Five Key Factors to Successfully DeployDigital Advice

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Index

INTRODUCTION

Why is it taking so long for financial institutions to deploy digital advice?

FIVE KEY FACTORS TO SUCCESSFULLY DEPLOY DIGITAL ADVICE

1. Identifying the target market and accompanying strategy, customer proposition and distribution models

2. Getting the business model right

3. Choosing the right technology strategy

4. Ensuring they have the right workforce on-board

5. The role of compliance when deploying digital advice

HOW CAN GLASSBOX HELP?

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Introduction

Digital advisors or robo-advisors are online services that use computer algo-rithms to provide financial advice and manage customers’ investment portfo-lios, with moderate to minimal human intervention.

THEY REPRESENT A BIG CHANGE FOR AN INDUSTRY TRADITIONALLY USED TO (AND BASED ON) FACE-TO-FACE INTER-ACTIONS WITH ITS CLIENTS.

Such algorithms are executed by soft-ware and thus they do not require a human advisor.

The software employs its algorithms to automatically allocate, manage and optimise clients’ assets, based on a set of pre-determined questions, config-ured to provide a good representation of someone’s financial profile and personal circumstances.

The first digital advisors were launched in 2008 but it’s only in the last three to four years that we have seen their increase in popularity.

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Why is it taking so long for financial institutions to deploy digital advice?

he main obstacle to digital transi-tion is advisor buy-in. For a sector that has always done well through

face-to-face meetings, there is strong resistance to a new process, which could have any weakening implication on exist-ing relationships with clients.The issue for the bank is that the loss of a Wealth Manager, in most cases means an enormous risk in the loss of associated clients, and at a time of tight margins, companies cannot afford to lose this business. Therefore, they need to be cer-tain to make the right decisions on strate-gy and investments for digital, to ensure changes are easy to adopt from advisor to client and complement the existing relationship. The buy-in of the advisor is crucial to the bank.

Beyond this, of course the scale and cost of the project are significant considera-tions, as well as regulatory compliance, however what has prevented many finan-cial institutions from moving forward is not knowing the best route to take.

Without knowing exactly what the cus-tomer wants, what the advisor needs and how this all fits with the corporate strate-gy of the Wealth Management (WM) firm, the first steps cannot be taken. These are the main reasons why many banks are only now running projects to determine the criteria for their digital capabilities and are slowly moving towards invest-ments.

Ultimately, there is an overwhelming number of benefits to both advisor and financial institution in digital integration, which makes it certain for the transition to take place, but how quickly?

With resistance from advisors, firms need to rapidly educate and work with their advisors to give justification for the change, and then work together to determine the right strategy for all.

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1. Identifying your target market and accompanying strategy, customer proposition and distribution models2. Getting your business model right3. Choosing the right technology strategy4. Ensuring you have the right workforce on-board5. The role of compliance when deploying digital advice

So, what are the five things financial institutions need to know to prepare and successfully deploy digital advice?

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A successful digital advice strategy de-pends on customer proposition, change execution and successful integration of best-of-breed digital capability.

Financial institutions should start by identifying their target market, and in turn the accompanying strategy and customer proposition. It’s crucial to ensure all stakeholders agree on this to create strong foundations for the project.Once these components are agreed upon, a high-level customer journey can be mapped out. One of the top starting points is to design a Target Operating Model (TOM), essentially a blueprint of how the organisation will provide value for customers.

It seems like most companies are going down the ‘hybrid’ route, of employing professional advisors alongside their online platform, to improve efficiency and reassure customers, rather than taking a ‘pure robo’ approach.

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Design is a key part of the strategy and normally requires introducing new tech-nology, which could involve buying third party software, integrating technologies or changing existing processes.

Once financial institutions accept advisors have a part to play however, they should still automate all they can.Automating paraplanning and suitability is also useful, as they can create auto-mated letters offering simple advice, but can also calculate an individual’s lifetime allowance and so can contribute to risk control and efficiency.

Financial institutions will also need to keep up with AI & machine learning going forward. To this end, we can expect business models will continue to evolve, due to incremental innovation, ongoing evolution of the digital advice and of reg-ulatory regimes.

1. IDENTIFYING YOUR TARGET MARKET AND ACCOMPANYING STRATEGY, CUSTOMER PROPOSITION AND DISTRIBUTION MODELS

2. GETTING YOUR BUSINESS MODEL RIGHT

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Choosing the right software is an important decision – companies used to try and build their own, but technology changes at such a

quick rate that buying the ‘best in market’ product and integrating it into an exist-ing system is now the preferred option. Adopt new software, rather than adapt your own.

In order to support customer needs, the design of websites and associated sys-tems are becoming ever more sophisti-cated, dynamic and personalised.Information presented to an individual customer:

May include information generated from multiple sources/systems, which are visually reconstructed by the browser (us-ing frames, Ajax and other technologies)

May have to include disclaimers, caveats and warning messages specific to that customer, that investment, that product, at that time, based on the cur-rent circumstances of that customer

Will be subject to specific versions of the T’s & C’s

May be displayed differently depend-ing upon the device the customer is using

Can look different depending on the browser/browser version the customer is using

Will vary as the layout and content changes constantly

May be based on specific circum-stances that day, or could include a time-limited offer, end of tax year dead-line, etc.

3. CHOOSING THE RIGHT TECHNOLOGY STRATEGY

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3. CHOOSING THE RIGHT TECHNOLOGY STRATEGY

It may be possible to retrieve relatively easily the data relating to the customer’s interaction (e.g. name, address, salary, etc.), but not the context (i.e. the actual screen, the questions asked, the informa-tion provided, etc.).

Hence why, choosing the right technolo-gy plays such a pivotal role in the success-ful deployment of digital advice.

In order to provide the quality and level of service and support that customers expect, Wealth Managers need to be able to see exactly what information has been provided so far (in real time), so that they can pick up the thread and answer the customers’ queries. In addition, the firm needs to have a complete record of ex-actly what information was shown to the customer so that in the event of claims or disputes in the future, or if they need to undertake reviews or investigations, they can see and prove exactly what hap-pened. And if there are problems with the Customer Experience, they need to know immediately what the problem is and have the information to fix it.

The challenge is that the typical system architectures that support digital chan-nels are not able to support these service and record keeping requirements.It can take days or weeks of skilled and costly resources to re-assemble the information from a number of different sources and even then, it will potentially only give a partial picture of what the customer saw – especially if the session in question happened months or years in the past.

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Assembling the right team is also crucial - you need the right balance of subject matter experts and change agents, as well as mix of internal and external expertise.

Traditional banks and challenger brands face different obstacles. Established companies have a competitive advantage in a ready-made customer base and known brand, while challenger brands must invest heavily in advertising and marketing to build their reputation.

Not only financial institutions have to assemble the right workforce to bring digital advice to life, but they also need to ensure their client-facing agents’ skills are recalibrated to complement those offered by robo-advice, therefore maximising the efficiency and effectiveness of hybrid models.

There was a time when financial services companies were required to keep a written record of customer transactions and communications for compliance purposes. Regulators operated on the premise that if it wasn’t written down then it didn’t happen. Then came the rise of the call centre and voice recording became an essential system, to capture and store customer interactions. But now the world looks very different and most companies today do not have complete records of exactly what the customer saw and did on their website.

If the regulator knocked on the door today, could you retrieve and replay in full, the exact journeys customers took with you online – as seen by the customer? If the answer is no, then keep reading.

One of the biggest challenges today is that no two customer journeys are the same. Websites have dynamic content that is personalised to the customer and their particular circumstances. Then you have the sticky problem of knowing how this content appeared on their screen, whether it was a laptop, which browser (as this can have an impact on what’s displayed), tablet or phone. You need to be able to recreate not only what the customer saw, but also how it appeared to them. For example, did they have the opportunity to see all of the terms and conditions before accepting the policy?

The need for online record keeping has been amplified and is being highlighted by the current publicity surrounding digital advice and suitability.

4. ENSURING YOU HAVE THE RIGHT WORKFORCE ON-BOARD

5. THE ROLE OF COMPLIANCE WHEN DEPLOYING DIGITAL ADVICE

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Following the Retail Distribution Review (RDR) a number of financial services businesses did away with their direct sales advisors and as a result obtaining financial advice in the UK is to a large extent the preserve of the relatively wealthy; but it is generally recognised that the level of financial literacy in the UK is low, and people need advice to navigate their way through the complexities of pensions, savings and investments. However, triggered by new pension freedoms announced in George Osborne’s March 2014 Budget, and the FAMR Report, digital advice is aiming to bridge this gap by providing a means through which financial service providers can help customers access the information and find the products that match their needs via digital channels.

In order for financial service providers to offer such information and advice online they need to have the confidence that they have a complete record of what the customer was shown, how long the customer spent viewing the information, what questions the customer was asked and how the customer replied. And they need to be able to replay those records (potentially years after the event) to prove that the

customer was taken through all the required steps. You only need to look at how an entire industry has emerged from the PPI debacle. Then if a customer does challenge and says, “I was not told that when I made the purchase”, there is not only a record of what was presented to them and how it looked on-screen, but also how long they spent on each section. Did the customer simply click through the Terms & Conditions, rather than reading them. It removes the ‘he said she said’ conflict to provide a single version of the truth.

IF FIRMS HAVE DESIGNED THEIR CUS-TOMER PROCESS TO MEET ALL THE REGULATORY REQUIREMENTS, RECORD-ING SESSIONS IN THIS WAY WILL ENABLE ORGANISATIONS TO CLEARLY DEMON-STRATE THAT THEY ARE ADHERING TO THE RULES.

However, regulatory compliance isn’t the only benefit to capturing every customer session. In the context of digital advice, it can also assist in ensuring customers have understood the process they have been through and have the right product to suit their needs. For example, if a customer initially states that they have a low risk appetite but changes their mind during the process and selects a high-risk investment, this session can be flagged for a call to the customer to double-check that they are aware of the implications of their choice, thus avoiding any unwelcome ramifications for both parties.

The steps needed to deploy online recording are simple (requiring no major web integration work), fast and perhaps even more surprising, relatively low-cost to implement and manage. The biggest obstacle is to make financial service providers aware that they are potentially

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How can Glassbox help?

Glassbox’s record and replay technology gives firms the ability to monitor digital channels and immediately produce reports and alerts in response to requests for information or issues as they arise. Record and replay technology records every session as it happens, so that if a customer encounters difficulty and needs to speak to the firm’s contact centre, the agent can immediately find and replay the session to see what the Customer’s problem is and help them, and to co-browse. In the case of software issues, it enables IT to see the actual problem sessions and fix them, ensuring a continuous improvement of the digital Customer Experience. Record and replay technology enables firms to maintain robust records of every customer session by recording every session exactly as seen by the Customer, regardless of whether they are using desktop, mobile web or native apps. The information is evidential – it can be used to resolve complaints

and disputes by proving what was provided for the Customer. The Glassbox technology compresses the data so that it requires <5% of the original data footprint so it is viable to be able to store and retrieve the information economically and quickly - for the life of a product. If it is necessary for compliance or audit to undertake reviews or investigations of digital business, Glassbox’s record and replay technology can automate much of this activity by searching the data to find and replay every session that meets the criteria. Specific funnel reports can be defined to run routinely or ad hoc to identify every session meeting the criteria for further investigation or review. The data can be exported for further analysis or review.

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