There has been much change in the pensions sector over the past few years - and not just with regard to the unusual turnover of pensions ministers. From regulation and pension freedom to new technologies and innovation, the pace has been set - and it is fast.
For those already capitalising on the opportunities presented, their future is looking exceptionally rosy. For some, ‘business as usual' is more comfortable. What we do know is that, on a daily basis, we are seeing another financial services group, such as Allianz, Black Rock, LV= or whoever, embracing new ways of doing business in the future - and specifically the adoption of robo-advice services.
With so many leading organisations introducing technologies to deliver a better-quality service for consumers, here are five opportunities that exist in the sector and, importantly, are there for the taking for any size or type of advisory firm - not just the very biggest players.
1. The Advice Gap
The ubiquitous phrase is commonplace throughout the sector - and now with consumers - as the FCA attempts to address the situation in the public arena. With the high cost of advice blamed by many for the advice gap, the only way firms can realistically address the issue is with an improved, high-quality and cost-efficient process that is accessible and affordable to all consumers.
If you consider the majority of consumers currently in the advice gap typically hold a pot of between £50,000 to £150,000, it makes sense that robo-advice can meet their needs while freeing up the time of professional advisers to work on additional clients and drive valuable new business.
As an example, LV= launched the Wealth Wizards robo-paraplanner earlier this year. Clients now spend on average just 50 minutes on the phone with an adviser. The app then produces a recommended solution and an advice report (suitability letter) for the customer in under 30 seconds. The adviser typically then spends another 50 minutes completing the case file and preparing the advice.
That is a total case time of under two hours compared with a typical industry standard case preparation time for ‘at-retirement' advice of between seven and 15 hours in the advice practice. With each adviser now able to complete 15 to 20 cases per week, it is difficult to argue against automated advice when presented with significant savings such as this - especially as it helps to reduce the nation's advice gap.
2. Digital Reins
From healthcare advice to online shopping, consumers in the UK are clamouring for convenient, time-saving online solutions with half of the ‘generation App' millennials now wanting to use smartphones to conduct business, including their own financial planning.
When it comes to consumer finances, a survey from MoneyMagpie and TISAshows 69% would feel more confident managing their finances online. Digital is therefore no longer an optional extra - it is core to how consumers behave, engage and interact.
Currently the industry awaits the launch of the pension dashboard in 2019, which will revolutionise the way consumers experience their pension information. When questioned, nine out of 10 schemes are currently in favour of the pension dashboard, viewing it as a beneficial development for the industry and consumers alike.
We can therefore conclude these developments add up to one thing for consumers and advisers alike - a steady increase in the demand for digital convenience when it comes to pension advice, whether that be supplying data, receiving reports, changing investments or simply reviewing their pension value and future projections.
The onus on the pension sector is now to deliver a streamlined digital service that can only be served effectively through the adoption of robo-advisory services in order to save firms time and money, while delivering the additional value of convenience demanded by the customer.
Straightforward, practical examples can be easily adopted by organisations and advisers firms, simply by integrating the technology into their current client digital services, website and applications. This can help deliver results such as greater engagement and participation, as well as many more users completing journeys and transacting, as a result of richer content and more compelling overall solutions from multiple, integrated service providers.
3. Increased Demand
The demand for digital is undisputed but there has been much debate about the demand for robo-advice. What is clear is 2017 was the year of the consumer and they certainly made themselves heard. As an example, Accenture found seven in 10 consumers would welcome computer-generated advice for their banking, insurance and retirement planning, while Deloitte estimates around 15 million people in the UK are now willing to pay for automated advice.
When you combine the consumer pension-pot gap, the demand for advice driven by pension freedom and the cry for digital solutions, you end up with an explosive intersection that clearly indicates the demand for robo-advice.
What has also become clear is that consumers are still searching for guidance - fewer than one in five over-55s have found the online guidance from The Pensions Advisory Service, Pension Wise and the Money Advice Service useful, according to MetLife.
Meanwhile our own Working Late Report shows that, in the workplace, only 24% of employees are offered financial education by their employer. This demonstrates to the advisory sector there is a strong appetite for retirement advice, and with 56% of our Working Late Report respondents wishing they had added more to their pension when they were younger, the desire to invest additional monies is evident. Managing the demand and being able effectively to service a new generation of investors with affordable quality advice will be the challenge.
4. All Change - DB to DC
With demand for moving from a DB scheme to a DC at record highs, there seems to be no slow-down on the horizon as sector commentators and experts predict further increases in transfers.
While this is a spoonful of sugar for the advisory sector it can also be too much of a good thing for firms who are unable to ramp up to service the sheer weight of demand from new enquiries and existing clients. This is where technology like the robo para-planner can support this increased demand.
5. Quality, Quality, Quality
For any adviser, the back-office is as important as client-facing activity. Fulfilling necessary regulatory requirements such as fact-finding and full record-keeping can be time-consuming. Regulatory pressures are increasing for advisers, as are demand for support from consumers.
Advisers need to maintain the quality for their customers while maintaining standards for the regulator. Reducing the back-end administrative burden while delivering consistent high-quality advice can serve to address all these points and support the needs of all the stakeholders in the chain.
There has never been a more perfect time for the sector to combine robo-advice with human support to deliver advice to millions of existing and new customers. The need now is quickly to create efficient end-to-end processes that make the most of more available customer data and provide a service the customers want.
With plenty of white-label proven solutions on the market, the wind is certainly in the sails of the advisory firms to embrace a more efficient way to deliver and effectively compete in a rapidly changing environment where the innovative will win out.