New customer behaviours
There are different opinions about the financial customer of today. Some say financial literacy has improved with a willingness for DIY, while others suggest people – with assets and appreciated needs – are more time poor and increasingly dependent. There is some truth in each of these theories and also some behaviours in between.
But one of the common characteristics is that customers have higher digital expectations and are more mobile. Customer experience has rarely been led by the digital capability of financial services providers and advisory distribution. Rather their expectations are met after a time lag.
Adoption of technology
Customers that have been exposed to digital capability through other commercial interactions for some time have exerted a digital pull as a result on the offshore/international financial services industry, which has in general been slow to respond. However, this is changing.
This embracing of technology and digital solutions in order to meet client needs and aspirations is a perfect marriage between this pull and the cost/margin pressures organisations find themselves under.
Technology solutions may finally be delivering what customers have been asking for but in fact they are as much a requirement for financial services providers, distributors and advisers to deliver effectively at scale and reduce cost.
The holy grail of ‘granting’ the customer more digital ‘self-service’ may have taken time to realise but is now a firm characteristic of market development.
Alongside a range of own capability being put in place by life companies and advisers, with tools and portals etc, a key development of this is the growing presence in the international financial services arena of platforms.
Some platforms have operated in the offshore/international arena for some time, Praemium, Arden and Platform One, but others are entering from other markets, Novia from the UK, for example.
Example 3: Novia offshoot
Novia developed an international proposition in 2014, leveraging off its successful growth in UK platform provision. New offshore platform business Novia Globalis a response to Novia recognising there was significant opportunity due to due to increased appetite from from international advisers for technological solutions in meeting client investment needs and growing scalable cost efficient businesses.
The Novia platform offers access to features and functionality such as a broad range of funds and investment assets through a general investment account and cash facility, and mulitple tax wrappers. Online financial planning, portfolio construction and investment tools are available, together with management information reports and rebalancing/switching options.
Capital attitude
Just as many groups have found the international arena or their offshore subsidiaries falling off the core business agenda, other sources of capital and strategic focus have seen the potential opportunities and appraised the risks as manageable.
While some bank and insurer capital has moved away from these markets, which are often seen as subscale and disproportionately risky, private equity sources with a sometimes closer focus on risk and return potential have seized the opportunity.
They have been able to apply more singular focus to the regulatory landscape with a potential to change. Thus, the shape of capital backing international product providers is starting to change.
Private equity investment in international life companies is becoming increasingly common and competitive. The latest example is the move of Axa IoM to the LCCg stable, backed by private equity.
Adviser due diligence
Advisers need to keep a very close eye on business partners, especially in markets that are experiencing change, hence they should ensure an awareness of the high level market dynamics. Some of these will inevitably impact on the adviser, their business and clients.
From an adviser perspective there is a regulatory push towards greater due diligence being carried out, and an emphasis on the process being recorded, when selecting products, solutions and providers. Advisers can use various independent sources to support this due diligence.
When trying to keep abreast of key provider-related issues, and gauging potential business partners, advisers should aim to understand a provider’s approach, strategy and delivery in the areas shown in table 1.
Comprehensive and robust due diligence processes will put advisers on the front foot in terms of assessing new business partners and re-assessing existing ones. This is especially important in markets that are evolving and within which further M&A activity is anticipated.
Advisers must ensure they can identify partners that can help them deliver requisite financial planning solutions for clients and dovetail with their post-RDR business structure, systems and processes.
