It completely changed the financial services regardless. A similar change, albeit a quieter one, is happening in the industry at the moment. New technology is changing how markets work and how financial services are administered.
Some of these changes are very obvious. The noisy pits which once dominated trading floors have been replaced by the quiet hum of computers. The City was once an ocean of pinstripe wearing men. We need more women in the City but it’s certainly a more diverse place than it was. High frequency traders can make transactions in fractions of the amount of time that it once took to buy and sell.
Much of this change is due to the advent of the internet and fast computer processing power. The asset management industry is changing too. Some have prophesised that this will manifest in part with the death of financial advice as we know it. They see the rise of robo-advice and think that this will eventually wipe out the job of financial advisers as individuals take increasing control over their investments.
But these critics see the world in black and white and ignore the shades of grey in between. The reality is that the market for financial advice is not any more immune to change than the taxi industry was when Uber came along.
Online platforms can take some of the manual labour out of the exercise of giving financial advice. But there are a great many people who want the comfort of having a well-qualified, professional there to guide where they put their money. Technology presents a huge opportunity in this situation. It can give advisers more effective tools to give more efficient and better reasoned advice. The future of advice is one where the decisions of humans are augmented by technology, not replaced. In this sense, advice will be bionic, not exclusively robo.
We all know that the demand for advice is there, the ‘advice gap’ is testament to that. The challenge for advice companies is how to meet that demand without increasing costs too much. The right technological tools can make it possible for an adviser to offer a decent, tailored service to more clients. In this way, technology can make advisers’ businesses more scalable and help them close the daunting ‘advice gap’.
But technology will require advisers to change the way that they work somewhat too. It’s not enough to simply have a good online platform. Advisers need to help their clients understand what the combination of technology and their advice means for them.
They want to understand all the options open to them and why they are worth considering. Advisers need to be available for them at each step to help guide and inform. This doesn’t necessarily have to be in person. Relatively simple technology like ‘live chat’ on websites is a good way of showing clients that there is a real human to interact with if they need assistance.
The way that clients are segmented by advisers will probably also change. Ultimately, a decent platform should give advisers the chance to offer more propositions to clients. It should also allow advisers to streamline some of their processes like reviewing investments and tracking their progress against objectives. But advisers need to first decide whether they’re going to use new technology to target new clients, help their existing ones, or both.
Financial services, like most industries, has a long history of resistance to change. But there’s no point. Technology forces progresses on us all. Some people thought that the railways were a terrifying invention and a harbinger of doom. It’s hard to imagine now since they brought enormous positive change. And not all of it in the most obvious way. Before rail travel, there was no standardised time across the country. Each town had its own time and, since travel between them took so long, there was never an effort to standardise it. But trains, and passengers, need to know departure and arrival times and that meant having one time for everyone to go by. It’s time for asset management companies to embrace the change. Those who don’t are destined to idle on the platform.