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Disrupt or Thrive: how financial advisers can harness the power of digital advice

Financial Newswire Contributor20 June 2023

Advice groups need to make a choice as technology continues to reshape the industry, says Midwinter Chief Commercial Officer Steve Davison.

The financial advice industry is constantly changing. Whether it be regulations, market conditions, or simply the changing needs of clients, successful advice practices find a way to adapt.

Innovation can keep businesses at the forefront of changes, help them become more profitable, or ensure they stay relevant to their clients. But innovation comes in different forms and a deeper understanding of the differences can help a practice make more effective changes.

Know your type of innovation and its benefits

Disruptive innovation – a phrase famously coined by consultant Clayton Christensen – refers to innovation that makes products and services more accessible and affordable. This innovation doesn’t make products and services better, but rather focuses on making them available to a broader customer group.

Technology plays a key enabling role as the business model targets new consumers or low-end, less profitable consumers. Disruptive innovation also fits into a broader value network which benefits everyone and encourages take-up.

Robo-advice was an early form of disruptive innovation in the advice industry, designed to replace human advisers with a product aimed at less profitable consumers.

This early form of digital advice was generally not well regarded by the financial advice profession and failed to attract much early success.

However, it has led to an identity issue for digital advice, which is often likened to robo-advice but includes a far wider breadth of solutions. Digital advice works across multiple channels including online, phone, and face to face, and can enable a hybrid advice experience, keeping the adviser in the equation when it matters.

While some advice organisations are looking to the disruptive nature of digital advice to target entry-level or lower value clients, for those not keen to change the status quo, digital advice can also form the bedrock of sustaining innovation.

Sustaining innovation describes the way organisations use innovation to build better-performing products or services that can generate higher profits. Unlike disruptive innovation, the goal isn’t to look for a new or larger customer base, but rather make more profit from existing clients.

We’re seeing a mix of new organisations such as superannuation funds entering the advice industry through disruptive innovation and incumbents improving their businesses with sustaining innovation. There are also early signs that some businesses are starting to mix the two strategies.

Disruptive Innovation Model from “What is Disruptive Innovation?” December 2015, Clayton M. Christensen, Michael E. Raynor and Rory McDonald. Adapted to Digital Advice by Bravura Solutions Limited, 2023.


Digital advice can propel multiple strategies

A number of super funds are currently pursuing a disruptive innovation strategy by launching intra-fund advice services through their online member portals.

This type of digital advice targets members who wouldn’t typically pay for comprehensive financial advice; at the end of the self-directed journey, members receive an intra-fund advice recommendation and a Statement of Advice.

Some advice practices serving the high end of the market are taking a sustaining innovation approach. They’re using digital technology to improve their efficiency and client engagement, leading to a more profitable and stronger business.

Innovation doesn’t have to be an either/or situation. A strategy that incorporates both disruptive and sustaining innovation can enable a business to compete at either end of the market.

For example, some super funds are also now providing comprehensive advice using digital advice technology integrated with their financial planning software, moving members toward the higher end of the market, as initial engagement through digital advice leads to meeting an an adviser remotely or in person.

Some advice practices are also using digital advice technology to service different client categories. Higher value clients may warrant an ongoing high-touch approach with digital technology acting as a support. But many of the needs of less profitable clients could be served predominately through an automated digital advice channel.

Advice groups could potentially use some low-touch digital advice technology to expand their reach into the mass market. This is a great way to start advice relationships, many of which will eventually develop into comprehensive advice as clients reach key life stages.

Innovation through digital advice technology is the gateway to these new customer acquisition and business models.

Don’t be left behind

These changes are no longer ideas. Advice groups and practices that use digital advice to innovate are likely to attract and retain clients more profitably than those that fail to leverage this enabling technology..

Digital Advice can help practices extend their reach and relevance to meet evolving customer needs and in doing so improve business efficiencies and profitability.

Whatever pathway a business chooses to follow – disruptive or sustaining innovation (or both) – there are three key areas to focus on to ensure success:

  • Process: Map out the ideal business and client processes to determine how technology will enable the desired business outcomes.
  • Channel: Decide where and how to connect your clients with digital tools; this could be online self-service tools, phone or other assisted experiences, or even face-to-face interactions.
  • Change: Outline the change process to get clients and staff to buy-in and adopt the technology. Don’t underestimate the value of putting enough time and resources into this step.

Innovation, propelled by digital advice technology, is reshaping how advice is produced and the channels through which clients and advisers engage.

These changes will expand the reach of advice by changing how it is delivered, particularly as clients increasingly demand better digital experiences – but it is the businesses that act now that will ultimately reap the rewards.

Midwinter has produced a new practical guide to help financial advisers incorporate more digital elements into their business. You can download the paper, Digital is reshaping advice: embrace the benefits, at

Midwinter is Bravura Solutions Limited’s advice platform.

Financial Newswire Contributor

Financial Newswire Contributor

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9 months ago

Despite articles like this Midwinter make it difficult for other pieces of technology to integrate with them. Basically they do part of the solution in a fairly poor manner and make it difficult for other better products to fill in the gaps. Talk is cheap, even in an advertising article like this one.