The Impact of Automation on the Financial Advisory Profession

Jan 04, 2019 | 10 months ago | Read Time: 3 minutes | By iKnowledge Team

How long has it been since any of you have visited a bank branch recently? Or issued a cheque? Or went to a mutual fund investor centre to make investments? Or spoke to an agent for your insurance needs?

The business of banking and other financial services is rapidly automating themselves so that customers have the convenience of all their financial transactions done at the click of a button, or the swipe of a finger. Whether it is transferring funds, paying credit card bills, buying insurance online or mutual funds, opening a fixed deposit, buying shares, applying for an initial public offering etc., technology has brought it right down to the individual’s desktop, laptop and mobile device.

Technology in financial services

This automation is not restricted to transactions and buying and selling of products but it is now rapidly getting into the field of advisory itself.

Where earlier chartered accounts and tax consultants would physically sit with people to guide them through the tax planning and tax returns filing process, this activity has shifted online and at lower costs. A tax consultant usually charges around 3000 to 5000 for annual personal income tax filing, while an online tax filing system allows the individual to do it free of cost or for one-tenth the cost if the taxpayer takes the help of an expert.

Fintech Companies

Fintech, which was one of the buzzwords for 2015, is changing the way financial services and the business of financial advisory are evolving. Financial Planning Standards Board, USA, a global, professional standards setting body for financial planners and owner of the Certified Financial Planner marks outside the US, said a report[1] in 2016 that financial planners were increasingly using technology to deliver better services to their clients.

This was a marked change from earlier when they saw technology and growth of fintechs as a threat to their business. “…. Financial planners are less concerned about the disruptive potential of fully automated advice, and are talking about fintech more as a complement to their businesses,” the report said.[1]

The report added that the specific areas where they were taking the active help of technology were in basic data collection, client profiling, building a portfolio, asset allocation, calculation on risk and return, document processing, logistics and so on.

The benefits to financial advisors came in the form of increased efficiency in their operations, more accuracy in their calculation with better data analysis tools, more extensive data being captured, all this leading to superior recommendations to their clients.

From the regulatory angle, fintech also ensured that financial planners are able to manage their compliance systems better right from KYC (know your client) requirements to disclosure. Automation to a certain extent also takes out the human bias in case of asset selection and allocation. When it comes to more sophisticated fintech tools risk profiling and analysis are done through artificial intelligence systems which provide a more detailed output which is without bias and quite objective.

Disruption in financial services

Global consultancy and accounting firm PricewaterhouseCoopers pointed out that financial institutions, in the aftermath of the 2008 financial crisis are looking to fintech to provide better solutions, products and services to their clients. “This embrace isn’t just about the tech, it’s about culture, ways of working, problem solving, customer engagement and new ideas of leadership.”[2]

One of the biggest changes is taking place in the field of insurance with technology aggregating platforms providing insurance quotes online, based on which individuals can decide on low cost life insurance products. Aegon Life, for instance, has made it convenient for its customers to buy its plans online thus removing the role of commissions and minimising the expenses for the insured. Its iTerm Plus Insurance Plan is one such plan that starts at an economical rate of 405* per month. Individuals can choose from among four options taking cover for up to 36 critical illnesses.

Disruption of the existing ethos is the name of the game and customer retention is the main motive driving adoption of new technologies and platforms. Technology companies (such as payment banks, P2P lending platforms etc, mobile wallets) are virtually snapping at the heels of traditional brick and mortar banks and lending institutions as they provide ease in transactions and other financial services.

In order to stay relevant, banks have to ally themselves with fintechs, and work with them to provide better services to customers. Know about the different indian government schemes for women here.

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