think it’s changing enormously. I think even just over the last few years, probably since mid-2015, we’ve seen advisers and wealth managers in general adopt technology to a far greater extent in their business. Before it used to be very much back office oriented, and now it’s through the entire chain, right through to the front office, even to the end client now. Giving the end client a view is becoming an increasing part of how they do it. So technology is really important, but it’s not replacing advisers. I think Tricia Rothschild, who’s the CPO at Morningstar, said technology won’t replace advisers, but those advisers who use technology will probably replace those who don’t.
PRESENTER: So talk me through the main benefits then of this technology.
NICK EATOCK: Well, there’s a range, and obviously the main benefits to an extent depend on who you are, what role you play in a business, or even what role you play as the end client, as the customer. So I think from an adviser perspective one of the great benefits of the technology now is it enables you to concentrate on the value added bits of the service you offer, and not doing the time consuming, often boring admin-related activities that for too long have been part of the process. So we’re seeing that businesses in general are adopting those different bits across the spectrum, to ensure that everyone gets a better experience. And that absolutely includes the end customer.
The end customer is given more transparency over the information about them, how their portfolio’s performing, how they share information with their adviser, and that creates an overall better experience. The adviser therefore can concentrate on the bits that are actually the value add within that proposition. Similarly if you look from more the traditional back office areas, whether it’s through compliance, ensuring that the advice and the service you give meets those compliance standards, through to people who are more operational, you know, whether it’s recognising income within the business, whether it’s achieving valuations, all of those kind of areas can now be automated and free those people up to do hopefully more interesting activities.
PRESENTER: I imagine though a concern for some people is about cost, so is it expensive to implement this sort of thing?
NICK EATOCK: I’d probably say it’s more expensive not to implement it. If you look at the benefits you can deliver from the software, we’ve shown that the adopters, the core adopters of our technology drive 83% more revenue than those who don’t. So that’s the cost of not doing it. But yes there is a cost to implement anything, anything that you’re going through. But I think the key proponent of that is not measured in pounds and pence, it’s measured in hours. It’s the time involvement. You do have to dedicate the right people at your end to follow a process and implement the bits that are going to make sense. Even if you phase that, and it’s pretty common actually for advice businesses to look at the range of benefits that they can get from the software, and concentrate on one or two key items to begin with, and then at a subsequent phase maybe six months down the line move onto something else.
PRESENTER: So then how do you actually calculate increased revenue when technology is implemented?
NICK EATOCK: Generally speaking that’s a pretty tough ask actually. For most software, actually looking at a return on investment or the increase in revenue that might be delivered is tricky, but we I think have two key benefits there, or USPs that enable us to get to that data. Firstly most adviser and wealth management businesses that use our technology use it to also reconcile their income. So for every pound or pence that comes into the business, they use our technology to automatically reconcile that, both against the originating adviser, but also against the client to which it relates, which is a requirement, a regulatory requirement in fact.
So because they use the software to do that, we have a very good view if you like on the top line revenue of the business. Similarly because our technology is delivered as a single solution to the entire marketplace, we have access to the data which enables us to determine how well people are using the software; in fact we capture about 1½ billion clicks per annum, and we analyse all that in great detail. So when you reconcile both that, which is a kind of almost a quantitative and qualitative view on how well they’re using the technology, against the revenue that they’re generating, you get a very good view on the difference, the alpha if you like that the technology delivers.
PRESENTER: Well earlier you said technology’s not replacing advisers, so does that mean it doesn’t come at the cost of people’s jobs?
NICK EATOCK: We don’t think so. And certainly the data that we’ve seen suggests that it doesn’t. And I think part of the reason behind that is the demand for financial advice is far higher than the supply of financial advisers. We only have 30,000 financial advisers in this country to deal with everyone. And in a marketplace or an environment where pension freedoms and the move from DB to DC has changed the very nature and way in which people need advice, something needs to be done, and we think the technology can help with that. So whilst initially people may say OK more automation, doing things that I used to do manually will mean that what do I do? You know that very natural human behaviour. The reality is that what happens is that it enables those people to concentrate on value added activities, things that actually benefit either them and/or the client more.
So what we have seen actually is that advice businesses are using it to scale their advice that they offer to more and more client: 127% more clients on average. We see firms with three to four administrative staff book more revenue per adviser than those with just one to two. So actually this has not come at the cost of people’s jobs, it has enabled people to scale more. And as the Fidelity survey pointed out, actually it makes people within the business 39% more fulfilled in the job that they do, so that’s a good thing.
PRESENTER: So then what would you say are the main obstacles for people adapting to this technology?
NICK EATOCK: People’s propensity and desire for change; it’s always been the case. And I think if you’re implementing some technology, you’ve got various people within a business, some who will see it absolutely as a key driver and a key enabler. But some who may, for some of the reasons you outlined there, is it going to take people’s jobs away? Who may think that this, I’ve always been doing this activity manually and this is who I am. Now you’re going to tell me I can do that automatically, so what do I do? The reality is they can add the value add now to the business and allow those businesses to scale. I think Darwin said it best right, let’s go way back. Darwin said, he talked about it’s not the strongest who will survive, or even the most intelligent, it’s the people who are most responsive to change.
So listen to that, and realise that the change can actually deliver you a better business with more fulfilled people. There was a survey done in 2014 by Fidelity in the States, their e-adviser survey, where they looked at the difference that technology-enabled advice businesses had over people who weren’t enabled through technology. And one of the many stats of improvement that they showed was that their people are 39% more fulfilled. They enjoyed their job better, more. So that’s a good thing.
PRESENTER: Well let’s look at this from the other side then, and how would you say technology improves the customer experience?
NICK EATOCK: In a number of ways, and I think probably one of the key elements here that I think we all have to remember is that as advisers or wealth management businesses we’re managing people’s money, and it’s their money. So they should have access to how that is going on a regular whenever they want it type of basis. The traditional industry has kind of historically almost hidden away from that; whereas I think it’s really important to have that data at everyone’s fingertips so that they’ve got an understanding of how things are going. Not just with the parts of their financial wealth that their adviser is managing, but also the other elements. And through the technology you can give them that picture of everything about their portfolio. So that’s a massive win if you like for the end customer.
The other thing is that money tends to be a bit boring. So you need to present the information in a way that is intuitive and accessible for clients so that they actually develop some kind of interest in how things are going. And what that does is it creates a better level of engagement between adviser and client, and that’s got to be good for everyone.
PRESENTER: So do you have examples of how clients have responded to this sort of thing, and on the flipside are you seeing that perhaps some of them are a bit nervous of technology, so nervous to use that kind of thing, or are they are responding well?
NICK EATOCK: Actually the people who are most nervous to using the technology are the advisers, not the clients. And I think historically they’ve been nervous because they feel that maybe the technology will disintermediate their relationship and therefore not be a good thing. What we’ve actually seen through the data, and remember we have over 1,100 firms use our client portal technology today, just over half of all the people that use our back office practice management technology use the client portal, and amongst all of their clients we’ve seen an increase in monthly engagement from just 3% a month for those people not using the technology, or before they used the client portal, up to 58% per month. So that’s an incredible rise in engagement, and just shows you what a difference it can make. I think the other thing about client portal technology and mobile apps and all that kind of stuff, and we provide all this software, is that advisers tend to look at their clients as being their clients tend to be in their 50s to 70s and older than that.
So there is a false suspicion or impression that those people are going to be less interested in the technology. Whereas again when we look at the actual data of usage, the people who most commonly use the technology are the people in their 50s to 70s. Very often those people have time, and extreme interest in what’s going on, so they will use the technology. We’ve got a great example. We’ve got some omni-channel technology within our software suite that allows people to have online meetings, which are all recorded from a compliance trail perspective, but online meetings as opposed to face-to-face meetings. And one of the principle challenges I think in the advice industry is that ultimately clients want to see their adviser every so often, but on their terms. And the adviser wants to see their clients as often as possible, and you can’t always do that face-to-face.
It’s not always convenient trying to find a time that works for everyone. So some level of automation and remote meeting technology actually does help. It enables you to have a meeting in five, 10, 15 minutes, rather than drive out for an hour to have an hour’s long conversation so everyone feels they’ve got value from it, and then an hour back. That doesn’t necessarily work for everyone. And what we have seen is that actually the clients push for this massively. I had an example the other day from an adviser who said their 84-year-old client said I would like a few more remote meetings now please. So they are pushing the technology as well.
PRESENTER: Well that was going to be my next question, because of course technology dominates everything we do now in life, so I was going to say how much do clients expect when it comes to technology?
NICK EATOCK: Well we feel that they do enormously. There was a great survey in 2014 by RBC Capgemini, and they asked the question to advised clients - so this is all around the world as well - they asked advised clients around the world how likely is it that you will fire your adviser or wealth manager in the next five years if they don’t provide access to your information digitally and their services through that digital measure. 65% said they would. You know, and if you look at the people who are under 40 it was up near 80%, and even the clients who were above 60 years of age were up at 50% of them saying they’d fire their adviser. And remember they gave them five years.
That was back in 2014, so this is the crunch year. 2019 is the crunch year. They are demanding this. And of course they’re demanding it, because this is how we experience so many things in our lives now. We’ve all got mobile phones, we’ve all got apps on those mobile phones, and we expect to gain access to information through that. Actually interestingly the people, the clients who are at the older age tend to use the mobile phone but less, but they use the tablet through, Apple seem to do very well amongst our user base, whether it’s an Apple iPad or another tablet, they use that tablet technology to access the information.
PRESENTER: So then what are the other benefits for automated advice, maybe gaining new clients even?
NICK EATOCK: Yes, I mean so digital advice, and everyone has a different definition on this, so it doesn’t necessarily always help but, so for us digital advice is a combination of different routes. Digital advice at its heart is about how you service your actively advised clients. And that’s about sharing information with them through that mechanism, servicing the information that you need to get back from them, signatures through electronic signatures, meetings electronically. That’s just a kind of a new way of doing some of the traditional advice journey. On the other hand you’ve got automated advice, or the American term is much more about robo advice, but for us automated advice is about a new segment of clients. It’s about the future pipeline of your business.
I always say to advice businesses automated advice is not going to get you rich quick, or even slowly. But what it will do is it will bring on a bunch of clients and protect the future pipeline and health of your business. So those are people who typically can’t afford the price of full advice. They have lower assets to invest, maybe just £1,000, £2,000, something like that. The traditional cost of advice and know your client and so on makes that really difficult to provide an offering to them. Automated advice enables you to do that. And then people then can start their investment journey. We all know that the magic law of compounding means the sooner you start, the better position you’re going to be in.
Similarly we know a number of our advice firms now use the automated advice solution with their corporate clients. So their corporate clients will have an employee bank, and typically an adviser would maybe touch the top one, two or three people within that business. What about the other 90 or 100 people who aren’t quite at that stage where they warrant full traditional financial advice? Well provide an automated advice solution to them, and you’ve got something that can take them through up until the point which may be five years, 10 years, 15 years’ time when actually they’ve got to a position in their lives and their careers where they do need financial advice. And similarly I think probably the third and most important one in many ways is the wealth of your existing advised clients.
Your advised clients, if they’re in their 50s to 70s say, will almost certainly have, many of them will have children, and the wealth will at some point pass on down through the line. You want to keep the family wealth as long as you can. 60% of children fire mum and dad’s adviser. You don’t want to be the wrong side of that equation. Start talking to them in a sense that’s relevant and digital that starts creating a relationship that they value and then you are in a much better position.
PRESENTER: But how do you see it impacting the performance of the adviser?
NICK EATOCK: In many ways really. So performance can be judged through cold hard data that we definitely see, so advisers delivery 83% more revenue, 33% more recurring revenue, 127% more clients, and 126% more assets under advice. So these are all very cold hard objectives about saying actually is the adviser delivering more? And if performance is measured by virtue of the revenue you write, which is clearly one measure, then it’s doing well through that. But also we do see that advisers are just having a better experience, and a better way of communicating with their clients, that actually works well for both parties. You know, I think one of the great benefits of digital technology these days is it’s not just about it working for one cohort but not the next; actually it’s working for both. Whether you’re an adviser trying to provide the information to your clients, or whether you’re a client wanting to get access to that information, this works well for both. In truth, it lowers the cost of servicing clients, and that’s got to be a good thing, whether you use that as an adviser business to generate more wealth from other clients, or whether you just generate more time, devote more time to those existing clients in providing the value add that you can through that.
PRESENTER: So let’s move on to regulatory challenges now, so what do you think advisers are facing and how can technology help?
NICK EATOCK: Well they continue to face a myriad of regulatory change, and that’s not just even just from within a financial services regulation point with things like GDPR. GDPR was a massive change to so many businesses around Europe last year. MiFID II is driving further change as well. One of the interesting things for us we saw about GDPR was it really forced or encouraged advisers to think about how they communicate information to their clients, and how they gather information, which pushed many more of them to use the client portal technology.
There was one firm I remember who around, this is probably around March/April last year said to us, said we can see how the client portal technology will help us meet our GDPR obligations, but our clients don’t really want this; we’re just doing this because of this regulation point. And we sat on our hands and said, we wanted to say we think they’ll like it, but we just sat quiet and said at least you’re adopting it, which is better than not adopting it. And so he did, and their firm brought on a few thousand clients and what have you through that, of their existing clients through that mechanism. To his credit towards the end of last year, November or so, he came into the office and he said I just wanted to say sorry you were right. Our clients love this, they absolutely love this.
So actually I think some technology, sorry some regulation can be challenging, but actually a lot the regulation out here will, like GDPR in my opinion, actually drive better businesses with better business models and better opportunities. It doesn’t always feel like that if you’re the other side of having to implement processes and/or technology to deal with the regulation, but it genuinely can help. Similarly I think one of the, MiFID II for example, has introduced the requirement for ongoing suitability, and that’s something that most advice businesses or wealth managers just haven’t considered was going to happen. So it was kind of beyond the spectrum of the processes that they were looking at at the moment. And again the technology can help deliver on that, and it can help get the client to be a part of that journey, and fill in the updated fact find, and let you know what’s changed all through this mechanism, all actually because the client’s using that technology as their kind of view, their view of their financial life. And that’s a real, that makes everyone feel more comfortable.
PRESENTER: Well data quality is also an issue for the financial advice industry, so how can technology help there?
NICK EATOCK: I think again part of it’s about GDPR. You do have a responsibility now to actually share the information you have about clients. And give that access through a subject access request. Within 30 days you need to provide that information to the client anyway. So how can you make that process more effective? Because in a traditional world most advisers will sit with a client with a paper fact find, and they’ll fill in one of those, and they’ll scribble on it. And they’ll probably go back to the office and hand it to someone, who either will scan the document in, which isn’t really data, it doesn’t become data, it just becomes documents, or you’ll have someone typing in the bits. And if an adviser’s handwriting is anything like mine that makes it a really difficult thing to do, so the quality, that’s why some of the quality of this data just isn’t anywhere near how it should be.
Things like digital client portal technology allows the end client to fill in that data themselves, and actually that (a) means it’s more accurate, because it’s stuff they know, they know well. They also take a lot longer to do it. They get some kind of buy-in to the technology providing them with a view on their finances that they didn’t have before. So actually they spend longer, they spend more time getting the right information, rather than a traditional fact find process which I often refer to as a guess find, because you’re asking a client all sorts of awkward questions about their financial circumstances, and the various pensions, and what value’s in a pension, and all these things that they don’t necessarily have a view on what they actually have. And they feel awkward about that. So provide the capability to allow them to do some of this from home at their leisure, and you create a much better base dataset.
Now what I’m not saying is do away with personal face-to-face fact finding. I’m saying do away with the drudgery of it. And then when you sit in front of your client perhaps for the very first time, if you’ve had 80% of the data collated already you can concentrate on the 20% about finding out what their goals are, what drives them, what makes them tick. Which is after all the core elements of a financial planning journey, understanding that information about your client, rather than the cold hard data, which if you can get that through this kind of mechanism nice and easily and not on your time as an adviser, that’s a better position to be in.
PRESENTER: So adopting to new technology can be challenging. So when does implementation fail, and how can people avoid that?
NICK EATOCK: I think implementation normally fails because of individual buy-in. You do have to buy into the process that you’re going through, because it’s change. It’s back to that question earlier of change. Change is a difficult thing for most of us. We will cope with change if we see a brighter future ahead, so we can see that something will be better. And in order therefore to go through you need to (a) show people that there’s something better. They’ll be able to do things more effectively, more quickly, not have to do that boring bit of their job that they did before. That will all be automated and that will create a better working circumstance, make them more fulfilled. And you have to do that across the organisation. Because it’s all very well the principal or CEO of a firm saying this is the thing we should do, but ultimately it’s the rest of the people in their business that will affect how well that actually works.
So you need buy-in across the organisation. I think there is absolutely no point implementing technology if just the CEO wants it and no one else wants it. Or similarly just the operations manager wants it, and no one else does. You do have to get that buy-in. That’s probably the single biggest instance we see where implementation of technology doesn’t work.
PRESENTER: So what sort of technology is out there and how can people get started?
NICK EATOCK: Oh god, there’s just so much. I mean even as a business ourselves we integrate with 450 different technology solutions to the software we offer out to the adviser market. So I think you have to start by whittling it down over the things that you think will make a difference to your business. Identify what that is. Is that your core practice management technology, operating maybe more in a traditional back office arena, because your income and your compliance and all those areas, your MI you’re a little bit concerned about. Is it because you don’t have a digital proposition, and you realise that you do need something to face up to clients; is it in financial planning or cashflow tools; all those kind of things.
So I think you need to understand a little bit about what you want. And that’s not an easy question often. Sometimes you need someone to come in, and there are various industry commentators around and consultants who can help with that process to identify what you really need, what you’re missing in your business. But then do the beauty parade, start talking to technology businesses, because there’s a bunch of us out there, and we all do things in different ways. Talk to other advice businesses, or other wealth managers out in the marketplace. Understand what they’ve adopted, what worked well, what didn’t work so well, and go through that process. I think it’s, but you should do it, you must do it. What’s really important is that technology changes, and technology changes all the time.
Technology is probably going to change more rapidly than you are, but you are going to have some changes too, and what you do not want to do is buy into a technology partner, a principal technology partner who is fixed and rigid about the way that they do things. So go for a partner who is open, who’s very happy to integrate with third parties, whether they are competitors or otherwise. You want to buy into that open ecosystem, because that will provide you with the most flexibility to achieve what you want to do going forward.
PRESENTER: In terms of implementation, looking at timeframes, how long does it take to implement, and is it suitable for all firms, because I imagine there’s a concern that it’s really just for the big firms out there?
NICK EATOCK: So to the latter point, no. We’ve got lots and lots of small one person businesses that use our technology, right up to 1,000 plus people. So there really is no, there are no people that don’t benefit from technology; having said that, depending on your profile as a business you will get different kinds of benefits. So some bits will mean more to you than other bits. And that is very often what drives how long it’s going to take to implement. That in combination with if you’ve got a big business, actually often the biggest challenge you’ve got is just change in itself and implementing training across your business. How do you do that with as little disruption to the existing business as you can? Because technology does take you through a hockey stick, you know, those first few months can be down months, they can be a bit harder because you’re sometimes battling against processes that are different from the way you used to do it, and that becomes tricky in itself. But the payback is pretty quick too.
We see payback within six to nine months of the initial adoption of a technology. So actually it can be pretty quick, but you do have to project manage it. Most software businesses will have their own project management team who can have an implementation team who can help you through that, but also consider having people at your end. It does require, it takes two to tango. You do need some people within your own business who are part of that technology implementation.
PRESENTER: Well unfortunately we are almost out of time, so what would you say are the key takeaways for our viewers today?
NICK EATOCK: I suppose the key one is it’s never too late. So even if you haven’t adopted technology to be significant within your business today, it’s not too late. It’s never the wrong time to make a bad decision, to make a good decision rather. So do consider what you’re going to, the differences you can make, and the benefits through greater client experience and outcomes, saving more time. We can buy you more time back, and you can enable to invest in either more clients or more value add to your existing clients, or just becoming a more efficient business as a whole, which might drive a bottom line. Look at digital advice and automated advice about expanding the potential for you as a business in terms of your future pipeline. And all of this will drive a more valuable business with happier clients and better outcomes for the advisers.
PRESENTER: Nick, thank you.
In order to consider the viewing of this video as structured learning, you must complete the reflective statement to demonstrate what you’ve learned and its relevance to you. By the end of this session you’ll be able to understand and describe the main benefits of implementing technology for advisers, how technology is helping advice firms meet regulatory challenges and why technology implementation might fail and how to avoid this. Please complete the reflective statement to validate your CPD.