The system is perfect; it is you who is imperfect

There’s no question that technological advancements have been a boon to business in the past two decades. Apps that allow for quicker communication and artificial intelligence that helps find the best product for a particular client are admittedly assets we wouldn’t want to do without. But, Mark Polson reminded Future Focus attendees, there are currently limits to what these automated systems can do.

‘We don’t need to worry that the systems are going to replace us. I don’t think that advisor firms can rely on technology sorting everything out for them—and that’s a good thing!’

The ‘you’re using it wrong’ defence

Mark admits that our engagement with and use of technology can be lacking. Often we aren’t using it in a way that will achieve the best results. But this is a two-way street: the fault doesn’t lie solely on the human side. ‘I’ve seen this pattern’, Mark divulges. ‘When an adviser says, “Yes, but it doesn’t do this”, there are about six layers of defence thrown up by those technology firms about how you’re not using it right’.

‘You can’t train a system to recognise and understand the particular needs of a vulnerable client’ say Mark.

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While technology is making major strides forwards, it still operates through very specific man-made rules. What it clearly lacks is perceptiveness and emotional intelligence.

In Mark’s view, ‘singularity’ – ‘the point at which the rate of increased knowledge and intelligence of technology increases faster than our ability as humans to understand’ – hasn’t yet occurred. Humans are still in control of machines. The time when technology sorts out all our needs – and supersedes us – ‘is a while off yet’, says Mark.

Revenues have risen, but profitability has tumbled

Turning to numbers, advisory firms can be satisfied that revenue per adviser has risen over the past 10 years. But the bad news is that profit margins have fallen materially over the past five years. Economies of scale and efficiency gains have just not occurred in aggregate. The wide availability of technological solutions in the industry and the related costs have been a factor in driving overall advisory firm costs higher, but without any evident benefits to profitability to date.

This is because efficiencies haven’t been exploited properly. ‘The levels of efficiency… and profit… are not really there’, Mark explains. Additionally, the larger the firm, the harder it appears to achieve this.

A problem for the industry is that on one level it wants its clients to access more complicated and technologically impressive services. But the drive to be ahead of the game, to be competitive, and to outdo the competition are some of the factors that have led to what appears to be an over-engineering in services and products to clients. Mark believes it’s better to keep things simpler, as this is more likely to benefit both the client and the firm’s profitability.

‘The answer is not more features. The answer is more integration’

No singular platform or piece of software can do everything. Systems need to co-exist and work with each other, creating a wider eco-system.

Integration is essential, although this can, in turn, create complications. The illustration below is a software and systems map of an existing, relatively uncomplicated, small advisory firm.

An illustration of a software and systems map of an existing, relatively uncomplicated, small advisory firm.

The wide proliferation of systems and software adds significant costs, but is deemed necessary by this business. Clients would be ‘horrified’, in Mark’s view, if they knew this.

How then can advisory firms benefit properly from technology while lifting their profits and productivity? An integration hub where all a firm’s software and systems can be accessed, where the various apps securely share their interfaces, may well be the answer.

‘It is not about doing the things that we already do better; it is about trying to do better things’

Firms will often strive for perfection at the cost of simplicity and efficiency. But client needs are ultimately straightforward. They want to be well looked after; they want key data and information to be communicated in a timely manner; and they want their assets to grow. Everything is else is extraneous.

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