How tech can improve financial wellbeing

As a result of the coro­n­avirus pan­dem­ic and lock­down, many finan­cial advis­ers have wok­en up to the ben­e­fits of embrac­ing new tech­nol­o­gy and how it can improve a clients’ expe­ri­ence and enhance their finan­cial well­be­ing.

Over the past six months there has already been a sub­stan­tial change in the way finan­cial advice is deliv­ered with meet­ings held via Zoom and dig­i­tal sig­na­tures becom­ing wide­ly accept­ed.

Tech­nol­o­gy also shifts the val­ue of the finan­cial advis­er, not sole­ly focus­ing on prod­ucts but on the holis­tic finan­cial plan­ning they are offer­ing, says Gem­ma Harle, man­ag­ing direc­tor of Quilter’s advice busi­ness. “The val­ue of a finan­cial advis­er will increas­ing­ly be in the advice they give and not the prod­ucts based on that advice,” she says.

Those embrac­ing tech to car­ry out num­ber-crunch­ing, admin tasks can free up more time to do what their clients val­ue

Providing retirement support and advice

Der­rick Dunne, chief exec­u­tive of Beau­fort Finan­cial, says that over the next two years more finan­cial advis­ers will be invest­ing in tech­nol­o­gy to bet­ter serve their clients. “Tech­nol­o­gy and invest­ment plat­forms will com­ple­ment the wider invest­ment plan, help­ing the advis­er exe­cute and deliv­er for the client,” he says.

For many peo­ple, the last six months have been chal­leng­ing men­tal­ly, phys­i­cal­ly and finan­cial­ly. Per­son­al finances have become a source of anx­i­ety and life has often felt out of con­trol. 

“A key thing for all of us when think­ing about our finan­cial health is that we have to be hon­est and real­is­tic,” says Hei­di Allan, senior finan­cial well­be­ing con­sul­tant at LCP. “Seek­ing guid­ance, sup­port and advice can be crit­i­cal in enabling us to feel in con­trol of our finan­cial health.”

Finan­cial well­be­ing should not be looked at in iso­la­tion and should include phys­i­cal, men­tal and social aspects of our lives, says Jason Green, head of work­place research at FTRC and Ben­e­fits Guru.

“Advis­ers who are embrac­ing tech­nol­o­gy to car­ry out all the num­ber-crunch­ing and admin tasks can free up more time to do what their clients val­ue, that is look­ing after them prop­er­ly and giv­ing a more per­son­al ser­vice,” he says.

The emerging role of technology in financial advice

There has been a growth in robo-advice, which is the use of tech­nol­o­gy to rec­om­mend asset allo­ca­tion at a low­er cost than tra­di­tion­al finan­cial advice.

Green says a small num­ber of high­ly sophis­ti­cat­ed auto­mat­ed advice sys­tems are begin­ning to emerge that are like­ly to play a major role in deliv­er­ing retire­ment plan­ning to con­sumers with mod­est per­son­al assets.

“With­in the next few years, it should be pos­si­ble for con­sumers to access com­pre­hen­sive retire­ment advice, explor­ing and con­trast­ing the options,” he says. This could rev­o­lu­tionise finan­cial advice, mak­ing com­plex advice avail­able for as lit­tle as a few hun­dred pounds, com­pared to a pos­si­ble fee of ten times that lev­el for a human ser­vice.

The importance of the human touch in financial wellbeing

How­ev­er, when it comes to tax and retire­ment plan­ning, a more per­son­al touch still has a place, par­tic­u­lar­ly for old­er cus­tomers with sub­stan­tial assets.

“With the con­tin­u­ous rise of tech­no­log­i­cal solu­tions and robo-advice, the pen­sion space is def­i­nite­ly shift­ing,” says Chris Ball, man­ag­ing part­ner at Hox­ton Cap­i­tal Man­age­ment. “How­ev­er, the gen­er­a­tion that is cur­rent­ly com­ing into retire­ment might still val­ue the advice of a finan­cial advis­er and will not com­plete­ly trust algo­rithms and com­put­ers.”

The use of invest­ment plat­forms and mod­el invest­ment port­fo­lios, as well as the shift to vir­tu­al client meet­ings, has increased the amount of time advis­ers spend speak­ing with and advis­ing clients.

“For them, this is where our true val­ue lies,” says Leigh Philpot, head of wealth at Kingswood. “We have all embraced it to dif­fer­ent extents and we all have fur­ther to go.”

A com­bi­na­tion of human advice and pow­er­ful tech­nol­o­gy could be the key to deliv­er­ing the best long-term out­comes, says Col­in Dyer, head of propo­si­tion and pri­vate client man­age­ment at 1825, the finan­cial plan­ning arm of Stan­dard Life.

“What tech­nol­o­gy can’t do is pro­vide the per­son­al touch and mar­ry life goals with atti­tude to risk, the invest­ment strat­e­gy, tax effi­cien­cies, like mak­ing the most of life­time and annu­al pen­sion allowance, and ulti­mate­ly agree­ing the desired tar­get income,” he says.

A hybrid model for financial advice

The advis­er of the future might there­fore har­ness the best of tech­nol­o­gy with the under­stand­ing of a client’s per­son­al and finan­cial cir­cum­stances.

“Pen­sion advice has tra­di­tion­al­ly been a face-to-face inter­ac­tion that might cost 2 per cent of your pen­sion each year,” says Chris Rud­den, invest­ment con­sult­ing man­ag­er at Mon­ey­farm. “Now it can be done quick­ly, eas­i­ly and accu­rate­ly from a phone or com­put­er.”

As fac­tors in your life change, you sim­ply update the app. This brings the costs down huge­ly. “More often than not, there is a team of advis­ers on the oth­er end of the phone or com­put­er that they can speak to,” he says, pre­dict­ing a hybrid mod­el is key to the future of the indus­try.

True finan­cial well­be­ing comes from under­stand­ing the client and their needs, and help­ing them to live hap­py and ful­fill­ing lives through cre­at­ing well-thought-out finan­cial plans, says David Mac­Don­ald, founder of The Path, a finan­cial advi­so­ry firm with an empha­sis on eth­i­cal invest­ment.

“Robo-advice will become more accu­rate and sophis­ti­cat­ed as time goes on,” he says. “How­ev­er, there is a long way to go before robo-advice can cope with com­plex moral and eth­i­cal dilem­mas and ‘soft’ coun­selling.”

Top tips for financial wellness from the experts

“Pay your­self first; set up a month­ly stand­ing order to a sav­ings account that leaves your cur­rent account on pay­day. Spend some time think­ing about how mon­ey pre­sent­ed itself in your ear­ly life. Think about the things that make you tru­ly hap­py and spend your mon­ey on those things.”- Jean­nie Boyle, direc­tor and char­tered finan­cial plan­ner, EQ Investors

“The ear­li­er you start a pen­sion the bet­ter, no mat­ter how small the con­tri­bu­tions might be in the ear­ly years. If your employ­er offers a work­place scheme, ensure you enrol as it will be low cost. Look at your lev­el of con­tri­bu­tions and whether that lev­el is suf­fi­cient to fund your retire­ment.” — Anna Mur­dock, head of wealth plan­ning, JM Finn

“Invest in your­self, in terms of your health, your skillset and your qual­i­fi­ca­tions. Edu­cate your­self so you under­stand your finances; this will help you con­nect emo­tion­al­ly with your finan­cial goals. Estab­lish more than one income stream and be cre­ative about how you earn your mon­ey.”- Jamie Smith, finan­cial advis­er, Fos­ter Den­o­vo

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