Why digitalization in Financial Advisory Business is necessary?

There has been a spectacular rise in e-commerce industry and it has disrupted many traditional businesses. There is virtually no industry or market where it's impact cannot be felt or foreseen today. In the financial services industry, the emergence of a new group of digital wealth advisory/management firms offering automated investment advice services has today become one of the debated topics. There is one view that such firms may revolutionise distribution and advisory practice. Yet many experts have discounted and labeled this movement as unproven and believe that its' solutions are no match for a human, personalised investment advice. In this context, we want to explore the emerging challenges and how we can sustain and indeed grow our business in this rapidly evolving digital age.

The Evolving Market Place:
Let us take holistic, template view of the evolving industry. We may thereby segment the fraternity of financial advisors /distributors into the following three groups...

1. Fully Automated: These firms provide no human interface and work solely on softwares. Investors would register online on website for advisory /distribution related solutions for KYC compliant investors. Often offline verification / bank mandates are requested for enabling online transaction facility. Typical investor would be young, tech-savvy individual yet not serviced by traditional IFAs. They rely on smart visuals, packaged solutions and ease of use for investors to grow their customer base.
2. Financial Advisor (FA) Assisted: The segment is a combination of both technology and human interface in equal measure. Technology is smartly used for doing many activities /processes and providing value-added services to clients. The human interface is primarily involved in acquisition, relationship management, custom financial planning and behaviour orientation. The transaction process, reporting, customer service, business MIS, etc. are all automated and technology driven as also portfolio advice and management to some extend. A typical investor is difficult to define as they consist of HNIs to retail customers.
3. Traditional IFAs: These IFAs rely almost entirely on human interface and a large number of processes involve manual intervention. They are primarily dependent on physical branch networks. A large amount of time and efforts is spent on non-value adding services. While such IFAs do have a mixed clientèle of retail and HNI customers today, it is difficult to foresee profitability and growth for them in this model unless the clientèle is primarily HNIs and super HNI who would be more comfortable dealing with professional advisors face-to-face.

Widening Horizons:
The digital age is here and it is going to stay. E-commerce in the digital age is finding resonance and favour from not just investors but also regulators and government. With the government's focus on Digital India and a rapidly evolving financial services landscape, it is more likely that the transition will only continue. There has never been so many smart phones, ease of payment options and entrepreneurship spirit present together ever, each complimenting each other to create innovations to serve customers. It is really exiting to see the pace of change as it is all benefiting the consumers in the end.

The widening horizons of e-commerce enhances the ability to offer multi-channel strategies to industries and organisations. This can potentially reduce costs and improve customer management. A single organisation, multi-channel approach is fast becoming dominant. To be successful, we must all offer a positive client experience, problem solving solutions and take a unified view of the client's overall relationship. E-commerce must also be used to expand client options and offer broader product choices. Organisations which have existing clientèle, a diversified product basket, unified portfolio view, automated & integrated transaction platform, backed with effective customer servicing model cannot be easily replaced by digital entrants. Given the abysmal levels of financial products penetration in India, the markets can only expand hereon and every existing player and new entrant will have their own fair share of the growing cake.

Meeting the Challenges:
The main objective to consider here is what strategies will wealth managers /financial advisors adopt to stay competitive in the e-enabled environment? What value can they add to their clients? This concerns will only grow as we progress in the digital age and as industry evolves and matures. The emergence of the digital age has made clients more inquisitive, experimental and thus less loyal to traditional channels of distribution. The client's preferences and habits are also changing. Today the clients want solutions not products, ready access to information not processes and desire to act 'now' rather than to wait. These are changes which have big impact on the business of financial advisory /product distribution.

How can a traditional financial advisor meet these challenges? There are few things that need to be done with priority, if not in a mission mode ...

1. Making the strategic choice and commitment: It begins with defining your business model and approach. The strategic choice has to be made of moving business to the digital mode or keeping with the traditional ways of business. That conviction and commitment has to be come before anything else is to be done.
2. Adopting technology & automation: Next is your understanding and adopted of technology and automated processes in your organisation. As advisors, you need to identify which processes can be automated and which processes shall you manually focus on. Defining the processes is crucial as it will provide a ready template for your firm to work accordingly.
3. Pushing Customers to Automation: If the choice to go digital has been made, then it is also the time for your customers to go digital. In the age of Facebook and Flipkart, there would hardly be any customers who would not have smart phones or be tech-savvy. It is only a matter of perspective & attitude when it comes to wealth management and use of technology for same by customers. A plan for shifting existing customers on the digital platform is to be made while for new customers, the enrollment should ideally be in the digital mode.

Customer Value Identification:
Surviving and growing in the digital age also demands proactive actions and marketing by the advisors to their customers. The need is to highlight the value added services on offer to customers. In absence of this, their will be some risk for customers getting attracted to other digital entrants. If this idea looks stretched at the moment, we should at least accept that the customer, in absence of knowledge of our services, would be more prone to being fished by someone else highlighting his/her services. Your service value identification by customers is also important when we are trying to push the customers to the digital platform.

The question now is – what is my value proposition as a financial advisor in this digital age? The answer for NJ Wealth Partners is very simple and can be found by bit of soul searching ourselves. We would just list the elements constituting our value proposition without going too much into details...

• Consolidation / aggregation of entire portfolio for family easily accessible
• Access to a rich, diverse basket for financial products and asset classes
• Paperless /online transactions in financial products
• Value added services of proper financial need assessment (financial planning) and portfolio management
• Effective and efficient customer query /complaint management

Adopting Technology in Business Practices:
The challenge is also for the advisors to make activities process & technology driven rather than keeping them manual. The idea is to use maximum system tools which are available on the go to optimise and scale their practices. NJ Wealth Partners can effectively use many automated services offered by NJ like CRM, Financial Planning, Employee Management, Subscriptions, Customer Care in their business. They can also potentially do wonders for their business if clients switch the the E-Wealth platform and MARS. These few and many other services by NJ can also help Partners to improve their value proposition greatly.

Branding Your Differentiation:
Marketing or branding too has evolved enormously with changing times. Financial advisors are unfortunately not really keeping pace with the trends. In the digital age, your identity begins with your website. Having a website is a must for any advisor who presents himself as a seasoned professional. There is no meaningful shortcut to avoid this requirement. Next is the question of marketing and branding your business, products and ideas in modes, ways and channels which are relevant to the customers. While the need for traditional marketing through physical literature is still very relevant today, the advisors today now must use the the new channels of communication using digital formats like videos & images. These formats can be effectively circulated through your mobile phones, email accounts and websites. In combination with websites, they can be effectively used to enrich your live content for visitors. At NJ we have kept pace of this need for branding differentiation with our offerings in BizMall like WebNest and MCS.

Conclusion:
The following are some key observations...

1. Digital entrants combine the use of packaged solutions, presented with simplified user experience having ready online access backed with increased transparency and a largely automated process to offer automated advice directly to investors.
2. Emerging models have potential to make 'advice' for the mass market feasible and a certain segment of investors will find value in them. The advice varies from standardized to customised depending upon the complexity of automation.
3. The changes taking place are here to stay as is the fact with many industries/businesses today. So traditional players now need to determine if and how they want to approach these changes.

The emergence of digital entrants into the wealth management space has now slowly gathering pace. It will be some time before they can actually start making an impact on the industry and investor expectations. Presently the scale and size is very limited but what is clearly visible to us the the experience of other industries and the emergence of the digital era and e-commerce, in general. The evolving trends in the market will ultimately benefit new and existing investors alike by providing better and innovative solutions through an improved client experience.

To survive and grow, wealth management providers can no longer rely upon customer loyalty only. The advisors working in traditional ways will have to make the choice of transitioning their non-core services /operations to automated modes while keeping their human interface skilled & informed. Further, investors too will have to be gradually pushed in the digital environment so as to avoid loosing them in future to any of the digital entrants. The good news for NJ Wealth Partners is that the platform is ready today for the digital migration of Partners and their clients as well. Effectively using the many services offered by NJ can help the advisors to start making the transition to be strongly competitive in the industry and also be ready for the challenges. But investors will have to be made to acknowledge & appreciate the value of this digital platform and infrastructure behind the Partner. We at NJ are aware of the emerging challenges are keeping pace to make our Partners stay as competitive and resourceful as ever.