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The Future Advice Customer: A Very Different Person

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The Future Advice Customer: A Very Different Person

Contributed by Simon Binney, Business Development Director at Wealth Wizards

While it’s difficult to predict just what the future of the advice industry will look like as a result of machine learning and AI, we can certainly make a number of assumptions based on what’s happening around us.

The temptation for many advisory firms has been to tinker at the edges with some investment in technology in order to be part of the sector’s digital transformation or to play catch-up.  However, understanding where to invest and how could be as simple as observing your family, neighbours, friends and colleagues.  That’s because current and changing consumer behaviours provide valuable insight into how the world of financial advice needs to adapt to remain competitive and to survive.

By this I mean that our lives today are underpinned by technology and machine learning.  They are not only enhancing our experiences but they are changing the way we consume products, listen to music, communicate with others, pay for goods and services, manage our household expenditure, determine where we cut back our spending or make investments.

Simon Binney

Simon Binney

Slowly our houses and our lives are integrating machine learning devices; from the Nest thermostat that is monitoring your every move to determine patterns, Facebook that shows you the latest cycling accessory based on your hobbies, Alexa/Siri/Cortana waiting patiently for the next command to the fitbit capturing your every step and sleep patterns, we are cocooned in devices that make the daily grind that little bit better.   New fridges will soon be on the market that, when they identify a food item such as fish, they will deliver a recipe or cooking suggestion while upstairs a robo-assistant irons and folds the laundry.  Many of these inventions are designed to solve problems that we didn’t realise existed before; now we’re unable to cope without them.

Map this to financial advice.  With consumers increasingly demanding technology that does the heavy lifting, why is financial advice so different?    At the end of the day the problem isn’t necessarily where to buy the ISA or which pension provider to select, it goes deeper.  It’s the consumer’s out-of-control spending habits, their fears about being able to afford the future, confusion and embarrassment about retirement, how they will afford their dream home or provide their children with a deposit on a flat or money for university…. the list goes on depending on their age and circumstance. Collating this information and offering up a bespoke solution is what consumers will increasingly demand as digital solutions across the rest of their daily life solve irritating problems.

But in a sector where we are already suffering from a shortfall in adviser numbers and increasing pressures to service more and more clients, the indulgence of really getting to know a customer in this way sounds expensive and time consuming.

For inspiration, we need to look at how other brands are using machine learning to enhance the life of our customer while also driving their business forward. Names such as Amazon, Facebook, Apple and Google are becoming indispensable – it’s hard to imagine a world without them.  They are skilled at getting under the skin of their consumers because of their access to enormous amounts of data that consumers readily share with them; photos, text, videos, browsing habits and locations – a myriad of data that allows them to tailor product offerings.

Once confined to the corner office, data is the future and without doubt it’s the future of the financial advisory sector.  It is the most valuable currency in an age where machine learning algorithms learn and optimise their operations to improve performance developing ‘intelligence’ over time. Only by understanding the real financial wellbeing of our customers through data can we create the roboadviser of the future. This is a key reason whyOpen Banking is one of the most significant developments in the financial sector for decades.  The opportunity to create modern, client-centred solutions as a result of sharing data is a break-through. We can expect personal financial management tools where the financial planning AI – with unrestricted access to all financial data – considers a client’s entire personal financial situation; how they manage their money, their savings and spending habits, their behaviours and so on.  The tools will be able to consider alternative ‘what if’ scenarios in real time and recommend changes for improving their financial wellness.  This will take the user experience to the next level and increase the value of the services offered to users.

Combine financial advice powered by machine learning with our customers’ existing comfort level with products such as Alexa and Siri and this takes you to the next level.   You are looking at the potential for consumers to rely on their virtual personal assistant for an update on their financial situation and potentially managing their money, assets and debts based on their situation – which of course Alexa will be up-to-date on having spent a considerable amount ordering Christmas food, drink presents and an expensive winter skiing holiday.

And this takes us back to trust and comfort levels.  While it’s hard to image that Facebook or Amazon could provide financial advice, their global smart-connected digital consumer platforms are just one step away because of three reasons; they understand the consumer better than anyone; the consumer trusts them with vast amounts of personal information; and finally, they are spending $billions on AI research and investment.

However, offering financial advice is a complex web of regulation and specialisation.  For the tech giants and disruptors to enter the advice field, they’re going to need to know what they’re doing.  And this is where the advice firms have the advantage.  We’re already the experts in delivering financial advice.  What we need to do now is hone our understanding of the customer.  However, to do this quickly, we have to embrace the fact that machine learning might be able to do this better than us – and that an augmented human adviser plus digital approach, whether in reality or virtually, is going to be the solution.

[i]The AI-augmented human adviser will be able to handle a much larger number of cases and will spend more time on engagement and growth.  They will be exposed to and practicing the interesting and challenging parts of the advice journey improving their skills at a faster rate.  From a customer perspective, their interactions with human advisers will be much softer, while also being more accurate and far faster.  The customer will spend most of their time talking about their dreams and goals, their needs, their wants, their fears while the hard facts will be collected by an AI-powered robo-planner authorised by the customer to collect all of the pertinent details from one of the data aggregators.  Another benefit of the hybrid approach is the reassurance that human interaction can provide.  Altus research[ii] clearly demonstrates that customers desire to be able to contact a human via phone or webchat either during or after they have made the decision to invest in a digital roboadviser – is important to 80% of customers.

The roboadvice industry is already pushing the boundaries.  For example, the Wealth Wizards AI Guild is currently working on the next generation of advice powered by Turo, our new AI capability that provides access to faster cutting-edge roboadvice for the entirety of the advisory sector.  This work includes state-of-the art features such as voice, chat, emotive bots and computer vision capabilities that could be a reality in the near future.

According to Don Scuerman, CTO of Pegasystems, ‘the best chess player in the world is not a human or a computer; it’s a human and computer playing together.’  The same will be true of advice.   Financial advisers will work with machine learning to complement their own skills and knowledge in order to offer a new style of service to a transformed customer – this must be the norm if firms are to survive and thrive.

References

[i]Data and references throughout taken from ‘Artificial Intelligence: the evolution of financial advice’ Altus Consulting.  January 2018.

[ii]Altus consumer market research.  OnePoll, Q4 2017

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Return to Work Doesn’t Mean Business as Usual When it Comes to Travel and Expense

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Return to Work Doesn’t Mean Business as Usual When it Comes to Travel and Expense 1

By Rob Harrison, MD UK & Ireland, SAP Concur

The last few months have been an exercise in adaptability for businesses across the UK. With the sudden mandate to work from home, company processes that were ingrained in employees’ day-to-day routines were either put on hold or turned upside down. The new office normal now includes virtual meetings, conversing through instant messaging instead of in the hallway, and the redefining of “business casual” attire.

Many of the processes that have undergone changes fall into the category of travel and expense. With most business travel on hold and the nature of expenses changing, finance managers have had to adjust policies and practices to accommodate the new world of work. Recent SAP Concur research found that 72% of businesses have seen changes in the levels and types of expenses submitted, but only 24% have changed their policies to support this. Examples of travel and expense related changes that were made at the beginning of work from home mandates include:

  • A halt to business travel and its associated expenses.
  • Temporarily ending expensed meals for business lunches, dinners, or in-office meetings.
  • Increase in office expenses like monitors and chairs as employees furnish their home offices.
  • New expenses to consider like Internet and cell phone bills for employees who must work from home.

Now, as companies begin thinking about return to work plans, finance managers are discovering it’s not simply business as usual again. SAP Concur research found that many expect finance will return to normal quicker than general workplace practices, but vast majority see the process taking up to 12 months. New policies and processes need to be put in place to accommodate travel restrictions and changes in expenses. While finance managers need to stay flexible as the business environment continues to evolve, spend control and compliance should still be a high priority.

Here are a few questions that can help finance managers prepare for return to work while keeping control and compliance top of mind:

  • What will travel look like for the company? Finance managers must work with travel and HR counterparts to determine the need for employee travel, if at all, and how to keep employees safe. At SAP Concur, we surveyed 500 UK business travellers and found that health and safety is now seen as more than twice as important than their business goals being met on trips (34% versus 16%. Clear guidelines should be developed, even if they are temporary or evolving, so it’s clear who can travel, when they can travel, and how they can travel. Duty of care plans should also be re-evaluated and businesses should ensure they know at all times where employees are traveling for business and how they can communicate with them in the event of an emergency.
  • Who needs to approve travel and expenses? While it may be temporary, businesses may have to implement a more stringent approval policy for travel and other expenses. Due to health concerns related to travel and the need to conserve cash flow, business leaders like CFOs may want to have final approval over all travel and expenses until the situation stabilises. To help ensure new approval processes don’t cause delays and inefficiencies, finance managers should implement an automated solution that streamlines the process and allows business leaders to review and approve travel requests, expenses, and invoices right from their phones. According to SAP Concur research, 11% of UK businesses implemented some automation of financial processes in response to COVID-19. This is definitely set to increase post-pandemic.
  • Rob Harrison

    Rob Harrison

    What types of expenses are within policy? Prior to social distancing, employees may have been allowed to take clients out to dinner. In-person team meetings held during the lunch hour, may have included expensed lunches. As employees return to work, finance managers need to determine if these activities and expenses will be allowed again. Clear guidelines must be put in place and expense policies need to be updated to reflect any changes.

  • What happens to home office items that were purchased? While new office equipment may have been purchased for employees’ home offices, they remain the business’s property and what to do with them as employees return to work needs to be determined. Perhaps employees will continue to work from home a few days a week and need to keep the equipment to ensure productivity. However, if a full return to work is expected, finance managers have options that can maximise their asset investment and possibly save the company money, like replacing old office equipment with the new purchases, reselling to a used office furniture company, or donating to a non-profit.
  • How can cost control be ensured? For many businesses, cash flow will be tight for the foreseeable future. Spend needs to be managed to help ensure recovery and stability. An important aspect of controlling costs is having full visibility of expenses throughout the company. Implementing an automated spend management solution that integrates expense and invoice management brings together a business’s spend, giving finance managers an understanding of where they can save, where to renegotiate, and where to redirect budgets based on plans and priorities.

Once finance managers have asked themselves the questions above and determined how they want to approach travel and expense procedures, it’s vital they create guidelines and communicate clearly to employees. Compliance can only be ensured if employees have a clear understanding of what has and has not changed with travel and expense policies and what’s expected as they return to work.

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Spotting the warning signs – minimising the risk of post-Covid corporate scandals

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Spotting the warning signs – minimising the risk of post-Covid corporate scandals 2

By Professor Guido Palazzo is Academic Director at Executive Education HEC Lausanne.

A recent report from the Association of Certified Fraud Examiners (ACFE) found that almost seven out of 10 anti-fraud professionals have experienced or observed an increase in fraud levels during the Covid pandemic, with a-quarter saying this increase has been significant. Almost all of those questioned (93%) said they expected an increase in fraud over the next 12 months and nearly three-quarters said that preventing, detecting, and investigating fraud has become significantly more difficult.

For corporations, banks and financial directors, this is a clear warning signal of new risks ahead. Indeed, it’s not difficult to predict that the birth of next big corporate scandal will be traced back to this period. As the ACFE put it, the pandemic is “a perfect storm for fraud. Pressures motivating employee fraud are high at the same time that defenses intended to safeguard against fraud have been weakened.”

If we want to stop corporate misconduct, where should we be focusing our efforts? What should we do to minimise the chances of corporate scandals, fraud and unethical decision-making? Compliance and risk management are obviously critical in detecting fraud, but given that corporate scandals keep happening, perhaps it’s time to ask ourselves whether we need to take a different, more holistic approach to combat unethical behaviour.

Bad Apples or Toxic Cultures?

Most compliance is based on the premise that we need to keep bad people in check and to root out the ‘bad apples’ who usually get blamed when there’s a corporate scandal. When the scandal breaks, we all ask, “how was that possible? What were they thinking?” And we also tell ourselves that we could never behave like that and that it could never happen in our organisation – it’s not our problem.

But are those who succumb to this temptation really ‘bad apples’ or rather people like you and I? Most models of (un)ethical decision-making assume that people make rational choices and are able to evaluate their decisions from a moral point of view. However, if you made a list of the character traits of a rule breaker in an organisation and then compared it to a list of your own, you might be surprised to find a lot of overlap.

When we examine corporate scandals, what we invariably see is good people doing bad things in highly stressful circumstances. If you put sufficient pressure on an individual and they start making ill-advised decisions or behaving unethically, the first reaction is fear as they realise what they are doing is wrong. But then they will start to rationalise their actions to justify what they are doing. Over time, such behaviour becomes normalised and they convince themselves that there is no wrongdoing involved. That’s something that my HEC Lausanne colleagues, Franciska Krings and Ulrich Hoffrage, and I have termed ‘ethical blindness’, and it is a phenomenon that plays a fundamental role in systematic organisational wrongdoing.

Professor Guido Palazzo

Professor Guido Palazzo

The trouble with conventional technical and regulatory compliance strategies is that while policies, codes of conduct and formal processes are all very necessary, they don’t take into consideration the importance of leadership behaviour or human psychology.   We can’t pre-empt those who succumb to the temptation to do bad things in difficult circumstances unless we understand why they behave in the way they do. If we simply attribute problems to the psychological failings of ‘bad apples’ while ignoring the context, culture and leadership style which made their wrongdoing possible, then the barrel will still be contagious.

So what can be done to reduce the chances of new corporate scandals emerging in these challenging times? One take-away from previous scandals is the learning how to read the warning signals. This entails a deep understanding the psychological and emotional factors behind human risk, which surprisingly is not included in most compliance and ethics training. These small signals viewed in isolation may seem insignificant, but over time they can combine to create a dysfunctional context and culture where it can be all too easy for people to slip into the dark side.

Develop a Speak Up Culture

One of the most potent antidotes to that sort of dysfunction and the ethical blindness it encourages is a culture in which individuals at all levels feel able to speak up to their superiors about problems and ethical issues without fear of retaliation. But that will only happen if their own bosses are prepared to speak up and the tone for this must be set at the top. So, the critical question every executive needs to ask themselves is, “do I speak up?” Then they need to reflect on whether people come to them and speak up freely without fear of the consequences. That’s an approach to compliance that offers real protection against the onset of ethical blindness in a way that no conventional strategy can match.

This understanding of human risk element also elevates compliance to a leadership topic with all kinds of positive implications beyond compliance.  Whilst on the one hand, this approach helps to boost the status of the compliance and risk function, my experience of working with senior executives is that when they start to understand the psychological elements of the dark side, it shines a light on their own behaviour. One thing they realise is that, yes, it perhaps could have been them doing those things in one of those scandals. The other is understanding that their leadership style can unwittingly creating the context for unethical behaviour.

That’s one reason I invited two former senior executives who were involved in corporate scandals to share their first-hand experience as teachers on our new certificate in ethics and compliance. Andy Fastow is the former CFO of Enron and Richard Bistrong is a former sales executive involved in an international bribery scandal. Amongst other things, the valuable insights of people like these can help others to understand how risks accumulate over time and how this can impact the integrity of an organisation. Their stories also highlight the temptation that people can face as a result of the tension between the pressure to succeed and the pressure to comply.

Traditionally, compliance training and development has been technical and regulatory – what are the rules, what are people allowed to do or not allowed to do, and how do we demonstrate to the authorities that we did everything possible to ensure that people understand the laws and regulations? But what’s becoming increasingly clear is that it’s time for a multi-disciplinary approach if we are to start redressing the balance between the legal dimension of risk management and the human element.

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Trust is a critical asset

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Trust is a critical asset 3

By Graham Staplehurst, Global Strategy Director, BrandZ, explains how it’s evolving.

Trust is what makes us return to the same brands, particularly during times of uncertainty and crisis.

Pampers is an instinctive choice for many parents. It’s the go-to global nappy brand whether they shop online or in-store. By our reckoning, it’s also the world’s most trusted brand, driven primarily through its perceived superiority over competitors, which it has honed through a relentless focus on technological improvements that make its products the best in the category.

BrandZ has been tracking Trust since 1998 because it’s a critical ingredient in delivering both reassurance and simplifying brand choice, thereby boosting brand value. It’s also become extra critical in delivering business performance at a time when consumers are uncertain and often anxious.

Even brands that haven’t been available during Covid-19 lockdowns, brands that are already trusted, have found that they are more reassuring to consumers when they start returning to market with new safety measures such as protecting staff, which will be seen as evidence that the brand will take similar steps to protect customers.

With a growing demand from consumers for more responsible corporate behaviour, this in turn amplifies the need for brands to make a positive difference.

Alongside Pampers, other brands in this year’s BrandZ Top 100 Most Valuable Brands ranking that have strengthened their trust and responsibility credentials include the Indian bank HDFC, which has supported customer initiatives across its consumer and business banking and life insurance operations – with innovations such as mobile ATMs, and DHL, which has proven itself even more essential as a delivery service during the COVID-19 outbreak.

New brands too have managed to grow Trust relatively rapidly. Second in the Top 10 most trusted brands was Chinese lifestyle brand Meituan with a trust score of 130. This delivery and online ordering brand, which was launched just over a decade ago, has clearly demonstrated its understanding of what consumers want and developed a strong reputation for customer care.

Then there’s streaming service Netflix – founded in 1997 but which only became a streaming service in 2007 – which scored 127 and was the fifth most trusted brand in our ranking. Netflix has created a strong association with being open and honest compared to other ‘content’ platforms, despite the fact that it uses customer’s personal data to suggest future viewing options.

Top 10 Most Trusted Brands in the BrandZ Top 100 Ranking 2020

Position Brand Category Trust Score (Average is 100) Position in Top 100 ranking
1 Pampers Baby Care 136  70
2 Meituan Lifestyle Platform 130  54
3 China Mobile Telecom Providers 129  36
4 Visa Payments 128  5
5 Netflix Entertainment 127  26
6 LIC Insurance 125  75
7 FedEx Logistics 124  88
8 Microsoft Technology 124  3
9 BCA Regional Banks 124  90
10 UPS Logistics 124  20

What defines trust?

The nature of trust is evolving with ‘responsibility’ to consumers forming an increasingly large proportion of what builds perceptions of trust.  This amplifies the need for brands in all categories to act as a positive force in the world.

Traditionally, consumers trusted well-established brands based on two factors:

  • Proven expertise, the knowledge that the brand will deliver on its brand promise, reliably and consistently over time.
  • Corporate responsibility, which is about the business behind the brand. Does it show concern over the environment, its employees, and so on?

In recent years, the latter factor has become increasingly important. It is now three times more important to corporate reputation than 10 years ago and accounts for 40% of reputation overall, with environmental and social responsibility the most important component, alongside employee responsibility and the supply chain.

Companies such as Toyota, with its emphasis on sustainability, Nike, with its campaigns around social responsibility, and FedEx focusing on employee responsibility, highlight the fact that responsibility is high on the agenda for many brands in the BrandZ Global Top 100 Most Valuable Brands, which has been tracking rises and falls in brand value via a mix of millions of consumer interviews and financial performance data since 2006.

Such actions explain why trust in the Top 100 brands has been increasing not declining, filling the gap as trust declines in other institutions like government and the media. This is being driven largely by consumer concerns over the bigger issues including sustainability and climate change that society faces today.

One of the challenges that we face in assessing trust is understanding how and why consumers will trust brands they hardly know or have never used? Why do we trust Uber the first time if we’ve never used the platform before, or Airbnb the first time we rent an apartment or holiday accommodation?

The answer is that there are three elements that build trust and confidence when a brand is new to a market. These are:

  • Identifying with the needs and values of consumers
  • Operating with integrity and honesty
  • Inclusivity, i.e. treating every type of consumer equally.

New brands that can develop these associations not only build trust rapidly and more strongly but also tend to outperform their competitors in growing their brand value.

As a result of this new understanding we have added an additional pillar to our previous understanding of Trust builders. Alongside proven expertise and corporate responsibility, we have a new quality of ‘inspiring expectation’ driven by our three key factors of identification, integrity and inclusivity.

Airbnb, for example, has long had promoted a platform of inclusivity for both renters and users of properties on the platform, helping it to build an overall Consumer Trust Index of up to 105 – and 110+ on the specific dimension of Inclusivity.

Flying Fish in South Africa is a premium flavoured beer that has gone from a launch in October 2013 to being the second-most drunk brand in the country, with trust equal to the vastly more established Castle and Carling brands.  It has appealed to a new generation of beer drinkers with strong integrity and inclusion, using a playful mix of young men and women in its messaging to portray South Africa’s multicultural society.

Brands have a unique opportunity to earn valuable trust and create change, providing this is seen to be genuine. Being sincere, empathetic and ensuring your brand remains consistent with its core values will ensure your corporate reputation is not compromised.

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