Taking costs out of the advice process is a challenge we first looked at around 10 years ago, but quickly realised it was like pushing water uphill. Why? Because then the industry had no real margin pressures. Also, the disclosure regime wasn’t effective in driving consumers to question commission levels and charges, largely because the information was in accessible, complex and the average consumer couldn’t understand the effect of charges on their investments and savings. Has anything changed?

Since the RDR came into effect, we have seen more interest in the challenge and we expect the FMAR will accelerate the need to improve efficiencies and reduce costs of delivering advice to support new models, new technologies and new buying behaviours.

Imagine a value chain chart which shows where advice firms have taken costs out of their businesses. The heaviest investment has been in back office systems for processing and managing client data, CRM and facilitating interfaces with providers. Platform adoption has improved efficiencies in investment transaction processing, client servicing and in some areas advice creation – this has required major investment by the platform industry. Plug in applications to support advice creation, portfolio construction, risk assessment and financial planning have been widely adopted. This leaves us with the one area where we have probably seen least investment to improve efficiencies – face to face client interaction.

One of the glaringly obvious costs of delivering an advice service is the time spent in front of the client and the time to process the hard and soft facts collected. A few years back we surveyed a cross section of advice firms and found that 70% of client data was collected using pen and paper. Whilst we expect this has reduced with the aid of tablets [and laptops – both not without their own issues when used for data keying in front of clients ], paper will still be the method used by the majority. Paper data collection also requires human interaction to key into back office, financial planning and platform systems – again a direct cost to the business.

Robo advice is preoccupying the minds of many now, but how does that help the average advisory firm? Isn’t the advent of robo advice reserved for the D2C providers and a handful of forward thinking advisory firms wishing to service client banks that will never be seen? Our assertion is that the majority of advisory firms won’t embrace robo advice because they are wedded to face to face advice. This leaves robo advice as a strategy for the D2C players who wish to expand their market outside of their core segment of consumers who are confident to transact without advice. So for advisory firms, where will the cost savings come from?

We see other technologies playing a role in cost reduction for main stream advisory firms which are easy to adopt, low cost and can be used to deliver a humanised experience for the client – which frankly, for most is really important to get them to commit to taking action. These technologies include; web co-browsing, mainstream 2 way video calls, and emerging live video and audio technologies which deliver multi-way, tamper-proof, evidence quality video which is recorded and stored for client advice creation and long term record keeping. The latter is now available as a mobile phone app which is where advisers must be looking to engage customers and deliver new ways of accessing  their advice service. More on this next time.