Advice in a digital streaming age

Client Value Proposition / Client Segmentation, Service & Pricing / Business Growth / Practice Management / Marketing / 20 April 2020

David Haintz - Advice in a digital streaming age
David Haintz - Advice in a digital streaming age

It was only a decade or so ago that families on a Saturday night would trundle up to the local Blockbuster Video store and try to find a movie to rent.

Remember those days? There were stand-up arguments in the store, as Dad gravitated toward the action section, Mum had her heart set on a Julia Roberts drama, teenage daughter hankered for Johnny Depp and younger brother wanted Lord of the Rings.

Even after intense diplomatic efforts and the family somehow wrangling a compromise, they would discover the movie was already out. A hasty second choice would then be settled upon, except no-one ended watching it and the late fee kicked in.

These days, each member of the family is on their own devices at home, served movies geared to their own tastes and preferences and on demand. No parking hassles, no queuing, no late fees, no arguments, and all for about $15 a month.

Netflix of Advice

While financial advice is obviously a world away from movie rentals, the fact is technology and consumer demands are changing at such a pace it’s worth asking whether your business will look more like Blockbuster Video or Netflix in future.

The 'Netflixisation' of financial advice, long talked about, is now seriously emerging as a prospect in the industry. Indeed, management consultancy McKinsey, in a recent report, named it as one of six major trends likely to shape the industry in the next decade.

While the McKinsey report ‘On the Cusp of Change’, focused on the possible state of the North American wealth management sector by 2030, many of the same forces and influences are already evident in the Australian and New Zealand markets.

Number one on the McKinsey list is the Netflix effect. The report predicts up to 80 per cent of new clients by 2030 will want to access advice in the streaming model – in other words data-driven, hyper-personalised, continuous and via subscription.

“For wealth managers, continuous access and automatic hyper-personalisation could change the terms of success,” the report says. “Advisers can embark on the journey now by using data and technology on a more frequent and consistent basis.”

The Fitbit of Advice

The second trend is more in keeping with what is happening with the personal health and fitness sector. In recent years, fitness trackers have taken hold, providing consumers with real-time assessments of their sleep, exercise and diet.

McKinsey predicts that this trend will be manifested in the advice industry through the increasing adoption of granular goal-tracking for clients, spanning not only long-term retirement objectives but shorter-term saving, education and broader wellness goals.

To achieve this, advisers will need to deploy digital monitoring and tracking tools that provide real-time incentives for clients and that aid motivation.

“To bring goals-based advice to life, and make it practical, intuitive, and actionable, advisers need to leverage behavioural economics techniques such as gamification and community-based competitive measures,” the report says.

Tech Takeover?

The third trend, and one that is sparking fear for many in our industry, is the prospect of the big technology firms capturing a larger share of the market through the provision of core technology infrastructure such as analytics and cloud services.

The big question is whether the big tech firms like Google have ambitions to go into the advice service itself or whether they are content to be service providers. And, of course, the regulators may have some bearing on that outcome as well.

As to what happens to advisers amid all this change, McKinsey sees three trends emerging – fewer advisers overall and those remaining focused more on coaching than on investment solutions; changing demographics in the industry as younger people, women and more minorities take up advice; and the growth of user ratings.

“Advisers will gradually shed their role as investment managers and become more like ‘integrated life/wealth coaches’ who advise clients on investments, banking, healthcare, protection, taxes, estate, and financial wellness needs more broadly,” McKinsey says.

This in turn will require firms to rethink their hiring and training programs as the industry transforms into one that offers more holistic above-the-line services.

Holistic Advice

The picture that emerges will be familiar to those who have been following my columns over the years. Greater personalisation, customisation, transparency and breadth of service beyond pure investment have been on the cards for a while.

What has changed is the sophistication of the technology and the demands of an increasingly discerning market that wants the ease of service and the choice they are now familiar with in other industries such as entertainment and travel.

Don’t get me wrong. High-margin, specialist face-to-face advice is not going away anytime soon. But the successful firms of the future will have to be more agile and adaptable – thinking and acting more like technology firms but with an advice hat on.

The challenge is a substantial one. But so is the opportunity.

Looking for next steps? How to implement?

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