In our recent retirement research report, Life Beyond Work: The Changing Face of Retirement, advisers identified three key challenges: changing regulation, meeting client expectations and pressure on adviser charging¹. Technology is part of the solution in addressing all three issues, while also helping adviser businesses sustain profit margins and deliver operational capacity. Ultimately, embracing technology may become a competitive necessity for adviser businesses.

The retirement landscape is becoming more complex. The relatively straightforward advice required by the baby boomer generation - with defined benefit pensions and plenty of housing wealth - will need to adapt to meet the needs of Generation X. Their retirement is likely to look notably different, with employment patterns changing and more diversified sources of wealth. Against this backdrop, advisers will have to find ways to do more with the same resources or see their margins slip.

Advice is also likely to be more involved, and the regulator will require more evidence of product suitability under Consumer Duty. It is difficult to achieve this without recourse to a technology solution. Advisers will need to future-proof their operating models and propositions. Wrappers and investment solutions need to be fit for purpose and work as effectively for decumulation clients as accumulation clients.

In our report, one industry expert noted: “My concern is that without proactive adaptation, some advisers leave themselves exposed on areas such as demonstrating value and suitability. The regulators will act if they don’t see adequate change, and those unprepared advisers may face consequences.”

Harnessing opportunities

But technology adoption is not just about managing threats. Advisers increasingly see the opportunity in areas such as artificial intelligence (AI), believing it can increase efficiency and automation. The potential of AI and automation was a recurring theme in our survey, with many advisers believing it would play a pivotal role in shaping the industry.

It still appears unlikely that technology will replace face-to-face advice. Despite the hype around ‘robo’ options in recent years, most advised clients prefer personalised advice from a real person. However, AI solutions can do some of the heavy-lifting around onboarding and practice management, alongside high-touch, personalised advice. Key decisions will need to involve contact with a human adviser to confirm understanding and provide clarification, but it is possible to envisage an advice practice where technology handles the routine tasks while advisers supply the emotional understanding and human contact.

While this hybrid approach remains at an early stage, one respondent in our report said: “Consumer Duty could catalyse hybrid models using technology to make advice more affordable and accessible, especially for less affluent clients and those still in early accumulation.” Embracing digital tools and integrating technology with conventional advisory solutions is becoming a real possibility for advisers. 

Technology also offers a solution to the mounting pressure on fees. It helps advisers address competitive threats – if other advice groups are using technology to deliver better solutions at lower cost, non-tech enabled advice businesses may start to look arcane and inefficient.

Adviser technology

There are a few areas where technology solutions are already well established. For example, our research identified 92% of advisers already use a cash flow solution for at least some of their clients². This is likely to become even more important when dealing with the more complex needs of the next generation and in demonstrating how choices influence outcomes.

Evolving technology is making personalised projections more accessible across all clients, not just the wealthiest or more complex. It is also well-aligned with the demands of Consumer Duty in that it enhances consumer understanding and shows solutions are fit for purpose.

Efficiency gains are likely to focus on improving back-end efficiency to contain costs and compliance burdens, alongside adoption of engagement systems, including the client portal and risk profiler. Functions such as client onboarding, data gathering, portfolio rebalancing, and regulatory reporting appear ripe for optimisation. Those areas can harness AI to drive productivity gains, without diminishing personalisation and can help advisers build a clear competitive edge. Ultimately financial planners and clients should be able to interact with these systems to input data, get real time insights into their financial plans and reduce administrative burdens.

Some hybrid advice models aim not just at improving productivity but also at expanding reach. It is clear that the next generation prefer a more technology-enabled advice model. Our research showed Generation Xers often want to see a tech-led front end followed by a remote conversation to confirm understanding, answer further questions and provide support. This approach can also help deliver more flexible solutions for this generation.

Technology can often be an after-thought, or an irritating distraction from the important business of advising clients. However, there is real value in technology adoption: it can help to serve clients more effectively, to run a business more efficiently, to meet changing regulatory needs and to generate operational capacity, allowing advisers to serve a greater breadth of clients. As one industry expert concluded: “The cost intensive, in-person nature of retirement advice in the UK is under scrutiny. Advisers will need to illustrate their value more clearly, especially as the landscape shifts.”

¹ Research conducted by NMG Consulting for BNY Mellon Investment Management between June and July 2023, based on responses to an online survey with 202 retirement-focused financial advisers and 64 in depth interviews with consumers, retirement specialists and industry influencers. https://www.bnymellonim.com/uk/en/adviser/adviser-support/research.html

² Source: Research conducted by NMG Consulting for BNY Mellon Investment Management between June and July 2023, based on responses to an online survey with 202 retirement-focused financial advisers. Participants were asked "How many of your clients who are near, at, or in retirement are you using cash flow modelling for at the moment?"