The focus of our conversation at this Round Table conducted at the inaugural MDRT Global Conference in Sydney last year revolved around what advisers perceive to be the major opportunities that exist for them and for their advice business in 2020 within a changing regulatory and consumer world…
Panellists (L to R)
- Delia Wong – Singapore
- Kinson Ng – Hong Kong
- Jenny Brown – Australia
- Kobus Kleyn – South Africa
- Katrina Church – New Zealand
- Jim Silbernagel – United States
- Peter Sobels – Riskinfo, RiskinfoNZ
- Natalie Jarvis – Zurich/OnePath, Australia
- Michelle Hoskin – United Kingdom (inset)
United Kingdom – Michelle Hoskin
- Be a business owner first
- Financial wellbeing – health and wellness
This great conversation kicked off with business best practice specialist, Michelle Hoskin, who shared what she considered to be the best opportunities for advice business growth in the UK in 2020 and beyond. She said that while many countries are only now experiencing regulatory change in the financial advice sector, “…the UK’s five years past that now. And some are twenty years past making changes in their businesses because they could see what was coming.”
some are twenty years past making changes in their businesses because they could see what was coming
There are two areas in which Michelle predicts significant opportunities for advice businesses in the UK:
Be a business owner first
Michelle advocates that the more financial planners stop running businesses like a financial planner and run a business like a business owner, they will accelerate their success – almost overnight. “And that’s because when you look through the eyes of a financial planner and you look at your commercial entity, you will see it very differently,” she said.
“You’ll see your relationships with your team very differently. If you have the kind of relationship you have with your team as you have with your clients, things will be very different,” she told the panel.
Michelle thinks the 80/20 rule probably applies in the UK, wherein 80 percent of advisers run their business as advisers rather than as business people and business owners.
According to Michelle, ‘non-advisers’ are coming into the advice sector “…with a pot of money” with the intention of setting up a financial advisory business without ever personally advising a client. “They’re not going to get licensed; they’re not going to take an exam …and they’re absolutely nailing it, because they’re coming at it purely from a commercial perspective.”
She said these new entrepreneurs entering the UK sector are good at business. “Because they’re doing it from that perspective. They’re hiring the best skills and the best people,” she said.
By contrast, Michelle observed that advisers who run their own businesses do a little bit of everything and hire others to fill the gaps. “The result is that those advisers/planners are hard-wired into their business, never to escape,” she warned.
Michelle says she’s never been busier in her own business, where she’s receiving calls from start-up advice firms asking her to consult on helping them set-up their business using best practice global standard to give them the best chance of success.
80 percent of advisers run their business as advisers rather than as business people and business owners
The second great opportunity from a global planning perspective, according to Michelle, is the move into the wellbeing space – financial wellbeing. “The UK isn’t quite there yet, but that’s the drum I’m banging big time,” said Michelle.
Her message to advisers is that they should consider including a health and wellness narrative into their financial wellbeing service proposition for their clients.
Michelle referenced her training session called ‘The Future You’, in which she trains financial planners and advisers to go down the process of understanding the future version of a client – and for them to help their clients design a future version of themselves – for their wealth, health, relationships, friendships, environment; skills and capabilities, spiritual and charitable connections – the whole person. “We are whole people,” said Michelle – “…the money doesn’t define us.”
She passionately argued that financial advisers are the only professionals on the planet – not doctors; not lawyers; not accountants; not bank managers – that have the power to help a client design and unleash their own potential.
“With the set of skills that we have, we – as a planning profession – are in the best place to help and support our clients.
“Globally, we’re not there yet, but over the next 25 years, that will become the role of the adviser and the planner.”
Michelle said this vision also works for risk focussed advisers, whereby any insurances that are placed for the client, their family and their business are only there to protect the future version of themselves and/or their family.
United States – Jim Silbernagel
US adviser, Jim Silbernagel, identified with Michelle’s vision, but noted the United States advice sector hasn’t yet experienced the more advanced regulatory reforms that have been implemented in countries such as the United Kingdom and Australia.
Jim says the opportunities he sees may also be threats.
He estimates 90 percent of agents or advisers in the US deliver ‘transactional’ advice services. “They’re not doing the comprehensive approach. They’re just trying to make the sales.” said Jim.
Jim thinks this approach may herald the potential demise of the advice industry in the United States, but he does envisage opportunities emerging by way of technology advancements. Whereas typically in the US, transactional advisers don’t want to deal with clients unless they have significant amounts to invest, he says technology can now allow advisers to be able to afford to provide advice services to younger people – who still want the relationship – but who don’t want to spend the time in one-on-one meetings.
“The opportunity with technology is that we can create training for younger people and provide them with access to financial literacy and resources to implement their solutions in a cost effective and profitable manner,” he told his peers.
Jim has built a ‘one-stop-shop’ practice in what he describes as a small community “…and if you’re not offering that as a business, you’d better be collaborating with other businesses that can help provide [those additional services].
“Time is very short for people [and] our lives are so busy,” he said. Jim reflected that younger clients have the expectation that all the services they need can be accessed via their smartphones “…and if you don’t have access to that technology, you’re not going to be in business tomorrow.”
According to Jim, there exists a huge shortage of advisers in the United States, which will become more acute as the cohort of baby-boomer advisers retire.
He says there is ever-increasing demand for his advice services and that technology advancements provides him with a great opportunity to expand his business to more clients.
Jim says that if advisers don’t provide these services, he is concerned the US Government will step in to fill that gap “…and they’ll fall woefully short [of what is needed].”
While Jim says it’s hard for advisers to utilise technology in today’s regulatory environment in the US, this also creates an opportunity for those who get the formula right.
younger clients have the expectation that all the services they need can be accessed via their smartphones
He has also recruited a couple of younger advisers to work with him to link with younger clients, such as the Millennial generation.
Generally, Jim is very bullish about the opportunities that abound for US financial advisers, especially if they can utilise the added value and cost efficiencies associated with incorporating technology into their business services and processes.
New Zealand – Katrina Church
- Client services
- Business efficiencies
- Wellbeing message
Providing context for her peers, NZ adviser, Katrina Church, noted the commencement of a two-year transition period to individual adviser licensing, which commenced in New Zealand from November 2019.
While she says some advisers don’t see this development as a good thing for them, Katrina sees this period as a fantastic time to be in the financial advice business in New Zealand.
She says New Zealand is poised to take advantage of what she believes to be fantastic opportunities that are arising in a world where technology can offer new and exciting ways of adding value for clients.
She thinks that with the implementation of new technologies, she and her NZ adviser peers can find new ways to help consumers solve their financial problems and to give them “…belief again that they can actually get out there and make a difference to their own financial future.”
She said that if the adviser is offering a holistic advice service, irrespective of whether they provide that advice themselves or bring in others for various components of advice, they can overlay those services with a wellbeing service element.
She added that if we take the time to care and to have that wellbeing connection with people, as well as offer holistic advice, then this represents a great area of both change and opportunity.
The other area Katrina says will make a significant and positive difference for her adviser business is to bring in new technology that will allow her to do what she does both faster and more efficiently.
She told her peers that her clients expect answers more quickly in today’s world, as that’s what they’ve become used to in other sectors of their lives. “So we’re doing a lot of automation projects at the moment,” said Katrina, which aims to remove some of the core functions of her administration team, “…so that my staff actually turn into people again and spend time talking and solving problems for our clients.”
clients expect answers more quickly in today’s world, as that’s what they’ve become used to in other sectors of their lives
Katrina used the example of life policy anniversary letters, which used to take the time of two staff in contacting Katrina’s businesses’ six thousand clients, but which will be performed ‘by robot’ very shortly. She says this will help meet regulatory expectations but at the same time will deliver more timely services for their clients. This single change, according to Katrina, will see what has been a NZ$120,000 pa cost to her business reduced to around NZ$4,000 pa.
Referencing Michelle’s point about advisers approaching their services more as business owners than as advice professionals, Katrina said she wanted her business to become more dynamic than it has been in the past, which will help to lighten the load on advisers and help them get out into the market to help change more peoples’ lives.
Australia – Jenny Brown
- Business owner focus/change in mindset
Jenny Brown noted the new exam all Australian advisers must sit, together with other regulatory changes impacting the minimum education level for all advisers in future (namely degree level or its equivalent).
She said registered adviser numbers in Australia had reduced from around 25,000 as at 1 Jan 2019 to just over 20,000 by 30 June 2019 – a drop of 20 percent in six months, with regulator anticipating another 20 percent reduction over the next year or so.
Jenny said her responsibility as an adviser was to demonstrate to her Australian peers that they can still achieve business success under the new Australian advice regime – that advisers can still be positive, which she said was an affirming message stemming from MDRT and its adviser members, all of who are willing to help their peers.
Business owner focus
“Those who are business owners – and act as business owners – are the ones who are going to thrive. Those who are the sole practitioners who have no staff or maybe one staff member, are the ones that unfortunately will not thrive,” predicted Jenny.
To survive, she said smaller advice businesses needed to grow. “They need to work together and to change their mindset to be business owners; not practitioners.”
This message accords with both Michelle and Katrina. Jenny says this change in mindset represents a massive opportunity for advice businesses like her own.
Be a business first and an advice practice second
“That’s one of the two key messages,” said Jenny. “Be a business first and an advice practice second. And embrace technology for greater service and process opportunities.”
Singapore – Delia Wong
- Growing high net worth client market
- Ageing population
- Regulatory reform
Unlike other countries, the first key opportunity Delia Wong identified was the great influx of expatriates from around the world into the Singapore community and the advice opportunities this represents.
In embracing Singapore, its business opportunities and lifestyle, she says many of those expats seek residence in Singapore, which then presents opportunities for Delia and her advice colleagues.
High net worth clients
Another opportunity identified by Delia is the increasing affluence of the general Singapore population, particularly over the last ten years, and the increase in the numbers of high net worth individuals. She also sees this increase as a huge opportunity, should she and her peers elect to “…sharpen our skills” in reference to how to serve high net worth individuals
She also likes to give back to the industry – for what it has given her – but also because she says her clients like to see that she is contributing back to the industry. She says when your clients see you serving, then they see you differently.
The third opportunity highlighted by Delia stems from the Singaporean Government raising awareness about the importance of retirement planning and health care (eg advertising messages and television shows raising awareness about the increasing number of dementia patients in Singapore), because Singapore is experiencing low birth rates, which translates to an ageing population.
She says the Government’s message is that it can only help its community to an extent, and the rest is up to the individual. Delia embraces this message and leverages it in her discussions with her clients about protecting the life they are trying to build for themselves and their families.
According to Delia, 20 percent of every Singaporeans’ salary goes into the country’s Central Provident Fund, which funds health and medical costs. But she cautioned these contributions can only help to a certain extent and that it largely depends on the individual to look for risk transfer instruments to relieve any sudden medical bills incurred.
Regulatory measures will also represent opportunities for Singapore advisers because new regulation means there will in future be less advisers. She believes only the good, competent and ethical advisers will remain. The current minimum qualification is a diploma, which Delia positions as just slightly below a tertiary degree qualification. She says with these regulations, the general competency and skills of advisers is getting better and better and this is great for the reputation of the Singaporean advice sector.
Finally, health and wellness – Delia walks the talk in working out and staying fit.
Hong Kong – Kinson Ng
- Life expectancy/ageing population trends
- Specialist advice for Hong Kong residents
- Exploding middle class in greater China
Life expectancy/ageing population
Kinson Ng told his peers the increasing life expectancy of residents (89 for females and 85 for males) represented significant challenges for the Hong Kong Government, but at the same time represented a huge opportunity for the retirement planning advice sector.
He said the HK Government made recent changes relating to retirement funding and asked the community to invest in a new hospital insurance scheme, encouraging people to shift from the public hospital sector to the private sector.
According to Kinson, the Government is also encouraging those with life policies to assign the benefit proceeds to the Government in return for annuity payments to the beneficiaries under an arrangement designed to be more attractive for the consumer over the longer-term.
While Kinson is not convinced about the value of the HK Government offer, he told the panel that the prominence given to this initiative has motivated many Hong Kong residents to review their own retirement plans.
Specialist advice for Hong Kong residents
He says he and his colleagues need to take a more holistic approach to prospective Chinese clients, because the culture in each province is different from that of Hong Kong. But within Hong Kong itself, advisers can specialise more.
Exploding middle class in greater China
While China boasts a growing number of ‘super-rich’ individuals, Kinson focusses on the middle income-earning community in Hong Kong and greater China. He defines the Chinese middle classes as holding on average $1m – $2m in assets.
While the majority of Kinson’s client base are HK residents, he is looking over the next few years to build his China client base, which is where he sees significant opportunities for value-added advice services and therefore opportunities to grow his business.
He said regulatory requirements and client expectations were less in China than exist in Hong Kong, which he characterises as more ‘Western’ in approach and regulatory maturity than is the case in China.
Kinson says he cannot actively solicit new business in China, but he is able to deliver advice based on referrals provided to him from Hong Kong clients.
South Africa – Kobus Kleyn
- Social media/personal branding
- Intergenerational advice
- Health and wellness/regulatory reform
- Paraplanners and fintech
Social media/personal branding
Kobus Kleyn strongly advocated to the panel that a huge future opportunity for all advisers around the world is the power and influence delivered by social media. He says he believes this to the extent that if advisers don’t keep up with social media engagement they won’t be around for much longer.
He referred to LinkedIn as a powerful tool for anyone who seeks to operate a professional business enterprise and that Facebook and other social media services also play a role.
People are buying us
Kobus highlighted personal branding as critical for any adviser with a presence on social media:
“People are buying us. They are not buying corporates or companies or your products anymore. Those days are gone.” If you don’t have a very strong personal or social media brand, you’re not going to keep up with your clients wanting to do business with you, wanting to know you and wanting to be proud of what you do.”
Kobus focusses a lot on branding – not branding his firm but branding the individuals within his firm. He says the future is all about building a relationship – not just with the client – but with the whole family. Like many other countries, Kobus alluded to the huge generational transfer of funds and assets as baby boomers in South Africa transition their wealth to their children and following generations.
He is a firm believer in the holistic advice approach, even if some advice needs to be referred to other specialists, as he says this separates his proposition from product sellers.
55 million South Africans, according to Kobus, are served by around 123,000 advisers. He says anyone can buy a product from anyone, but not everyone can buy a relationship from everyone. He says it’s about the advice experience for both the client and for their family.
Health and wellness, regulatory reform
The ‘wellness’ narrative in South Africa, according to Kobus, is called holistic financial life planning, or relationship planning.
For Kobus, the wellness narrative is an opportunity, but so is the tsunami of regulation, he told the panel. He gave the example that in South Africa, advisers must meet with their clients at least once every year. Setting his practice to accommodate this regulation, Kobus said he had his most successful year ever as an adviser, generating 85 percent of his new business through his existing client base and data mining his existing book of business.
Although his focus has always been on annual or regular reviews over many years, Kobus told the panel his enhanced focus on significantly more regulatory detail allowed a win-win situation for all stakeholders to create wealth while protecting wealth:
“The principle is to build regulations and compliance into your practice, and not deal with it as a stand-alone model,” said Kobus. “In this way, it becomes cost-effective, because the benefits of an enhanced plan with associated products and fees outweighs the compliance cost.”
Longevity is creating an opportunity to enhance your risk business
A further opportunity Kobus identified was the trend of the South African population living longer, which exposes the general population to many more trauma events in their more extended lives. He says 85 percent of the claims through his business are dread disease (critical illness) benefit claims. Put simply, “Longevity is creating an opportunity to enhance your risk business and your clients’ financial plans with wealth protection” said Kobus.
In this day and age, reflected Kobus, we will survive most of the dread disease events that befall us, and we need to protect our clients financially against surviving these events.
Paraplanners and fintech
Paraplanning was also seen as an opportunity for Kobus in South Africa. Explaining to the group, he said paraplanning was a significant opportunity in the area of business succession and continuity planning for an advice business. In his business, Kobus has succession partners of various age and experience in order to build long-term continuity for the clients of his business, should something ever happen to Kobus or when he exits his business.
He believes that in the South African context – and in other countries as well – para-planners offer the biggest opportunity for advisers to hone their practices and enhance their value propositions.
(Kobus is hoping to arrange for fellow panellist, Michelle Hoskin, to visit South Africa in 2020, and for her to share her experience with advice businesses in South Africa around paraplanner best practice.)
He also reinforced the message regarding adviser acceptance of fintech and other technology services, which he sees as representing opportunities for advice businesses; not threats. He says robo advice has no empathy; it doesn’t have people skills and it can’t tell you when an investment opportunity sounds too good to be true. “It’s an algorithm,” stressed Kobus, but he believes robo advice – as part of a hybrid system in an advice practice – can add value, especially within the millennial cohort of clients, which can then allow the adviser to focus on the higher net wealth end of their business.
Australia – Natalie Jarvis (Zurich/OnePath)
- Consumer openness to advice
- Social media
Zurich/OnePath’s Natalie Jarvis reflected on the fundamental change in life insurance which has taken place in Australia in recent years, in which ownership of life insurance firms has transitioned away from banks and towards global insurers.
She stressed that irrespective of whether a life company owns distribution channels, all insurers appreciate the critical importance of financial advisers in distributing each insurer’s products and services.
While Natalie noted Zurich/OnePath also runs direct and group insurance offers, she said that advice channels are seen as probably the biggest opportunity for insurers to expand their business in Australia.
Natalie referenced a recently-released report from ASIC – Report 627, which surveyed around 2,800 consumers. She said this report reaffirmed the opportunities for advisers in the finding that while 27 percent said they had received advice, a huge 41 percent of consumers said they would be seeking financial advice in future.
While Impediments to more consumers accessing financial advice in Australia were detailed by Natalie as the cost of life insurance and the trust factor, she said the levels of knowledge, professionalism and experience of financial advisers was not questioned by the consumer respondents.
there exists a real opportunity for the industry to shift the thinking of consumers for the benefit of all stakeholders, including for the benefit of consumers themselves.
Natalie concluded there exists a real opportunity for the industry to shift the thinking of consumers for the benefit of all stakeholders, including for the benefit of consumers themselves.
While she believes many experienced advisers probably didn’t need to undertake more study to comply with new minimum adviser education standards, Natalie said the community perception of these new minimum education standards for advisers will ultimately prove to be a positive for the sector and the community perception of the professionalism of its advisers.
Natalie cautioned that the life insurance industry needs to be aware of the continuing rise of the influence of social media and that it needs to embrace this trend as an opportunity – as an avenue – for positive messages about life insurance and the value of advice to cut through to the public.
Notwithstanding the sometimes-challenging issues that confront advisers the world over, the consistent message from this 2020 vision Round Table discussion is that significant future opportunities exist for financial advisers.
A number of the opportunities outlined by your panel of adviser peers related to a specific set of circumstances that exist within each individual country. However, other thoughts shared by the panel related to universal opportunities that exist for virtually any adviser and advice business with the ability, know-how, attitude and flexibility within their existing structures to accommodate the changes that may be required to leverage those opportunities.