How tech is revolutionising financial advice post-RDR

By Jo Gilbey
Find me on: LinkedIn 18-Sep-2014 09:39:00

When it came into force at the end of 2012, the retail distribution review (RDR) became among the biggest changes to ever hit the financial sector and financial advice. Implemented with the aim of increasing fairness and transparency in the investment industry, these new rules really have shaken things up for advisers.

The disappearance of the commission-based model has helped to create an obvious line between professional financial advice and product providers - and this is positive in many ways. For advisers, though, it has created something of a dilemma.

New challenges

Ask any financial adviser and they're likely to agree that sustaining profit was easier before the RDR was introduced. With providers taking on much of the service work, the costs associated with advice were minimal - inevitably, some firms focussed more heavily on sales than servicing. Now, however, all advisers are required to provide an ongoing service to every client, and delivering value has to be the priority. 

While this new model still works when it comes to servicing larger, profitable clients, the same can't always be said for smaller investors. The time and effort required to provide a decent return for firms with smaller portfolios simply can't be justified - or can it? Instead of placing the focus solely on high net worth (HNW) prospects, advisers can embrace technology and refine their services in a way that allows them to profit from working with clients of all sizes. 

Technology's head start

The digital revolution has impacted most industries in some way or another, and the financial sector is no exception. Technology has been gradually changing the way advisers work for some time - its impact was being felt by professionals before the idea of an RDR even began to emerge. The benefits of embracing IT in the financial sector were already plentiful, but now could really be its time to shine.

Before the RDR, many firms had embraced technology but only to a limited capability. It was being used alongside most of the conventional methods to support existing services. Now, it must be at the heart of the business's operations - and here's why.

Time is money

If financial advisers are to continue delivering value for smaller clients, they must choose one of two options: increase manpower or boost efficiency. With the help of software for financial advisers, the latter can be achieved with ease.

Financial technology has come a long way in the last few years. Many of the tasks that advisers would have been required to take care of at the turn of the millennium can now be handled quickly and accurately by automated financial adviser software. With such powerful applications to hand, it’s possible to save significant amounts of time.

The benefit here, like in many other industries, is that valuable skills and knowledge can be applied much more efficiently. Instead of highly-trained professionals having to spend time filling out forms and staying on top of admin duties, they can focus their efforts on more important and demanding tasks.

Convenient communication

While it's not quite down to automation specifically, the way advisers communicate with clients, and handle their data, has also changed because of technology. Web-based financial adviser software applications are bringing both parties closer together, removing obstacles caused by physical location.

Face-to-face meetings, along with supporting telephone calls and emails, were once crucial when it came to demonstrating value to clients and leads - something which must now be a priority. The time it took to arrange and prepare for such events was costly; again, this is because the process often involved simple tasks that don't demand the skills of a highly trained professional adviser.

With new client portals in place, however, physical location needn't be an obstacle. Clients can access information and their adviser's expertise when it suits them, from wherever they are in the world. Provided user experience has been carefully considered, personal interaction levels can be reduced, with service value increasing as a result.

Working in harmony

In order to fully harness the obvious power of technology, financial advisers should look to implement technology across all areas of their operations. Choosing the right system is about more than just finding one that works for adviser and client, however - financial adviser software must seamlessly integrate with all third parties too. This includes fund groups and product providers. Compliance is another concern - does the system and the way it is used fit in with the relevant industry regulations? Data protection could be something to look into, for instance.

The shift to technology isn't quite as easy as flicking a few switches - like any other major change in an enterprise environment, it requires initial investment and plenty of planning. At a time when many businesses are struggling to adapt to a financial world governed by the FCA's RDR rules, though, IT is by far the most valuable tool.

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