To define financial services agencies, Wikipedia explains the industry as follows:
"Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit card companies, insurance companies, accountancy companies, consumer finance companies, stock brokerages, investment funds, real estate funds and some government sponsored enterprises."
As I'm most familiar with insurance, accountancy, credit management and investment agencies, these are the ones I'll focus on.
I know a thing or two about what keeps executives and employees in those agencies awake at night as we have quite a few of them as PieSync customers. That's how I get to talk to insurance brokers, accountants and investors.
I learned that in the financial industry, the development of technology is cause for both joy and fear.
Technology Levels the Playing Field Between Large and Small Financial Services Agencies
First some good news. Research done by payment solutions provider Billing Tree shows that in the field of debt collection, technology helps smaller agencies compete with larger ones.
As technological platforms become accessible to more firms, more companies benefit from their advantages.
When Billing Tree released its 3rd annual 'ARM Industry Operations, Technology & Payments report' in April, it found 2015 to be the first year where no discernible difference could be seen in online payment technology adoption by agency size.
Where debt collection is a specific industry, similar technological trends are happening across the entire financial industry.
Will Technology Replace People in Financial Service?
On a potentially more disturbing note, the Billing Tree study predicts a diminishing role for 'live agents': when there is more technology available online, firms need less people.
Image: Technology Utilization by Accounts Receivable Management Agencies, by Billing Tree.
The fear of disruption, where an entire industry is under attack from new players with new technology, is especially felt in finances, where up to now change has happened rather gradually.
It might all change pretty quickly pretty soon as new technology in the banking and finance sector is making waves.
This new technology in finance is so important that it has been given a proper name: FinTech.
Numerous startups are building software specifically to change the way finanial systems and corporations work.
These FinTech companies are founded with the purpose of disrupting incumbent financial systems and corporations that traditionally rely less on software.
Examples of Industries That Face Disruption from FinTech (Financial Technology)
1. Investment Banking
So-called robo-advisors like FutureAdvisor aim to automate portfolio management with software that takes in account investor's age and how much risk they want to take. The software manages your accounts and investments, in your name, much like a traditional financial advisor would do.
2. Loan Companies
Personal loan lenders are getting competition from online firms. Companies such as Spotcap and Avant use computer modeling to decide who can get a loan. This speeds up the process so much, that Avant claims it can fund users within a day.
3. Accounting Agencies
Traditional accountants are potentially under threat, as cloud-based accounting software like Xero and Freshbooks is sold through a relatively cheap subscription model. If you can easily do the books of your small business by yourself, helped by software that makes sure you're doing it right, why would you pay an accountant?
How Financial Services Agents and Consultants Will Stay Relevant
Is there no hope then? I don't believe it. The value of personal contact, knowledge sharing and being a trusted advisor will not easily be replaced, but to survive the technological changes ahead, agencies providing financial services will have to emphasize their strengths.
In his blog post 'Auditors, accountants and the digital disruption' David Smith discusses the most significant technological changes to impact the accounting profession in the next 5 to 10 years. Smith also provides ideas on how to deal with those changes in a positive way.
- Mobile: there will be many different ways that professional advisers and professional service firms will start to engage , connect and provide information to their clients.
- Big Data: building big databases will enable accountants to provide learnings from that type of aggregate information to small business clients, which has historically been the domain of very big business.
- Connectedness: next-generation communication tools,'Skype on steroids' with very high resolution communication taking place across fast broadband, will make it possible for an accounting firm in the back of nowhere to service clients right around the world.
The right combination of technology and offering a personalized service will help agencies remain competitive in a dynamic marketplace.
Technology such as customer relationship management (CRM) and various mobile solutions are key to share your specific financial services knowledge and expertise and help as many potential customers as you can.
When the financial services industry is said to be 'optimistic about the future' in a recent article in The Telegraph, and the main growth is expected to come from cross-selling to existing customers, you know it's perhaps time to rethink and update how you manage contacts in your agency.