By Sean Hanlon
Executive director, BrightRock
We know we live in the information age. Some believe technology can replace independent financial advisers (IFA) in the advice space. This thinking is reflected in the growth of online aggregators internationally and, especially in our market, the entrance of new direct players, many of whom rely on online platforms for their initial client contact.
The doomsayers would have us believe that the combination of increasingly cynical consumers and cyberspace advancements threaten IFA-based distribution models. But the flipside of any threat – as any good SWOT analysis will tell you – is opportunity. While smart new systems and software are massive enablers and drivers of efficiency, at BrightRock we don’t believe they will ever fully replace the advice given by a qualified and informed adviser who understands their clients’ aspirations, needs and dreams.
So what are the opportunities to bring the two together? And what can product providers do to facilitate it?
Independent advice is still at the heart of our industry
There has been a rise in online aggregation technology but when it comes to creating insurance solutions that meet the consumers’ needs, there’s still no replacement for the quality of advice received from an IFA.
An aggregator is a person or a thing that aggregates related and frequently updated content from various sources and consolidates this content in one place for viewing. The past few years have seen the emergence of online aggregators to assist consumers in their purchasing decisions. This is particularly true of developed markets like the USA where, as far back as 2009, noted research firm Forrester reported that around 39% of all insurance purchases (short and long term) were transacted online.
In the SA insurance industry, aggregation technology is not yet as firmly entrenched. We are starting to see more insurance contracts being concluded through the internet, with direct insurers increasingly using aggregation technology to supply clients with online quotes. The power of online aggregators lies in their accessibility and convenience. Clients receive quotes in seconds and, once they’ve completed the process, their details are sent to an insurer which will contact them to conclude the policy. Given the increasing demand for accessibility and transparency in financial services, the appeal of this technology is clear. But can online aggregation ever fulfil the same role as a financial adviser, particularly in the complex life industry?
The first issue with online aggregated policies is that they’re stripped down to the bare essentials. While clients may benefit from the convenience and a low premium, the cover they end up buying may not necessarily suit their needs or be flexible enough to meet their future needs. This and clients’ fundamental lack of understanding of their financial needs is arguably the greatest objection that can be made to the online aggregation tools.
Advisers remain firmly in the lead in SA as the source of trusted advice. In their ability to relate to their clients, as no online aggregator can, IFAs are not only able to understand their clients’ concerns and their aspirations, but are able to relate those concerns and aspirations to clients’ underlying financial needs. In turn, they are able to relate those financial needs to a life insurance solution that can adequately cater for them.
In essence, good old-fashioned independent advice is no different from newer forms of aggregation; however, we’d argue the quality of the output is better.
Bringing people and processes together
In the age of consumerism and, in particular, after the financial crisis of 2008, thinking has begun to change around the needs of the consumer and the financial adviser. Companies have started listening to the people for whom they are ultimately building their products and systems. Smart processing applications make it possible for them to design more suitable, user-friendly products and services for the end-user. Asmart process is a system, service or product journey that appears to pre-empt the adviser’s needs and the needs of the client and is designed to support a process of collaboration and co-creation.
Smart processing should shift the role of adviser from that of process translator to that of process guide and product co-creator. An independent financial adviser remains the best aggregator and, when paired with the right processes and technologies to support, they can co-create truly smart needs-matched life insurance products.