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Client loyalty may be on the wane

Client loyalty may soon become a thing of the past, according to the general manager of distribution at IOOF, a transtasman financial services company.

Monday, July 20th 2015, 6:00AM 4 Comments

by Susan Edmunds

IOOF’s Renato Mota said clients would become less loyal to their advisers over the coming decades.

It would be replaced by endorsements as the main driver for client engagement.

“With the average person spending 1.72 hours each day on social media, likes and social networks will become the new advertising," he said.

Advisers might have to change their business models if they wanted to keep up with the new ways of doing business, he suggested.

“The future may also see clients expecting financial advisers to compete for their business. We have seen this model with airfares and hotels. Now recently-launched Australian company flongle.com.au which gets mortgage providers to bid, through reverse auction, for mortgages, represents the first steps into financial services.”

But he said consumer trust would remain vital as concerns about privacy and data security clashed with increasing amounts of personal information being held online.

There is scepticism about how soon such a change could be expected in this country.

Adviser Mark Sheehan, of the Institute of Financial Advisers, said he was not aware of anyone in New Zealand doing online advice well. “If in fact advice itself is something that can be done well online.”

Other changes Mota is predicting include growth in investment platforms as investors seek to aggregate their investments, assets and liabilities.

“At the same time as wrapping products become more sophisticated, simplicity and the user experience is key to success. Clients are also likely to have target oriented outcomes, rather than focus on investment performance alone.'"

He said that would mean advisers were left to focus on their core competencies, such as retirement planning, rather than get caught up in asset allocation questions. 

What is in the investment portfolios that advisers manage is likely to change too, Mota said,  as companies that distribute rather than manufacture become more valuable.

Asset-poor companies such as Uber and Airbnb represented a new business model, he said.

Tags: client engagement communication financial advisers technology

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Comments from our readers

On 20 July 2015 at 7:41 am Pragmatic said:
I suspect that IOOF will be in the box seat to test the theory of client loyalty...
On 20 July 2015 at 3:10 pm w k said:
create something controversial, enough people buy into it ...... (boom) a new job invented.
On 22 July 2015 at 9:04 am gaman AFA said:
heh heh, nice to see satire on the goodreturns website.

IOOF commenting on customer loyalty reminds me of Gerald Ratner. I guess they speak from a unique perspective. Although some good for the industry may come from the way IOOF does business - the whole vertical integration model where a single entity tries to capture every possible piece of value in the chain form product design to management to distribution is under real scrutiny in Australia.

http://www.afr.com/business/banking-and-finance/financial-services/ioof-scandal-puts-spotlight-on-vertical-integration-20150621-ghtmb3
On 22 July 2015 at 10:39 am Pragmatic said:
Well said @am gaman AFA. There is significant speculation that large Australian financial institutions will start to unbundle their vertical integration models, and dilute their exposures to the wealth management space (which contribute between 6% & 11% of their total cash earnings). This is being driven by both media & Australian politicians, with some interesting ramifications for their NZ subsidiaries (and the NZ wealth management environment).

At the heart of the debate, is that Australian financial services institutions appear to have compromised their fiduciary duties in exchange for enhancing profits from their wealth management entities, with IOOF the latest subject in this discussion.

Still on the subject of client loyalty: you don't need to look much farther than the growth of SMSFs over the Tasman, to understand how quickly consumers can/do vote against an industry with their feet.

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