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Building the Tesla of the advice market

27 Feb 2018

This article first appeared in Money Marketing.

Last month, PR firm Edelman published its annual survey of public trust. It showed financial services is people’s least trusted industry. This isn’t very surprising. Indeed, it echoes research Octopus commissioned from YouGov last year, which showed 70% of people have a negative opinion about financial services.

The problem lies in the relationships financial services firms build – or fail to build – with their customers. You build trust by building positive emotional connections with people. Financial institutions simply aren’t set up to do this.

On a more positive note, this underlines the vital role financial advisers play. Because advisers can build personal connections. People want someone to guide them through a landscape they find off-putting, and which is populated by companies they don’t trust.

Why people don’t warm to their bank 

A good adviser shows understanding, warmth and empathy. By contrast, financial institutions are driven by process, and a narrow focus on finding ‘efficiencies’. Short-term profits take priority over long-term customer relationships.

Customers want a smooth and painless experience, yet everywhere you look there’s friction.

It’s hard to feel warmth towards a company that makes your life harder. And it’s hard to trust a company you don’t feel warmly about.

There’s also a sense that the industry has, in effect, outsourced its conscience to the regulator. Customers suspect that firms do the right thing more because they have to than because they want to. Imagine meeting a person who was like that. Would you trust them?

Technology won’t be a silver bullet

If customers feel cold towards financial services, what can firms do about it?

A common industry trait is to see technology as the source of all improvement. So-called robo advice is an example of this approach, with new entrants seeking to use automation to improve the customer experience.

But technology can only ever be part of the solution. It can’t address the trust problem. A computer can’t show empathy and understanding, and customers will still look for people with these qualities to help them make decisions with confidence.

Building the Tesla of the advice market

So, despite the hype we sometimes hear, advisers aren’t about to be replaced en masse by machines.

That doesn’t mean they should ignore technology. Far from it. New entrants to financial services, from challenger banks to peer-to-peer lenders, are creating great, friction-free customer experiences. They have well-designed websites, they work seamlessly on mobile, and they allow customers to do what they need to do quickly and easily.

It’s forcing established players to up their game. Over time, customers will come to expect this level of experience across the financial services industry, including from their adviser. Customers hate friction, and technology can be a great way to reduce it. We see this in the way many customers have embraced online and mobile banking.

New technologies also mean advisers can now think big. Established companies tend to think incrementally. Look at the way that car industry responded to electric vehicles. At first, they ignored them. Then they came up with hybrids – the least amount of change they felt they could get away with.

Then Tesla came along with a mission to make every single vehicle in the world electric. Now big car companies are struggling to catch up. The Tesla of the advice market would set a target everyone thinks is impossible, like going from 150 clients per adviser to 500, or even 1,000. Crucially, they’d aim to do this while also improving the customer experience. How? By using technology to become three or four times more efficient. Technology can do 90% of the heavy lifting, freeing up the adviser to build deep, meaningful and trusted relationships with their clients.

For journalists in their professional capacity only. Issued by Octopus Group. The value of investments, and the income from them, may fall or rise. The information in this document should not be construed as offering investment or tax advice. Issued February 2018.