April 20, 2023

Will Financial Advisors Evolve or Perish with Technology?

How you can evolve and survive

Jerry Chua
Cofounder, Chief Activator @ Finberty
Jerry Chua

Digitalization has happened gradually over the past few years, but COVID-19 accelerated the trend. The pandemic may be largely over, but that doesn’t necessarily mean consumer preferences will return to where they were before. Most sectors have now embraced technological adoption, and financial planning is no exception.

will technology replace financial advisors

Digitalization has happened gradually over the past few years, but COVID-19 accelerated the trend. The pandemic may be largely over, but that doesn’t necessarily mean consumer preferences will return to where they were before. Most sectors have now embraced technological adoption, and financial planning is no exception. The traditional financial planning business will need to pivot if clients with insurance and investment needs continue to demand digital channels. I’ll look at some of the most significant trends and whether they will cause financial advisors to perish or push them to evolve.

The impact of the pandemic on consumers

On one hand, experiencing a global health crisis reminded many people of the importance of life insurance. Around one in three clients who began looking for life insurance after the pandemic hit said that COVID-19 was their primary driving force, according to the BCG/LIMRA Life Insurance Customer Experience Survey in 2020.

Yet this didn’t result in good business for all. Since restrictions from the pandemic meant that seeking out services in person wasn’t an option, many customers turned to technology for financial advice instead of traditional methods.

Insurers had to adapt, and many of them worked on their technology adoption to include features like:

  • Wet signatures on applications
  • Online scheduling
  • Video conferencing for customer meetings
  • Faster underwriting

While most of these technologies aren’t new, they’ve only recently started to become their own and enjoy greater adoption. That may be for the best since they provide a better and more convenient customer experience.

Some emerging technologies have replaced the traditional job functions of financial advisors. For instance, consumers can now search for life insurance quotes online or get investment recommendations from a robo-advisor.

However, that doesn’t mean the role of the financial advisory role is disappearing completely. In many cases, technology is helping financial advisors rather than replacing them. Technology can make life insurance simpler to understand, easier to apply for, and more available faster — meaning less administrative work for financial advisors and quicker results for consumers.

During the pandemic, it was common for people to use the internet for research before making a life insurance purchase. But that didn’t mean they wouldn’t speak to a financial advisor at any point in the process. Instead, they’d turn to them at the final stage.

Digitalization also allows customers to get more consistent service. Bank customers may speak to their provider a few times a month (or even a week in some cases), but life insurance/financial advisor doesn't typically involve this kind of regularity. There are fewer touchpoints; typically, only when a consumer first purchases a policy, when they must file a claim, or at the follow-up review which may only occur after around a year. This can mean that customers find it stressful if they need to make a claim, but redesigning the process with technology has the potential to provide a better experience.

I expect financial advisors who can adapt to the situation swiftly and implement these technologies to enjoy increased client conversion rates and customer satisfaction scores. Meanwhile, financial advisors who continued to rely on networking and social events for their prospecting were at a disadvantage.

Research confirms that the need for face-to-face interaction isn’t going anywhere. The BCG/LIMRA survey referenced earlier found that 97% of respondents were happy with the experience of talking to a human advisor about their policy — compared to an 85% satisfaction rate for online correspondence and 79% satisfaction through email. In a similar vein, after understanding the cost and terms and having trustworthy information, speaking with an advisor is ranked as the fourth most important component in easing the purchasing process.

Meanwhile, some of the biggest reasons customers decide not to take out an insurance policy include the inability to locate features (e.g., savings option or long-term care rider), a difficult application process, and being unhappy with the value proposition.  This proves that financial advisors are still crucial in the sales process — when they’re competent. Qualities such as being skilled in determining a client's needs, outlining possibilities, and reassuring the client they’ve made the right choice on a policy stand out during the survey.

I believe this is what adds to the value of a qualified financial professional.

financial advisors evolution

Need to adapt to shifting trends

While it’s true that the need for human interaction in financial planning is unlikely to be going anywhere yet, financial advisors still need to adapt — above all, to the shifting consumer trends and regulatory requirements.

One of the biggest problems those who work in the industry face is the time wasted on ineffective activities and processes. For instance, when a customer calls to ask for their portfolio summary, most financial advisors have to ask them to wait while they spend hours digging through files to find the relevant information. When you consider this is happening on a larger scale, with five or more daily calls, it becomes clear that the process doesn’t make sense. Financial advisors would be better off spending their time on activities that generate income and help customers.

Then there’s the possibility of missing customers altogether because you have too much to juggle. Nothing is more upsetting for a financial adviser than forgetting to contact an existing client and finding out that they decided to take a policy out with someone else because they thought you were too busy.

Another concern is data security. Today, financial advisors must follow strict rules and protocols when handling data, and they need consent before marketing a product. Professionals can stray into murky territory when marketing their services, and the worst-case scenario is dire consequences like losing your license. Yet financial advisors are heavily reliant on lead generation to survive.

The role of technology

Technology can help to solve some of these concerns. Instead of a financial advisor needing to be the first point of contact for every query, a lot of information can be handled digitally. Online channels can also give customers a variety of access points to interact with an insurance provider throughout their financial journey — for instance, when they’re initially carrying out research before taking out a policy and when they need to access their summary.

This is more convenient for the customers and allows them to interact more frequently with the business — and it frees up the time of financial planners for more important activities, making it easier for them to scale their operations. However, this arrangement still allows financial advisers to provide reliable advice and high-quality service, influencing a customer’s decision to purchase.

Ultimately, technology can help financial advisors to be empowered rather than replacing them. Instead of thinking of technology as a replacement for financial advisors, it’s the key to helping them solve some of their biggest problems in the financial planning industry.

adapt to survive and stand out in the financial industry

What it means for financial advisers

The life insurance sector experienced abrupt — sometimes drastic — changes after the pandemic. It’s unclear if the shifts in consumer attitudes will be long-lasting or if the increased interest will start to dim. But one thing that it’s already clear will remain permanent is the digital acceleration COVID-19 has encouraged.

I expect to see technology used throughout the entire value chain in the future, especially in distribution. Future financial advisors will use less paper and more screens, increasing their productivity as they can focus more on meaningful interactions with consumers rather than administrative tasks.

It’s important for financial planners to embrace and become experts in these new cutting-edge technologies to cultivate customer loyalty, spur growth, and draw in new clients. If they do so, they’ll have a better way to plan marketing campaigns, lead customers through an elevated customer journey, manage leads and relationships, and more.

As for the consumer side, policyholders will benefit from making purchases, conducting research online, and accessing the information they need, when they need it. However, they’ll still be able to access face-to-face interaction when it’s most useful, such as when taking out savings or life insurance products or making large-value purchases. All in all, this is about offering a better customer experience.

Speaking with CNBC from the Global Mobile Internet Conference in Beijing, Lee Kai-Fu (Artificial Intelligence Technologist and Expert) tackled the big question: Will humans still have a place in the world as machines grow more intelligent?

The answer, he said, is that nothing can replace human-to-human interaction.

“Touching one’s heart with your heart is something that machines, I believe, will never be good at,” said Lee Kai-Fu,

He further emphasizes that service jobs should be considered “first-class” employment.

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