For many financial advisers, fintech is thought of as a negative disruption, rivalling their traditional business models with technology that could eventually take away their jobs. However, a new report from the Financial Planning Association may help allay fears, as it spotlights the products that are designed to improve efficiency, reduce costs and optimise valuable face-to-face client time.
Ben Marshan, the FPA’s Head of Policy, answers our questions on the key findings of the FPA Fintech Report, shares the criteria used for their recommendation list of complementary fintechs, and identifies the three main initiatives that advisers can implement in order to effectively embrace this new era of digitalisation.
Q&A with FPA's Head of Policy, Ben Marshan
What are the key points from this report that could make traditional Financial Advisers excited about the fintech revolution of their industry?
The strong messages we hear from our members in relation to fintech is that they are confused by what fintech does, they are overwhelmed by the choices available, and there is some fear that fintech is out to replace them. So while there are a lot of fintech reports out there in the market, what makes the FPA Fintech Report “Mapping Fintech to the Financial Planning Process: why fintech is not a threat” different is that we sat down and researched what each fintech does, identified the ones who are providing, or can help to provide, financial advice, and then mapped the fintechs into the financial planning process. For members who are struggling with increasing regulation, increasing costs and client disengagement, the solutions we have identified can assist in saving them significant amounts of time (thus reducing costs and inefficiency), and making their financial plans more engaging for the clients.
What was one of the most interesting findings to come from this research?
One of the most interesting things we found is that while the trade and consumer media is constantly talking about fintechs taking away everyone's clients, of the approximately 400 fintechs currently in the Australian market, 117 are involved in parts of the financial planning process, while only 54 are trying to compete for clients – and in many instances they provide useful implementation solutions for managing the clients' finances. So there is a lot of really useful fintech out there, and less competition than what members have been worried about.
"We sat down and researched what each fintech does, identified the ones who are providing, or can help to provide, financial advice, and then mapped the fintechs into the financial planning process."
Your report indicated that fintech tools have largely been ignored by Financial Advisers to date, how did you measure this?
The FPA does annual surveys of members, and we also monitor many of the industry surveys which come to market. The clear message out of these is that practitioners are concerned by increasing costs, increasing regulation and that fintech was confusing, overwhelming and potentially something to be fearful of. This is also the message we hear when we talk to members directly and there was a clear message that they wanted someone to cut through the hype and tell them how all this could be used in their practices.
Your report suggested that there are three main initiatives that financial planning businesses can adapt in order to embrace this new era. Can you touch on these?
Our research found that consumers are after a central place to keep all of their financial information so that they can readily see their whole financial position. By adding in expense and income flow, this becomes a valuable resource for a client but also a trigger for planning conversations. These triggers can be automated by notifications and thresholds that deliver key information to a client when most appropriate.
Secondly, by having access to the client's whole financial affairs, the advice provided can be truly bespoke for each client, rather than being broadly generic. This will increase consumer engagement with the financial planning process and the client will feel true ownership of their financial plan. Clients will ultimately feel the value of the advice that is being delivered to them.
Finally, communication will become more open, and dealing with clients remotely, rather than face to face, will become the norm. While clients want to interact with a human, having to come to a planner's office to conduct a meeting will no longer be a barrier for the planner/client relationship. While planners will need to be more open with their time to facilitate this, clients will also feel a higher sense of engagement and value in getting help when and where they need it.
"Of the approximately 400 fintechs currently in the Australian market, 117 are involved in parts of the financial planning process, while only 54 are trying to compete for clients."
Through your research, you found that the key benefit to planners when using fintech was an increase in engagement with their clients. Can you identify some of the best fintech tools that are assisting in this area?
Any tool which creates efficiencies in the advice process will ultimately lead to increased engagement, as the planner will have more time to spend with their clients. But a hallmark of the fintech tools we reviewed was the friendly and open user interfaces and logical user experience processes. But in every part of the advice process there were solutions which would make collecting data more engaging, making goal setting come to life and gamifying their tracking. Fintech tools help with strategy development that clients can understand and engage with, and implementation solutions that clients can interact with while they are sitting at home on their lounges watching TV at night.
What criteria did you have in place to identify the fintech solutions which were in direct competition with the traditional financial advice model?
Primarily, competition is developing out of the implementation solutions where the tools will help clients identify goals and risk tolerance on the way to investing the client's funds. While they can be seen as competition, most are fairly rudimentary at this stage, and focus on just a single pot of money or investment, and therefore don’t take a holistic view of the client's financial position. These will come, but at this stage what exists as “competition” in a lot of instances can be a really engaging solution for the client’s planner to implement with them, and take into account within their holistic financial plan.
"There is a lot of really useful fintech out there, and less competition than what members have been worried about."
…and what was the criteria used for your recommendation list?
Primarily, we were looking for technology which is in the market, already being used by planners, and can be implemented today if members are looking for a fintech solution to improve their advice process. We identified a number of solutions that aren’t quite ready, and we have asked them to come back to us for inclusion in following updates to the report. For those which we identified were in the market - we sent them a request for information based on the kind of questions we know practices will be asking to figure out which is the right idea for them. This ultimately saves planners time figuring out what to look for.
What's in store for the next series of fintech related projects for the FPA?
Well firstly, since we went live we have had a lot more interest from a number of players who would like to be included, so I’m busy having meetings to understand where they fit in. So the first bit of work will most likely be keeping the report up to date. Secondly, we want to help members identify bottlenecks and inefficiencies to make it easy to figure out which fintech might provide them with value. Finally, there is a process practice that licensees need to go through to engage with fintechs, so we’d like to provide some support there. I’ve got some big ideas for the FPA Professional Congress next year in Sydney which I’m already working on.
You can read the FPA's report, “Mapping Fintech to the Financial Planning Process: why fintech is not a threat,” here.