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If the 2013 broker landscape was characterised by convergence, then customer advocacy is the watchword for 2014.
Savvy market players, who have started transitioning to a holistic model, are now well placed to deepen their service offering to their customers – and in the process build a sustainable business model for the future.
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And 2014 is already rife with opportunity to do so. The broker footprint increased from 41 per cent to 45 per cent this year (MFAA), showing just how much value consumers derive from professional advice when it comes to their property investments - and advisers who have entered into strategic alliances with their broker partners (and there are a myriad of models) can only benefit from this. Customers might start out by seeking a mortgage, but that’s just the first step on a lifelong financial journey… next follows investments, insurance and superannuation.
We saw the market become increasingly competitive last year on the back of low interest rates, particularly in the investor loans space and, although rates will most likely rise in 2014, I think this will have minimal impact on consumer sentiment and behaviour. Pleasingly, what we have been seeing though, as a result of this growth in demand, is increased competition among, and appetite for, second tier lenders’ offerings - giving brokers further incentive to look at more diverse options for their customers.
But with opportunities also come a few challenges in the broker/adviser space – particularly around regulation.
While the FOFA regulations introduced on 1 July last year were well intentioned as a platform to protect consumer interests, increased regulation has resulted in industry pushback – the pressure to unwind some of the additional compliance burden, together with the change of government (which has signalled a preparedness to consider amendments), has left the planning industry with a degree of uncertainty as to what the future holds.
2013 also saw ASIC demonstrate an appetite to use their powers more regularly, and crack down on non-compliance. They’ll be increasingly vigilant this year, so making sure your business operations are compliant should be a top priority.
So where are the opportunities to innovate in 2014? Many intermediaries I’ve spoken to have highlighted their intention to invest in new technology – whether it be customer interfaces, CRM or workflow systems. We’ve seen for ourselves at ING DIRECT that 98% of all interactions now occur via digital channels. So the challenge I see for intermediaries is how to capture the hearts and minds of this technologically savvy consumer who wants to interact anytime through their channel of choice.
Another area ripe for innovation is the broker commission structure. Traditionally based on volume, with some qualitative criteria, it opens up the question – in this age of convergence – of what the commission model of the future will look like. How can we build something that will serve aggregators and brokers alike while at the same time being in the customers best interests? I think there’s room for a new perspective here, and it’s timely too.
Convergence isn’t going to disappear; if anything it’s intensifying as a model (in various formats) in the marketplace and the landscape and consumer appetite is perfect to leverage off of this.
The dominant focus for 2014 should be to redouble efforts to build and maintain relationships with your existing clients over the longer term. Peer to peer influence (amplified by digital tail winds) has replaced traditional advertising media as a marketing tool. What we want to see is customers becoming advocates, and generating business ‘word of mouth.’
In this ‘age of the customer’ a sustainable business is built on keeping customer interests at the heart of all your business decisions. Customers today more than ever before value independent advice, transparency and a diverse offering of financial services providers as they journey through their financial lifecycle – now that’s advice worth paying for.
