Today's Advisory Career

Advisory In The Age Of Technology, Privacy & Digital Access

Adapting to the emerging trends in financial services

by Ross Vanderwolf, CFP

Mr. Vanderwolf, CFP, of Brisbane, Queensland, Australia, is the President of MDRT. He is a 32-year MDRT member with 18 Court of the Table and nine Top of the Table qualifications. A Platinum Knight of the MDRT Foundation, he is also a member of its Inner Circle Society and has served on its Board of Trustees. Vanderwolf, a 37 year industry veteran, is managing director of Rothgard Financial Partners, a full-service financial planning practice. Over the course of his MDRT membership, Vanderwolf has served on numerous committees. He has been recognized as one of Australia’s Most Trusted Financial Advisers, since this designation’s inception in 2014.

Regulations, product offerings and digitization continue to drive a long period of industry fluctuation. In our fast-paced profession, industry developments challenge us each and every day to regularly adapt and enhance our skills to provide exceptional client service. Shift your mindset away from the direct business impact of these changes to a focus on success rooted in client service. Tapping into the knowledge of industry peers with similar experiences sets us up for an optimistic future and reminds us not to lose sight of our true purpose: to bring positive impact to our clients’ financial futures.

The rise of digitization continues to disrupt the traditionally relationship-based financial services industry around the globe. Financial advisers are utilizing technology to streamline their businesses and enhance customer interactions with increased robo advice services, use of AI for customer service and integration of app-based planning tools.

A Mix of Tech and Tradition

During my recent travels in India and Asia, I observed many paperless companies that house all information on smartphones, iPads and laptops. The financial advice industry is relatively new in these regions and its development occurred while much of the technology was already in place, creating a natural fit. This differs from what we currently see in Australia and the United States where we still find ourselves using traditional routines with paperwork. Advisers in these regions can sometimes be slow to adopt tech-based trends due to inherited practices from their country’s long-standing history.

A recent MDRT study explored how American consumers prefer to use FinTech and human advisers, and the findings are applicable to our entire industry in the digital era. The results found that seven in 10 Americans (71 percent) believe financial planning should be managed by a mix of people and technology-based tools.1 Those who want to provide comprehensive financial advice, but recognize all financial planning is not directly profitable, can benefit in particular. Less complex solutions and small transactions can be facilitated through technology to create efficiencies and new service opportunities. For instance, through apps and portals, we can see direct feeds from our clients’ bank accounts and can easily add in budgeting advice to our services. We can also utilize virtual meetings and screen sharing to expand our client base outside of our immediate geographic locations. Technology like e-newsletters, Facebook pages, company apps, and portals for plans are the conduit for clients to receive information on-demand and can lead to solidified relationships. However, the professional human connection is what makes businesses successful and drives long-term loyalty.

The Human Element

With so much of our lives connected to social media and technology, we find clients still crave human interaction when it comes to financial planning. The study revealed an overwhelming majority of respondents (88 percent) believe technology should complement, not replace, the services of a human financial adviser and 85 percent would prefer to work with a human financial adviser rather than a robo adviser.1 Sales platforms are helpful for day-to-day account management, but in-person meetings and the personal touch of an adviser are immensely valuable for the emotional aspect of financial planning. Clients may not realize this value until they are confronted with a stressful situation or critical decision in which they could benefit from an adviser’s personal guidance.

While we can rest assured that the role of a human financial adviser will not be replaced by technology, advisers must adapt to remain competitive in the industry. The incorporation of technology in traditional practices can help advisers differentiate themselves and demonstrate that they are continually making improvements to better serve clients. The expertise and ability of a human adviser to develop a trusted, two-way relationship are beyond what technology can offer and will continue to be the foundation of the industry.

Client Expectations

MDRT’s study also evaluated what technology clients expect their advisers to offer. Ninety-four percent of consumers who work with a financial adviser find it important to have software that models financial outcomes and 80 percent find cloud technology for storing and accessing plans important. These expectations don’t meet reality; only 48 percent of consumers said their adviser uses software to model financial outcomes and 28 percent said their adviser uses cloud technology for plan storage.i These discrepancies create opportunities for us to implement tools or better communicate the technology we already use in our practices and differentiate our services from our competitors. All in all, it’s imperative we break out of the inherited methods and embrace the age of digitization as an opportunity to develop our skillsets and offer more.

Global Population Structures

the baby-boom generation in the United States is currently approaching the age of retirement needs to plan to live well into their 80s, which differs from previous generations...

While technology can influence our daily activities, we must also stay in tune with the high-level global demographic evolutions that contribute to product trends in financial services. Population structures in different regions affect the needs of our clients and the services we must provide.

For instance, underinsured populations will create larger client bases for life insurance agents. Despite regulations that will shrink the size of policies, the Chinese life insurance industry is expected to grow due to an increase in middle-class families in need of coverage. By 2022, 76 percent of China’s urban population will be considered middle class.2 Australian advisers also reside in one of the most underinsured countries in the Western world, however due to increased regulation, compliance and underwriting requirements this will not change in the short term.

On the other hand, other industry segments are struggling with an over-saturated insurance market. In Japan, 90 percent of families own policies.3 This means there is less of an opportunity for advisers to break into this market, and they may find more success with other product offerings and comprehensive planning.

Aging Society

As life expectancies increase globally, advisers have more demand for retirement solutions. The Baby Boomer generation in the United States currently approaching the age of retirement needs to plan to live well into their 80s, which differs from previous generations.4 Chile’s life expectancy rates have also grown at impressive rates with an increase in 4.2 years per decade over the past 50 years.5 These populations will face longer periods of retirement and will need to prepare for increased income needs. Advisers who can provide effective, lifelong financial planning can help these citizens recognize their retirement needs and combat elderly poverty rates. A successful adviser stays up to date on the trends within their countries and tailors their services accordingly.

Industry Regulations

Increased regulations are an ongoing reality across the industry. Due to the implications of added supervision, clients may lack trust in financial professionals. As you work to consolidate or regain their confidence, demonstrate and communicate your ethical practices and how you prioritize clients’ best interests. Those who embody ethical behavior will solidify a loyal clientele and experience business growth. An association membership like MDRT can be an effective way to communicate to your clients that you are committed to ethical values and regularly upscaling your skills in preparation for changes.

Country-Specific Regulations

While the industry is heavily regulated regardless of geographic location, each country has its own standards. Life insurance agents in China experience added supervision to counter against ‘miss-selling.’ In the United States, the industry has experiencing fluctuating changes over the past few years with the Department of Labor fiduciary rule. When navigating industry regulations, consider how technology can play a valuable role. The intersection of these major trends allows us to keep accurate, digital records, which make audits more efficient and can easily prove adviser compliance.

Australia’s regulations are particularly notable in the industry with regulatory authorities establishing higher education standards and rulings that move practices from commission to fee-based business models. With a rise in the cost of doing business to remain compliant, many small practices may consider amalgamating with larger companies or outsourcing product offerings. It is very difficult for one person to implement the complex changes, which will lead to growth of larger companies that have access to technology and resources to remain compliant. I expect other countries will implement similar policies in the near future and advisers across the globe can learn from how Australian advisers and clients respond to the changes.

Professional Disposition

Financial advice is becoming more professional as an industry. From national regulations to company-specific offerings, advisers have more opportunities to continually develop their expertise. Within five years in Australia, anyone who advises in financial services must be degree-qualified. Last year, regulatory authorities in Canada proposed reforms to establish best interest standards. I encourage advisers around the world to strive for longer-term relationships instead of a one-time sale, and move beyond insurance to a more comprehensive outlook with well-rounded services. This outlook leads to retention of clients and agents.

Continued education, company support and association membership provide agents with the tools they need to navigate regulations without feeling helpless as many have in the past. MDRT membership connects professionals around the world and offers resources and tools to support us through these changes. With its shared learning approach, we can tap into the expertise of the top financial professionals in various regions and proactively prepare for the future. Together, we’ll continue to grow the industry and provide the best service to clients in the most efficient way. I am confident that advisers with the ability to evolve alongside emerging trends have a bright future ahead in the financial services market. ◊




1. MDRT Study, Can FinTech and Human Advisors Coexist?
2. Business Insider, China’s middle class is exploding
3. The Economist, Japanese life insurance
4. Market Watch, Where did baby boomers go wrong?
5. Aging and Health Policies in Chile: New Agendas for Research