Government and consumers are forcing the pace of digital adoption. Advisers and providers North Highland vice president, financial services Joanna Hall
At a recent client event, attended by the CIOs of leading UK financial services companies, there was agreement on many things, but perhaps the most significant was the current state of the financial services industry. Essentially, there is desperate need for a shake-up and those who don’t make the shift will find it increasingly difficult to compete. Some even predicted that we will see well-known providers completely disappear within the next five years.
So why now? Simply put, the shift to digital is creating acute turmoil across the industry. This is impacting both customer expectations of what their financial services provider or adviser should do for them, vastly increasing industry competition. But it is not just a case of installing a new IT system. It is about integrating digital transformation into an organisation’s fabric and working culture, so they can execute it for the benefit of their customers. The shift represents both a great opportunity and a significant threat. In essence, the industry is facing a digital revolution.
This revolution is being driven by the customer expectations mentioned above, but also changing regulations, which are making way for the arrival of digital. Barriers are coming down, making it easier for new, disruptive players to compete with existing ones. Take pensions, for example. The Government is now pressuring companies who are dragging their feet when it comes to pension transfers. One well-known leading provider can execute a transfer within five days, while others can take over six months. In essence, greater flexibility and agility will be required from players moving forward. Another catalyst for the shake-up is that customers are starting to demand the personalisation and service level they are experiencing in the modern retail space. After all, the ultimate goal that all retailers – and financial advisers – strive for is customer loyalty, and it is becoming a real commodity in an age of endless options.
How does a firm achieve this? Though it will require a number of digital and organisation alterations, the key for successful financial services organisations is in knowing client needs and preferences with enough detail to enable strong engagement. This means that advisers should try to better understand clients according to their needs, motivations and preferences, in addition to their wealth potential. Online investment management company Nutmeg has been able to do this particularly well with its digital platform and it will be interesting to see if others follow their lead. In addition to making their platform and content as easy as possible for those with low personal investment and pension awareness, Nutmeg has focused on making the customer journey seamless across laptop, tablet and mobile. This is the kind of customer-centric thinking that the financial services industry, which often marches to the beat of its own drum, will have to accept and adopt – quickly.
The barriers for entering and operating within the pensions and adviser space are lowering, and as a result new approaches are constantly being put on the table. Another area that requires reassessment is pension communications. This simply must change if providers and advisers are to hold the interest and loyalty of customers. Companies must improve on the current setup of a letter being sent out every six months. Rather, they must engage, educate and excite through communication based on a customer’s preferences – employing digital tools that are making this transition relatively easy and affordable to achieve.
The great financial services shake-up is coming, and time will tell who will be able to adapt to survive.