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Financial advisers urged to scale advice practices for the future

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Future-fit financial advisers will have to leverage digital technology to deliver affordable financial advice at scale, wherever and whenever the consumer demands it. “The Financial Intermediaries Association (FIA) believes that successful intermediaries will have to find ways to scale their financial and risk advice solutions, while accommodating changing consumer behaviours,” said Lizelle van der Merwe, CEO of the FIA, on the fringes of the 2021 FIA Advice Summit.

The annual FIA Advice Summit, targeted at financial intermediaries, places the spotlight on the value of financial advice in the context of South Africa’s prevailing economic conditions. It is held as a collaboration between the FIA, which is the representative body for financial intermediaries, and some of the country’s leading intermediated financial product providers in the life and non-life insurance sectors. Industry stalwart and event MC, Caroline da Silva, opened the 2021 proceedings by encouraging intermediaries to leverage digital technology to meet consumers’ evolving needs.

Much of the packed programme focused on ways to improve the ‘value of advice’ proposition in an increasingly complex financial services world. “The topic today, scaling for the future, is relevant in the context of how we think about financial services and the financial services value proposition,” said Discovery Bank CEO, Hylton Kallner. He singled out the accelerated adoption of technology as crucial in making the financial advice process better. “Technology allows us to create a seamless process for the customer, and allows the adviser to focus on what is best, being the advice process,” he said.

Presenters to the FIA Advice Summit made repeated mention of two significant catastrophe events that have forever changed local consumers’ perceptions of insurers and intermediaries. They pointed out that the claims experience following the 2020/21 Covid-19 pandemic and the civil commotion that played out in parts of Gauteng and KwaZulu-Natal in July 2021, had placed tremendous stresses on both traditional and special risks insurers and reinsurers, with government having to stand in as ‘insurer of last resort’ in some cases.

As the impact of pandemic and unrest becomes clear, product providers are wrestling with how to accommodate future systemic risks presented by climate change, cybercrime and pandemic. The country’s intermediaries, meanwhile, must ensure that their clients’ investment and risk portfolios are fit for purpose under the so-called ‘new normal’. One of the conclusions drawn from the FIA Advice Summit, was that mounting insurance losses will result in trade-offs between the cost of insurance cover and the level of cover that consumers enjoy.

“The cost of risk is something that is going to be very important for us going forward,” said Steyn McDowall, Executive Director at  lndwe Risk Services, who warned that increasing price and reducing cover was a toxic practice that would prove unsustainable, and something that intermediaries should monitor closely. In this context, intermediaries will have to advise on a sensible combination of risk mitigation and risk transfer mechanisms to reduce the cost of insurance to their clients.

Consumer financial behaviour is influenced by advances in technology, consumer regulation, major life events and unpredictable catastrophes. Covid-19 has also driven a range of behavioural changes as evidenced by consumers’ digital adoption, mobility, shopping, social interaction and work habits, among others. “Consumers are looking into their finances with a lot more scrutiny,” said Darryl Grater, Executive Head at Discovery Insure Distribution Services. “They are taking better care of their health and lifestyle choices, all factors that affect the insurance industry”.

Consumers need financial advice more than ever; but they need this advice to reflect their changing circumstances. “The traditional role of adviser or broker is going to move to that of a risk adviser, because that is what consumers are saying they want,” said Andrew Coutts, Head: Intermediated Distribution at Santam Insurance.

To succeed, intermediaries will have to offer specific, tailored insurance solutions that are delivered seamlessly via digital platforms without sacrificing the client / intermediary relationship. Coutts said the client / intermediary relationship could not be viewed as a transactional mechanism. Instead, intermediaries should approach the advice function as a negotiated engagement process that delivers on the sustainable value proposition of comprehensive risk mitigation and risk transfer.

Sasria SOC Limited, the special risks insurer that is paying out billions of rand in claims following the July 2021 unrest, said that advice and intermediary services would continue to migrate towards the digital environment. “It is up to the intermediaries to ensure that the advice provision, as well as the rendering of intermediary services, incorporates a large element of digitalisation,” said Muzi Dladla, Executive Manager: Stakeholder Management at Sasria.

Technology will play an increasing role in the financial advice process; but there will always be a space for human touch. And intermediaries will have to adapt to meet the groundswell of digitally-minded consumerism head on. “If intermediaries fail to embrace the new digital chapter, or fail to partner with like-minded product providers, they risk being left behind as they try to participate in the consumers’ digital journey,” said Grater. The good news is that many intermediaries have already seized on the challenges presented by pandemic and lockdown to offer efficient, flexible and scalable financial advice to their clients, in the virtual world.

Successful intermediary practices must focus on developing their staff; leveraging technology to develop and deploy future-fit systems that enable financial advice and eliminate advice errors; and find new ways to exceed consumers’ changing expectations. Technology will remain an integral part of the financial advice value proposition, as will a client-centric approach and the recognition that human advice is an important component in the advice value chain.

“The 2021 FIA Advice Summit reminds us that the value of advice and financial advisers is more important now than ever,” concluded Van der Merwe. “The FIA encourages our intermediary members to embrace technology in their businesses to enable them to offer their clients a better and more efficient service. And we extend a word of thanks to the many product providers who joined hands with us this year, to show their support for the intermediary in delivering excellent advice, product and services to the end-consumer”.

Caroline Da Silva closed proceedings. “The financial services sector has pleased me from the very beginning of lockdown in terms of both its resilience and its responsiveness to technology and innovation,” she said. “Congratulations to the FIA on hosting a virtual conference as successful as this one was; this is an organisation that is growing in influence each year, and the topics that were part of the agenda today are testament to that”.

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