How can Financial advisor Leverage technology

 

When it comes to technological changes, financial advisors no longer challenge against brokers, Robo advisors, and other advisory firms. People also judge their RIAs against the convenience and responsiveness set by multi billion companies such as Google, Amazon, and Uber.

Here’s the great news: Innovation is not always about disrupting existing markets. In majority cases, it’s about making seemingly small changes that uplift existing client relationships. By automating everyday administrative tasks, RIAs can have much longer and meaningful conversations with more clients.

Indian Mutual Funds Industry

The Indian Mutual Fund industry is one of the most regulated and investor friendly industry in the world. The regulatory focus clearly has been to develop the investment advisory capabilities and bring in more transparency and accountability in the way the advisory process is administered. This has also been coupled with restrictions on the payment of upfront brokerages on MFs and other caps thereby reducing the brokerage income earned by the distribution community. The two-pronged regulatory push along with the changing behavior of the modern Indian investor means that the Industry has a lot of catching up to do to keep pace with the changed scenario.

How can financial advisor leverage Technology

Technology is playing a very important role in both fuelling and managing this change. No longer does the distributor need to visit the client physically to fill out the physical forms, collect and deposit the cheques, provide him with a physical portfolio performance report etc. Transactions are now done digitally without using a single sheet of paper. Even SIP applications (which earlier used to be done individually for every SIP and the new Bank Mandate / ECS / Standing Instructions had to be registered) are now done digitally using one time NACH mandate / E-Mandate. Though the physical meetings are always necessary, a lot of these meetings are now done over a Skype call. These advancements have saved a lot of physical time and effort for the advisor and given more convenience and transparency to their clients

Some Statistics to take note of:

  • The share of gross inflows in Mutual Funds through digital modes has grown from just about 0.5% in Mar 2016 to more than 10% in June 2018.
  • Mutual Fund Utility (MFU) – A MF transaction platform executes 3.50 lakh transactions every month, close to 90% of these transactions are paperless. 50% of the accounts opened are through a digital medium
  • A record 5.92 lakh Mutual Fund transactions took place through BSE Star MF platform – the digital platform used by many intermediaries

Digital penetration in mutual funds

As we can see, technology is being adopted aggressively by product manufacturers, distributors and advisors, fintech companies and even investors. In fact the millennial investor is much more tech savvy spending 4-5 hours on an average daily online. Hence, it becomes even more imperative for the modern day financial advisor to be adopting and adapting to the tech changes as they unravel and impact every area of their business i.e. client acquisition, investment advisory, transactions & backend processes & client servicing.

Some of the examples are

  • Automation of back-end processes – Online transactions, consolidated view of client portfolio and reports, alerts on SIP expiry, asset or insurance maturity, brokerage reconciliation etc. are some of the usual processes that can be easily automated saving a lot of time and cost and bringing in much more efficiency

 

  • Client Acquisition, Onboarding and Servicing: Advisors can now reach out to prospects & clients even if they are living in different geographies and communicate seamlessly using Whatsapp, Linkedin, Chat, Skype etc. thereby obviating the need for expensive physical presence. With millennial generation glued to the digital medium, it has now become almost necessary to have a strong digital marketing strategy to win and retain clients.
  • Regulatory Compliances: The advisor can use technology to ensure that he is compliant with the latest regulatory frameworks. Online platforms will help him keep track of the advice given, client mandates, risk profiling etc.
  • Use of AI & Machine Learning: – These words no longer sound Greek as technology is helping advisors take the leap towards improving their core advisory process like asset allocation models, product research and recommendations, scenario analysis, the creation of financial plans etc. The new age technology is being increasingly deployed to learn more about the consumers and offer personalized solutions.
  • Providing power and transparency in the hands of the client: The client can view as well as transact on his portfolio at any point of time using different channels like a web log-in or even an App. This gives them the control of their finances in the literal sense thereby increasing the investor confidence
  • Educating the client – Achieving your financial goals is more of a consistent and disciplined behavior in addition to choosing the right product. This is where technology helps advisors to easily reach out and educate their clients using blogs, online tools etc.

As they say ‘Change is the only constant’, and adopting the latest technology in their business is more of a necessity than a choice. This will not only help in deepening their relationship with existing clients but also help them acquire new clients who are going to be much more tech savvy than the previous generations.

Sudipto Roy was heading Treasury function for Tata SSL and has an extensive experience of the Indian financial markets with a career spanning over 27 years he has worked in diverse industries such as Financial Planning & Distribution, Asset Management, Life Insurance, Insurance Broking, Equity etc. He has held a leadership position in PNB Principal Financial Planners, Kotak Mahindra Mutual Life Insurance, Birla Sun Life Insurance, and Kotak Securities.