Disruption has long been a feature of financial services distribution.
Generally disruption occurs with new market entrants, product innovation, shifting strategic focus on the part of suppliers in relation to control or autonomy of distributors….but disruption has typically come from within the industry itself.
Many years ago I read a piece of LIMRA research which suggested that 50% of a practice’s income in 5 years time would come from people who hadn’t even started working there yet. I suspect the 21st century version of that will be “ 50% of the revenue your practice makes in 5 years time will come from customers you don’t have yet “. The existing paradigm in financial services for decades disruption has largely centred upon changing the proportion of market share, or the proportion of client’s wallet share. That has been considered “disruption”.
Then came “regulation” and common wisdom holds that this will now be the most disruptive influence a practice will face during the next 5 years. There is no doubt that it will be a disruptor, and force practices to do things in different ways. It will change the structure and the processes of advice providers.
So too will technology – and that too is accepted wisdom. In many respects the technology disruption is already happening, though I suspect the greatest impact on how we do business in financial services has not even begun to feature on our radar screens yet. In 10 years time much of what was considered innovative in areas such as “robo-advice” (which is often little more than automated trading or low-cost transactional facilities with zero advice) will be recognised for what it was: an iteration of the existing distribution. Using features of technology to do precisely what the humans had been doing, albeit in greater volume, with more efficiency, and at lower delivery costs. Fundamentally though, this has not been innovation: it has been evolution.
It has been “ doing things better “. That is not even as good as “ doing new things ” – which might be a working definition of innovation.
Real innovation, and real disruption, will be concepts and methods which “do new things that make the old things obsolete”.
Obsolete . Heck of a word that. Stuff we do today, and the ways we do that stuff, become as relevant as an abacus is to todays accountant.
The big disruption is coming from consumers….Our clients. A fascinating study by PwC a year or so ago revealed what a lot of forward thinking CEO’s from a range of industries considered to be the greatest looming disruptor….and it is customers.
Over half of the CEO’s believe that many of their customers will find alternative providers or solutions within 5 years.
That is potentially a catastrophe, or it is potentially an opportunity.
Customers will figure out price points that are acceptable. They will figure out technology which makes a positive difference to them – and they will demand it. Much of the technology which we use today and convince ourselves is innovative and leads to better customer service actually doesn’t. For example; How many platforms exist to cure an advisers back office problem, rather than deliver what the customer values?
Customers are increasingly voting with their feet. If the price is wrong, or the service not up to standard, or a practitioner is using archaic technology which slows the entire process down, then it is highly likely that half or more of the customers WILL find alternative solutions.
The only entities who can survive such changes are those with mandated monopolies – and that is not us. A classic example of the sort of “business” which can effectively ignore disruption is our very own Inland Revenue…..their standard expected service response time to an email enquiry is 15 days.
Try that in your practice and you will be left without any customers at all.
Professional services firms do not enjoy the advantage of protected arrogance. We do not have captive audiences who must suffer whatever systems, service standards and solutions we decide upon.
The greatest disruptor to todays practice will not be technology as such, nor even regulators. It will be customer expectations which shift far more rapidly than our existing systems and process and thinking can adapt. The solutions (if indeed there are any) to surviving new methods which make our known ways obsolete lie in:
Disruption will accelerate, and the most challenging disruptors will be the ones your business relies upon for its income. Start thinking like them if you want to stay in the game.