The Future of Advice is Digital + Human

Ignition has long been a lone voice advocating for sweeping digital-led change across financial services. Finally we are seeing a choir of voices from regulators through to customers calling for change, and the industry must listen.

After listening to Daniel Toohey, Executive Director at Morgan Stanley and reviewing the research from Morgan Stanley’s Equity Research team, it is clear that they see a very different future operating model required for success going forward in the wealth management and financial advice sector.

Within the “Disruption Decoded – Wealth: Brave New World” research paper (June 13, 2019), the Morgan Stanley team provide a deep and critical analysis of two key wealth management specialists (AMP and IOOF) and share their analysis of the likely winners in the forthcoming market transformation.

Ignition was identified as a winner based on its well-developed, white-label digital advice platform, which is key to supporting the transformation needed (by incumbents and new entrants) to a three-tiered advice market model. The three tiers are supported by technology.

Morgan Stanley sees the future of financial advice being:

1. High-end face-to-face with planners servicing between 100 and 150 mass affluent to high net worth clients.
2. Mid-tier mass affluent using a combination of call-center, self-service and new technologies to support clients that are not economical for a primarily face-to-face model.
3. Self-directed delivered using a digital advice platform solution (most likely provided by a start-up). 

The self-directed segment is seen as a “significant market, offering opportunity to whoever can execute” (Disruption Decoded, Wealth: Brave new world, June 2019).

Ignition is in pole position

Mid 2019, Ignition is on track for the complete rollout of digital end-to-end advice solutions (across our three key financial pillars) supported by new rich user experience (UX) capabilities.

Anchored by our work with Bank of Ireland, a leading European bank, and top five industry superfunds in Australia, Ignition is able to support financial institutions including wealth managers delivering advice across:

• Insurance allowing customers to understand their current need, receive a comprehensive recommendation (including product) that can be actioned via advice and a product purchase to close the gap in near real-time.
• Investments investors can establish investment goals, develop personal savings advice (for lump sum and regular investments) and then receive and action a recommendation including placement of fund (inclusive of AML, KYC and funds transfer).
• Pensions / superannuation guiding members to establish personal and relevant retirement goals before identifying the best way for members to close the gap through smart asset allocation or contribution decisions. 

Beyond the completion and upgrade activities across Ignition’s three key pillars, we have begun work on our next stage of core enhancements including extending through AI:

• Rapid client-side deployment using state of the art low-code and no-code delivery mechanisms to allow our next wave of clients to be in the market sooner with the world’s best robo-advisory capabilities.
• Machine learning (ML) based decision aligning the data power of our platform with robust machine learning functions to autonomously understand the full decision loop from facts to outcomes and constantly ‘tune’ algorithms for optimal results.
• Natural Language Processing (NLP) moving engagement away from the screen and allowing users to progress through a journey, get help along the way and receive the advice through a natural and free flowing conversation.

Focus area and execution are key differentiators

Two factors have continued to help Ignition gain traction in the minds of leading financial services institutions in Australia and abroad, and are the same two factors referenced in Morgan Stanley’s research paper:

1. Focus area Ignition is unique and forward thinking in its focus on helping large organisations deliver rich digital advice experiences to consumers via a bank-grade advice platform. Most technology incumbents (such as IRESS and Midwinter) have worked hard to make advisers more efficient with strong and complex adviser desktop solutions. The result is a set of tools that are robust, but not intuitive, nor able to be easily driven by a customer. Digital disruptors (such as Stockspot, SixPark and Betterment) have focused on offering a simpler path to investment, mainly into cheap ETF portfolios. While easy to use, they suffer from a very narrow customer value proposition and a high cost of customer acquisition.
2. Execution The concept of robo-advice across different advice areas, driven at scale is something that has been in discussion for a number of years. It has proven more elusive to build and deploy than it seemed at first glance. Very few organizations have shown strong progress in delivering a scalable digital advice engine. Morgan Stanley has concluded that in building their Goals Based Advice Engine (GBAE), AMP have spent circa $200m to date and this solution is still not easily accessible by the consumer. AMP’s GBAE is a proprietary solution, built with an adviser first focus to once again make the adviser-based advice experience more efficient. By contrast, Ignition has spent less than 1/10 of AMP’s GBAE budget and has deployed solutions across insurance, investment and pensions in two regions, with a strong ability to scale and partner. With the internal barriers to innovation that exist across most incumbent financial institutions there is a strong argument for partnering with quality and well credentialed fintechs to help deliver of customer expectation and make advice more accessible.

Market opportunity and partnerships

In Australia the financial advice market is in a state of flux with a number of exits out of the financial planning area, some surprises and some clearly telegraphed. The near term will see more chopping and changing at the institution and planner level before the dust eventually settles. While this activity is distracting, it does not change the fact that delivering advice to the bulk of Australians, without the use of self-service technology, is impossible. The market opportunity in Australia for Ignition is still strong, as long as we are patient.

Globally the market is very different with institutions around the world focused on building and growing their financial advice footprint through digital technology. Many of our near-term client opportunities exist in regions where the bancassurance model of wealth product distribution can still deliver healthy returns or where regulators have updated advice legislation to cater for customers seeking to self-serve advice on a single-issue basis.

Conclusion

While it is easy to get caught up in the bad news items that litter the press, the staff at Ignition can see that large organisations are allocating more focus and budget to digital delivery and to the maturity of their consumer-focused advice solutions. Our customer testing continues to show that with the right self-service tools customers feel empowered to make good financial decisions for their own benefit. Our clients see that good advice is highly correlated with strong product sales. When you combine these factors, it makes sense that the team at Ignition feel proud of our mission to provide “advice for everyone” and constantly seek new and different ways to live this out.