The future of adviser technology
22 March 2023
For an industry often perceived as cautious and slow-moving, the financial advice sector is no stranger to technology-driven transformation.
The past few years have seen the industry reshaped by technology, from the emergence of fund platforms, so-called robo-advisers and the use of ‘regtech’, to the development of digital financial planning tools and video meetings. Few advisers could operate effectively without their front- and back-office technology and firms are increasingly recognising how, with the right technology, they can improve efficiencies, meet compliance demands and tailor their offerings - or risk being left behind.
However, despite these significant changes, the world of technology does not stand still. Here are three new technologies that I think will impact advisers and improve the advice journey over the coming years.
AI and machine learning
Although the terms are often used interchangeably, there are key differences between AI and machine learning. AI refers broadly to the use of programming and computer software to carry out tasks normally requiring human intelligence. Machine learning is a subset of AI that uses algorithms for the interrogation of ‘big’ data and to carry out more complex automated tasks.
Whether we know it or not, we all use machine learning and artificial intelligence (AI) in our day-to-day lives. For instance, smart assistants, like Amazon’s Alexa or Apple’s Siri, can answer voice commands to quickly deliver information, while streaming services like Netflix use algorithms to analyse your viewing habits to deliver content suggestions that increasingly match your preferences.
This technology is starting to be used in financial services too. According to the Financial Conduct Authority (FCA), more than seven in 10 financial services firms are actively using or developing machine learning applications, and it expects the trend to more than triple in the next three years1.
While some may worry that AI and machine learning pose a threat to human advisers, their use would be primarily to support and enhance traditional financial advice. For instance, allowing for more effective client segmentation and creating more personalised and timely recommendations using analysis of data from different sources, as well as helping produce more accurate estimates and projections for cashflow planning.
AI is becoming increasingly sophisticated, as evidenced by ChatGPT, which launched in November 2022. In case you missed the commotion about it at the end of last year, ChatGPT is designed not only to hold human-like conversations, thanks to an algorithm delivering a huge amount of language data, but also to identify and admit its mistakes, ask follow-up questions and reject inappropriate requests.
Before Christmas, people were clamouring to test its abilities by asking it to write stories, plays, poems and songs. Such was its success, that digital media company BuzzFeed announced it will be using the software to generate certain content for its site2. With Microsoft announcing a multi-year, multibillion-dollar investment in the ChatGPT creator, OpenAI3, it’s likely we’ll see far more of tools like this in future.
Again, rather than presenting a threat to advisers, tools like this have the potential to support the advice process. It could deal with many client questions during the early stages of the advice journey and direct more complex questions to a qualified human financial adviser.
Blockchain
You may be aware of blockchain technology from its links to cryptocurrencies including Bitcoin, but it has the potential to underpin a far broader range of financial transactions. According to the latest FCA data, 34% of firms supported by the Regulatory Sandbox are focused on blockchain technology, with use cases including facilitating more efficient low-cost cross-border payments, security issuance and execution process4.
Blockchain, or distributed ledger, technology acts like a traditional ledger in that they record and track transactions, assets and agreements. The difference is that all details of each transaction are recorded immediately and shared in real-time with all those within the network via a ‘single version of the truth’. Each ‘block’ of data becomes part of a ‘chain’ or digital ledger. Crucially, information in the chain can’t be changed once it is recorded. If a mistake is made, a new transaction must be added to the chain which reverses the error and both transactions remain visible.
Blockchain can provide an incredibly fast, secure and transparent way to transfer assets, which could be a valuable tool within financial services to reduce the risk of fraud, enable quicker, more secure pension transfers and streamline the investment switching process. It could also drive efficiencies directly within the advice process by improving the Know Your Customer (KYC) process through quicker and more secure identification and verification of clients, increasing standardisation and reducing admin costs.
Virtual reality
The use of computer technology to create simulated environments isn’t exactly new, but a combination of technological advances and the Covid-19 lockdowns has seen it enter the mainstream over the past couple of years.
Some financial services firms are now using virtual reality technology to recruit and train employees, with simulated client interactions for skills development, while banks are creating virtual branches to ‘meet’ customers.
In the advice industry, VR headsets could be used to enhance virtual client meetings, so they could feel like they are physically with the adviser wherever they are in the world. VR can also be used alongside cashflow planning to help clients visualise what a projected future might look like in terms of realising future goals, like a dream home or exotic holiday, enhancing their engagement with their long-term decisions.
With virtual tours of properties for sale becoming increasingly popular, the opportunity to take a virtual tour around your office might be a deal-clincher for potential clients. Or advice firms could showcase their business in a far more engaging way than a simple website or promotional flyer by creating virtual lounges for their clients, similar to those launched last year by banks JP Morgan and Union Bank of India.
While some of this may sound like pie in the sky, how many of us would have thought even ten years ago that we’d be paying for items and viewing financial information on our phones? Our data tells us that 33% of personal finance portal sessions are now on a mobile with 65% on a desktop and 4% on an iPad.
Time will tell which emerging technology will make an impact on financial advice and which it will happily continue without, but from experience, I believe that it pays to be open-minded when it comes to tech.
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1 https://www.fca.org.uk/news/speeches/ai-moving-fear-trust
2 https://www.forbes.com/sites/chriswestfall/2023/01/26/buzzfeed-to-use-chatgpts-ai-for-content-creation-stock-up-200/
3 https://www.bbc.co.uk/news/technology-64374283
4 https://www.fca.org.uk/data/innovation-market-insights
