IFAs and digital: embracing the new normal

A few short weeks ago, even the most digitally-savvy financial advisers thought we were still years from a mainly-online experience for clients.

That may not be true now. Coronavirus has changed everything and the digital era has been dragged forward years in just a few days.

It is not that we did not know digitisation was coming. When the FCA’s interim consumer research report ‘The changing shape of the consumer market for advice’ found that 4.5m UK adults took financial advice in 2017/18, it threw into sharp relief the 91%, or 46.5 million who did not.

Commentators said digital advisers and other online tools would start to plug this gap by ushering in online adoption – but it would take a few years. One of the problems is that digital advice firms have often encountered insurmountable obstacles on the road to profitability.

To be successful, they needed brand, scale and reach, commodities that many firms – including the now-closed Moola and Click & Advice – struggled to find.

The industry was certainly modernising as 2019 turned to 2020 but some face-face contact was still crucial, advisers said, as many clients would not want to give up the phone calls and meetings they were used to.

And then the world changed almost overnight.

Silver surfers

In the last fortnight alone, as millions fell into the grip of a nationwide lockdown, we have seen a seismic cultural shift. Through pure necessity, people in their 60s, 70s and 80s – are using tablets, video-conferencing and messaging services for the first time.

In every household, the battle against isolation is being waged as fiercely as our war with the virus itself, and the weapons of choice are almost always technology and a good internet connection.

As a result, we are seeing a global surge in digital adoption with online supermarkets, Netflix and Amazon among the many businesses cleaning up. Cash is increasingly viewed with suspicion at the local supermarket and homes commonly now have two or even three areas set up as home offices.

Part of the trend

Financial advice is not, for want of a better phrase, immune to this cultural shift. Coronavirus is the motherlode of necessity and if our industry cannot facilitate social distancing with digital intimacy, doing business will become difficult.

This is already happening. I heard of an example this week of a large company with nearly 300 advisers stuck at home, unable to advise because their processes rely so heavily on face-to-face contact. Businesses like this need urgently to look again at their strategies and aim for a digital-first approach.

On the flipside, there is evidence that more agile firms are beginning to thrive. Only last week, I noticed an IFA tweeting about how he had, for the first time, met, ‘onboarded’ and built a financial plan for a client without ever having met that person in the flesh.

This model will become increasingly common.

The new ‘new model’

Traditionally, financial advisers would conduct an initial interview face-to-face. They then do some research and arrange a second in-person meeting with the client in the form of a presentation.

The new way will begin with holistic online triage so that clients can be steered down appropriate guidance or advice journeys. They will then complete a digital fact find from home before a first appointment with a regulated adviser using video conferencing. Documents will then be exchanged over email or apps and signed electronically. In some cases, a suitability letter with recommendations will be automated based on the fact-find without a human adviser having been involved up to that point.

This is a future the financial advice industry must now embrace because coronavirus has taken away the choice. We may have weeks of lockdown ahead and the public will emerge different – more comfortable engaging digitally, less insistent on personal contact, less willing to travel.

Businesses need to build service propositions and strategies that work well without face-to-face engagement. They will need to get digitally intimate with their socially-distanced clients. Now that clients have seen the new way of operating, they will demand that too.

In this digital world, banks, building societies, financial planning firms and wealth managers had already been set the challenge of catching up. Now they have no choice.

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This article was originally published in New Model Adviser.