1. DISTRIBUTION TECHNOLOGY
OCTOBER 2016
The role of technology across financial advice 1

2. DISTRIBUTION TECHNOLOGY
Contents
1. THE DEMAND
7 CLIENT APPETITE
9 ADVISERS PERCEIVED OPPORTUNITIES
10 WHERE ARE THE TECHNOLOGY GAPS?
13 WHO ASSUMES THE LEAD? (MAN VS MACHINE)
16 EMPOWERING CLIENTS
2. IMPLEMENTATION
18 CURRENT STATE OF PLAY
21 HOW IS TECHNOLOGY CURRENTLY BEING USED?
22 TECHNOLOGY DEVELOPMENTS
23 THE BUSINESS IMPACT SO FAR
25 MONETARY INVESTMENT
26 ROBO – OPPORTUNITY OR THREAT?
DISTRIBUTION TECHNOLOGY
3. CHALLENGES & RISKS
30 WHAT ARE THE RISKS? (ADVISER PERSPECTIVE)
31 THE CHALLENGES OF EMBEDDING TECHNOLOGY
32 THE ADVICE / GUIDANCE GREY AREA
33 THE FCA SANDBOX
4. IMPLICATIONS
WHAT DOES THIS MEAN FOR:
ADVISERS
PROVIDERS
PLATFORMS
TECHNOLOGY PARTNERS

3. From holistic financial planning businesses
Methodology
Government is already looking at how new technology can play a role in disturbing consumer behaviour in retail financial services markets. The FCA has been looking at the potential to use technology to innovate retail insurance and investment markets, and in particular the market for financial advice with the rise of robo-advisor business models. Against this rapidly evolving backdrop we have undertaken extensive research with advisers and consumers in order to:
100 advisers, representative of the market, were sampled from our robust panel of circa 16,000 advisers.
The sample comprised advisers who were:
Nationally representative sample of firms in terms of number of RI’s, geography and AUM
From holistic financial planning businesses
Assess impact of so-called robo-advice across the value chain
Understand what both advisers & consumers really want and how propositions are evolving
Identify the opportunities – given the burgeoning ‘mass unadvised’ market
Understand the role of technology in supporting innovation that adds value and drives efficiency 1 2
All interviews were conducted by telephone, lasting 30 minutes on average.
Interviews were conducted during June and July 2016.
Participating advisers were offered access to online client facing material from Technical Connection in return for their participation.
Individual anonymity agreed. 3 4

4. Sample Profile
The study was designed to ensure it is broadly reflective of the adviser market – ensuring a spread of size (both in terms of assets under management and number of Registered Individuals) – with the majority being independent and directly authorised.

5. Advisers identify the opportunities
The role of technology
Advisers identify the opportunities
Q. From the following areas, where do you think technology has the greatest opportunity to add more value to your proposition?
Higher among Directly Authorised (76% compared to 68% of Appointed Reps)
Higher among Appointed Reps (47% compared to 35% of Directly Authorised)
Advisers are clear that technology can add most value to the ongoing servicing elements of the advice proposition rather than execution aspects. However, this is the area where there is the biggest gap in technology provision.
In the eyes of the advisers the greatest opportunity (73% agreed) lies in using technology to create richer and more efficient experiences for advised clients rather than servicing less affluent clients more cost effectively.
However, over half of advisers also feel there is an opportunity to implement technology solutions to improve strategy and planning (64%) and needs analysis (59%) to improve their propositions.
There are some interesting differences of opinion by adviser sub-set, most notably among those managing assets in excess of £50m
With the exception of ongoing servicing (where this group believes there is more opportunity than advisers on average) this group are less likely to see the opportunities technology affords across the whole advice chain.

6. Robo advice Opportunity or threat? THREAT – 19% OPPORTUNITY – 47%
Q. Thinking about the application of technology to service the mass market (i.e. robo-advice), to what extent do you view this as an opportunity or threat?
THREAT – 19%
OPPORTUNITY – 47%
Laying bare what we have so far only alluded to, advisers generally see little opportunity in applying robo-advice technology to service the mass market. Relatively few, though, view it as a threat (19%) – suggesting the market is rather more business as usual than media noise suggests.
With smaller firms always (anecdotally) talking about lacking the time for business development, it is no surprise to see larger firms (both in terms of number of RI’s and AUM) far more likely to see the nascent opportunity that robo-propositions present.
Sub-Group
% Opportunity
All
47%
1-5 Advisers
41%
6-10 Advisers
53%
+10 Advisers
62%
Sub £20m AUM
37%
£20m-£50m AUM
38%
+£50m AUM
63%

7. Man vs. machine
Servicing HNW clients (the report explores service for all client wealth brackets)
Q. For HNW clients, do you think technology should be a) human-led and technology supported or b) technology-led and human supported c) purely human d) purely technology?
Human Led / Technology Supported
Technology Led / Human Supported
Purely Human
Purely Technology
Initial Client Engagement
70% 9%
20% 0%
Needs Analysis
64%
14% 2%
Strategy & Planning
73%
11%
Execution
59%
Ongoing Servicing
66%
There is wide consensus that HNW advice propositions should be human led, though most recognise the increasing role of technology.
Still comparatively few see any element of the process as being purely human-led, which may be a consequence of more sophisticated clients beginning to take a greater level of active interest in, and seeking greater understanding of, their wealth – just because a client has £x AUM it does not necessarily follow that they will only want F2F contact.
Whereas with other client asset brackets ongoing servicing is an area technology is expected to play a growing role in, the trend is less pronounced for HNWs – where the expectation is that there remains a stronger need for greater f-2-f contact.

8. Mitigating the robo-threat
Man vs. machine
Mitigating the robo-threat
Q. What are you doing / planning to do as a business to mitigate against robo-related threats?
Reflecting the limited threat advisers perceive from mass-market robo-advice, the majority (57%) are doing nothing about it – confident that it will not be an appealing concept to their client base compared to full professional advice.
The main action has been to increase personal contact – particularly face-to-face – for mass affluent clients. In addition, there is a heavier focus on quality and holistic planning (rather than one-off advice).
Others, meanwhile, have decided instead to solely focus on the HNW market.
CLIENT PORTALS TO BRIDGE THE GAP (6%)
FOCUS ON EXPERTISE / QUALITY (6%)
FOCUS ON HOLISTIC PLANNING (6%)
FOCUS ON HNW CLIENTS (6%)
To regularly keep in touch with clients so hopefully we can discuss any changes that need to be made, garner their thoughts on specific things or needs. I think that the personal approach will mitigate it.
A MORE PERSONAL APPROACH (19%)
There is nothing really to mitigate. We need to maintain contact and continue to deal with our clients face to face rather than roll out robo advice. This is also where high net worth clients come into play, we have been drawn from mass clients to high net worth.
NOTHING (57%)
I think that what we are doing is concentrating on cash flow, we have moved more to financial planning rather than financial advice.

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