August 12, 2019

The Future of Advisory

Prathiba Girish
Founder at Finwise Personal Finance Solutions

The Future of Advisory

To be prepared for the future, we should first be able to envision it.  When we look at the future of advisory, a few things come to my mind, which we should be ready to adapt to

  • Democratization of Information – Technology has been a huge enabler of this,both for clients and for us, resulting in near-zero premium for knowledge
  • Commoditization of Services – Most products and services are available at the click of a button with zero or minimal human interface and this means the end of an era where a pure-transactions based practice could be built and sustained
  • (R)Evolution of the Uberized – Dramatic changes in Customer profiles, leading to Client-Planner relationships undergoing unprecedented changes

Democratization of Information

Today information asymmetry is minimal and information is available in abundance. This coupled with freely available curation services which convert this information into easily consumable knowledge nuggets (some of it of course not completely accurate) which can be actioned means that more and more clients are aware.

This is a risk, as clients trust and believe us as they see us as “experts”. The only way we as advisors can combat this is by

  • Constantly refreshing our knowledge to remain up to date so we can provide the correct inputs to our clients
  • Building greater breadth and depth of knowledge. That is, we need to now have knowledge of both a wide array of topics related to our services as well as a much deeper understanding of them, which earlier wasn’t so necessary.

This means getting out of our comfort zone and consciously recognizing where we lack and bridging the gap. Seeking constant learning as well as having meaningful debates and discussions with the fraternity may go some way towards bridging this gap.

Commoditization of Services

When you look around today, there are a lot of practices which are still thriving purely on a transactional basis. What I mean by transactional basis, is helping clients choose the right product – mutual fund, insurance, etc – without spending time to look at the bigger picture. Sustaining clients in this kind of a model will become tough because

  • Such advice is abundantly available in the media, so-called expert sites as well as specialist blogs.
  • Digitally-aware customers can now easily avail these directly through fintech and may not need intermediaries for pure transactions, and lastly
  • The increasing popularity of passive investing, as well as reducing margins, will be a key supply-side constraint.

For clients to come to us and stay with us over long periods of time, and for us to be able to charge them fees that we deserve, we should be able truly add value to their financial lives and not just manage the optics of it. A piece of paper which is a Financial Plan can be churned out by the computer much faster and cheaper than we can ever manage. The difference therefore would be in understanding clients more, and helping them navigate through challenges in their lives, both stated and unspoken.

(R)Evolution of the Uberized

Currently, a large proportion of our business for many of us, comes from our own segment – the 35-50 age middle-years. There is a huge comfort level in dealing with such clients as they are People Like Us. The new generation of millennials (<35) are markedly different and the challenges in handling them are numerous. Basis my interactions with customers in this segment, my learnings are

  • They have tremendous access to knowledge which they consume in huge quantities. This, plus their being digital mavens, means they have tremendous confidence in their ability to do it all. They believe that investing, making a financial plan and monitoring it with out letting their biases come in the way is a breeze and hence don’t necessarily see the value that a planner-adviser brings.
  • One-to-one relationships are not something this segment necessarily values. As a case in point, one of our clients who had just had a baby was discussing hiring a help. They decided to hire through an app where you had to pay by the hour, something which our generation would never consider, valuing instead the personal connect and loyalty.

This is a big shift since our current model is based on strong relationships with clients, based on trust and unbiased expertise. If clients no longer perceive the need for expertise and strong trust-based relationships, then how do you get them onboard and retain them? I currently don’t have a satisfactory answer to this and we keep interacting with and learning from millennials in our pursuit to find the right answers to conundrums like this.

While these seem dramatic changes, I am strangely comforted when I am reminded that Change is inevitable, and that people have faced the challenges of adapting to change for centuries. No matter how much we would like to believe change is our unique problem, the fact is that we are not the chosen ones, and our ancestors have also dealt with it successfully, as a result of which we are today here.

We as a fraternity will learn together to evolve and adapt to these changes, as long as we keep the interests of our customers paramount, and as long as we keep our eyes on the windscreen, rather than on the rear-view mirror.

John F Kennedy once said – “Change is the law of life. And those who look only to the past or present are certain to miss the future.

Post article note: We would love to hear your experiences and approaches that have worked for you. Meaningful dialogue is a definite source of enrichment for the community and we look forward to hearing what you have to say about the way ahead for our profession.

3 Thoughts to “The Future of Advisory”

  1. Rahul says:

    Hey Pratibha – simple, apparently obvious yet extremely powerful thoughts for all to seriously ponder over. Reminds me of one of my favourite books, ‘Who Moved My Cheese’ – the time is nigh that advisors realise the rapidly changing consumption process by customers across products & services. In one of the conferences, the entire audience raised their hands when asked ‘Who all book their tickets online?’ We all need to introspect, acknowledge our shortcomings and delivering ‘value’ in the truest sense – value is intangible and varies across customers. Most successful startups were born out of a simple yet potent idea of solving problems – Are we doing that? In the next 2-3 years AI & ML will enable hyper personalisation of services – high time we asked ourselves what are we doing for our customers that is genuinely unique. Cheers 🙂

  2. Trupti Muralidhar says:

    Well written Pratibha. What points you have brought is all out of the practical experiences with Clients hence its so true. Few points like offering just a few products and calling oneself advisors those times are gone past. We need to offer actual advise if we wish to be paid. You managed to summarise it all so well.

  3. Anees Rao says:

    Hi Pratibha,

    Very well written article, and I agree with the broad theme of the article. However, in my experience, even millenials struggle with personal finance regardless of access to knowledge. One reason could be that the financial services industry still survives based on obfuscation of facts, so the lay investor very quickly realizes that she is out of her depth. The other reason could be that time value of money and compounding effect is not something we have an intuitive understanding of, even though there are millions of examples all around us (population, education, and so on.)

    Due to this, I find that onboarding and retaining clients in the millenial category is based on the following:
    1) giving them more of a big picture focus – start talking about retirement from day 1 of earning. I think a lot of millenials (myself included) found it very hard to chart our journey for the course of our career, something that our parents never had.
    2) focussing on the fun stuff also from day 1: I always advise my clients to make sure that they’re having their fun in the years that they can, and help them plan for it. Whether it be vacations, or gadget purchases. The important thing is to wean them off loans for consumption, and teaching them about the dangers of cheap and easily available credit is a major point of focus.

    I’d like to end with the opposite quote: “The more things change, the more they seem to be the same”


Leave a Reply

Your email address will not be published. Required fields are marked *