The Three Things Clients Will Demand From Their Insurance and Financial Advisors by 2020

So, last week, I wrote a blog post about the bionic advisor. In it, I discussed where insurance and financial advisors were going from here. In a nutshell, I predicted that by 2020, the current landscape would look very different for insurance and financial advisors. These advisors would become bionic – using technology, such as robo-advisory services, to help them with the quantitative aspects of the profession, while still offering the qualitative aspects that clients are looking for. That is, advisors would shift prominently into the role of financial teacher, expert, and guide, while letting algorithms do the heavy quantitative lifting. If you haven’t yet, I’d highly recommend you read the post.

Today, I’d like to focus on a similar topic. Specifically, I want to discuss three key trends that are developing with regards to the client’s point of view. These trends answer the question of what clients will be like in 2020. That is, while advisors transform themselves into bionic advisors, what will they need to understand about their clients’ shifting expectations, desires, and preferences in a technological landscape?  

To whit, I believe there are three critical trends that will shape how clients look at financial services in the near future. They are: 

  1. Transparency being at the core of the relationship
  2. Client-facing technologies will be base stakes
  3. Many, but not all, clients will own the transaction

Each of these trends, I believe, will define important changes in how bionic advisors such as yourself will interact with their clients in the future. Each will change what it means to be an insurance advisor, financial planner, or portfolio manager. And, as with the bionic advisor, financial services professionals who are prepared to meet these changes head on will reap the rewards. 

Transparency Will Become Increasingly Valuable

Let’s think back to before the Great Recession. In a lot of ways, those were simpler times. Insurance and financial advisors were seen as the gatekeepers to financial products. If a client wanted to purchase insurance or build a portfolio, he or she would come to you. But then came the crash.Institutional trust collapsed (and is still cratered out). All of a sudden, people looked a little more sideways at their financial services professionals. Whether you were working for a bank or an independent, whether you were offering life insurance, group benefits, financial planning, or managing a portfolio, it didn’t matter. You got lumped in with the too big to fail banks, and people stopped implicitly trusting you.

The aftermath of too big to fail is client demand for transparency. People are demanding transparency as consumers and clients of services and products. But this demand for transparency is not necessarily a bad thing. In many ways, it’s an opportunity. To better understand that, check out the recent 2016 Transparency ROI by Label Insight. Label Insight surveyed 2000 consumers on the impact of transparency in their buying decisions. Now, a small caveat: this survey was looking at products specifically, as opposed to services. However, my personal experience and intuition is that this a desire for transparency is not limited to products. Fundamentally, people simply want to understand what they’re getting themselves into.

Okay, so let’s go through the study a little bit. What were the key conclusions? Well, first off, people really care about being informed. They want brands to provide them with as much information as possible before they make a purchase decision. Of course, that may strike you as fairly obvious. Who wouldn’t want more information before making a decision? Fair point! What is worth noticing, however, is that consumers are directly saying that loyalty and trust are built from a greater increase of transparency. Over half of the respondents (56%) said that increased product information inspired more trust in a brand. Likewise, 39% agreed that they would be willing to switch brand loyalty to a brand that provided more transparency and information about its products. Finally, a whopping 94% of respondents said they were likely to be loyal to brands who offered complete transparency. 

In other words, if you want to build strong, loyal relationships with your clients, you must meet their transparency needs.

Moreover, consumers were willing to tangibly reward these transparent brands.In the survey, almost three-quarters of respondents (73%) were willing to pay more for a brand with better transparency. That’s pretty incredible. Transparency is seen as a value in and of itself, and consumers are willing to pay top dollar for it! 

For financial advisors, this sort of client expectation must reshape the way they think about their businesses. We are rapidly moving away from an age where management fees and poor investment results can be obfuscated. Or where an insurance advisor can keep quiet the lifelong revenue stream the client is providing them, even when he or she hasn’t provided much value to the client since closing. Instead, we are entering an era of openness. Advisors will need to explain their fee structure appropriately and ensure that their clients receive value throughout the relationship. But this will create relationships based on trust. As Som Seif points out, clients are willing to pay fees for valuable services – the danger to advisors is if their clients believe they have not been paying fees all along. In such a situation, a client may feel tricked or lied to. Transparency is the solution here.   

Now, imagine a client in 2020 named Bob. When you and Bob start working together, you place him on an online portal. On this portal, transparency is paramount and this transparency is two-way. First off, Bob will be able to connect his bank account through the portal. This will provide you (or the robo-advisor tool you’re using as his bionic advisor) with a lot of data to make a smart financial plan. This plan will include his goals, his assets and debts, and any insurance to help him hit said goals should something serious come up. Moreover, this data collection will also allow Bob to constantly see how his plan is doing. After all, no plan survives contact with the enemy. It will also allow him to see the fees you are taking and the actions you are doing on his behalf. These actions can be anything from helping him renew policies, to proactively discussing changing an investment strategy or insurance policy based on changes in Bob’s life (detected by the platform). The key here is that Bob always has access to the activity stream. He can always see what you’ve done for him lately. On the other hand, so can you, and the system reminds you when you need to reach out to him to reduce his chance of churning (and to read why churn is murder, go here).

That is the future – two-way transparency and everyone extracting value from it.

Client-Facing Technology Will Be Base Stakes

A second trend that’s worth talking about is the adoption of more client-facing technology. I’ve touched on this theme a few times before (for example, in a previous blog post I wrote about millennials). What we are seeing today is a shift towards multi-modal methods of communication. As on advisor told me – nobody wants to hear about employee benefits over a two-hour lunch if they can be texted the details instead. Save the lunches for talking about their kids and confirming the renewal instead. More and more, we are seeing clients demand better forms of communication. This rans the gamut from direct advisor-to-client communication, to information about how their investments are doing, to technological reminders of what the client needs to do / has done in the past. 

Now, some advisors may balk at this. They’ll point out that their clients have never cared about technology before, why would they start to now? I discussed this line of reasoning a little bit in a previous blog about the Sink or Swim report. The Sink or Swim report, by PWC, was about the disconnect between wealth managers and their clients. At its core, the report pointed out that the main disconnect was technological. I’m just going to quote what I wrote before:

“So if it isn’t an issue of price and there is a fundamental belief in spending money for expertise, what is the problem? Where is the disconnect between what clients want and what wealth managers are offering? In a word: technology. In a few more words: wealth managers have underinvested in technology on the incorrect belief that their clients don’t care. Yet, surveyed clients showed an incredibly high level of technological uptake, using technology over five hours per day on average. Likewise, 98% access the Internet on a daily basis, 85% use three or more digital devices every day, and 69% utilize mobile and / or online banking. When surveyed, just a touch under 60% of HNWIs (and significantly more in the under-45 category) said that it was important for wealth managers to have a strong digital offering. However, wealth managers have consistently ignored this, offering subpar services in the realm of technology. For example, only 25% of wealth managers connect with their clients over digital channels outside email and only one in ten wealth managers use social media. This is the large disconnect. Many wealth managers are only now investing in web portals for their clients. Overall, wealth managers have critically ignored the technology that their clients have become accustomed to across the board.”

And this trend has no reason to slow down. In fact, as Generation X and Y begin to be primary clients, you’re going to see a total shift in expectations. In the near future, an advisor without an online presence and proper client-facing tools will not be able to compete. He or she will be seen as the equivalent of an advisor using a fax machine to conduct business – “sorry, what’s this?”

Many, But Not All, Clients Will Own the Transaction

The last shift that the bionic advisor will have to get used to is that he or she will no longer necessarily be the gatekeeper for financial products. In my very first blog, I talked about how, in the past, financial and insurance advisors were seen as the gatekeepers. That is, clients needed to go through them to have access to product. However, this has clearly changed. Look no further than robo-advisors such as Wealthfront or direct-to-consumer group benefits such as Zenefits. In both cases, we are seeing a world where consumers are able to purchase the final financial products on their own.

The bionic advisor, too, will have access to similar robo-tools. That is, an advisor will have back-office software to help generate financial, insurance, and investment plans. However, we may also see a more holistic approach with many clients. These clients will want to own the transaction. They will want to be able to choose their products directly and be the ones to pull the trigger. These people will need a bionic advisor to help make sense of the multiple platforms and financial products they’re purchasing. They will need an advisor to make sure that their decisions make sense as a whole. The bionic advisor, in such a situation, will be the connective tissue between the different platforms, making them run seamlessly to achieve the client’s goals.

In a situation such as this, the client will stay responsible for the transactions. He or she will be the one to come into the office with predefined systems in place that they want to use. Maybe they’ll be open to change, maybe they’ll be loyal to their system – that will vary case-by-case. But they will own the transaction and your job will be to hold their hand while they push the order button. 

The Opportunity

Financial planners, insurance agents, and wealth managers will become bionicNow, I’d like to spend a few words discussing the opportunity here. As we know, insurance advice, financial planning, and investment management are incredibly competitive fields. As discussed last week, the next five-to-ten years will be dominated by bionic advisors. That is, financial advisors who use the newest technologies to help their clients reach their goals. But bionic advisors will come into existence purely because of client trends and demands. Understanding these new expectations will be the prime impetus to become a bionic advisor. When we started building Finaeo, a big part of our mission was to help advisors get ahead of this curve. We wanted to let them get ahead of these trends. This has not changed. We still truly believe that there is an immense opportunity for advisors who provide their clients with the experiences they are starting to expect.

We want to help you become a bionic advisor.


Challenge for financial professionalsThis week, I want you to think about how prepared you are to meet the demands of future clients. How transparent are your current processes? Could you make them more transparent or ensure that your clients really understand what’s going on? What about your client-facing technologies – are you on social media, are you introducing new technologies to your clients as they become available? And are you ready for a world where clients come in with their own preferences for what platforms to use to purchase investments or insurance? The goal is to think about what opportunities these new trends create.