Most people would admit that they are creatures of habit. Whether they drink at the same table in their local pub, follow the same ritual on matchdays or always read the gossip column before tackling the actual news in the paper, human beings find comfort in the familiar.
Therefore, if change is on the horizon, many will approach it with caution and perhaps a feeling of trepidation. However, the 21st century has seen the pace of change continue to accelerate as technology finds itself creeping into new areas of our lives. While we haven’t reached the stage that Will Smith found himself in in I Robot, a generation which has grown up with the internet as a key staple of everyday life is about to see a fundamental change in the way financial service products are bought and sold.
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Mark Sismey-Durrant, chief executive at Heritable Bank, says: “People undoubtedly like dealing face-to-face but in the future, you will get a generation who have grown up with trust in computers. You need to remember that the way today’s ‘Y Generation’ sees the world is how the rest of the world will look in the future. Therefore, you’ve got to go with them, but how do you keep up?”
This is no easy task. The way that those in their teens and early 20s communicate today is much different from just five years ago, with texting and e-mailing now being shifted to one side by social networks such as Bebo, Facebook and MySpace.
As Phil Hammett, project manager at Lightstone, points out, communication has moved onto a whole new level.
“If you take it from a mortgage perspective, the tradition was to chat in the pub about what you are doing. However, this has been replaced by Google searches and jumping into blogs to see what people are saying about different products and what they’re experiences were. These words spread much quicker than those in a pub chat and they can create a powerful wave of opinion which is difficult to control.”
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Rapid change
Therefore, the way people are sourcing information on financial services is changing rapidly as the internet becomes the ultimate research tool. As Sismey-Durrant calls it, we have moved from ‘an age of deference to an age of reference’; where people no longer take an expert’s views as gospel and look for some of the answers themselves.
This trend can be seen in the explosion in popularity of comparison sites. Research by Onlyinsurance.com found 70 per cent of people used these sites when shopping for general insurance, while credit cards and unsecured loans have also blossomed through the format.
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Hammett comments: “Mortgages are slightly behind other areas as it is such an important transaction for people. However, comparison sites show that the demand is there and that people are more willing to shop around for the information. The consumer confidence around using these kinds of sites is a sign of things to come.”
Reacting to developments
So how does the intermediary sector react to such developments? As Paul Fincham, senior media relations officer at Halifax remarks, the traditional model is under attack from all angles.
“We are seeing changing working attitudes, with the emergence of technology driving the way we do business. People are looking to the internet for what they need, especially when they are working outside office hours, and the likes of John Charcol and London and Country have grown good telephone operations around offering people access outside of normal hours. People don’t also stay in one place any more so there is less reliance on family recommendations.”
This means brokers cannot stand still when it comes to embracing these shifts. With the vast amounts of information available at the click of a mouse, an adviser has to go further than just simply offering a basic service based on the best product.
Ian McKenna, director at Financial Technology Research Centre, can see the market approaching a crossroads. “Advisers need to get more savvy so as the tools become more available to the consumer, they can still offer value. You might find a customer goes to see more than one adviser to get an idea before doing the deal themselves.
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“There is now a different generation of consumers appropriating things in different ways. Therefore, brokers have to decide whether they are the intermediary for today’s market or one that can work in a new market. If not, there will be people coming in to fill these gaps.”
Time is running out
So how long have brokers got to think about these challenges and what their reaction will be? Unfortunately, it seems that time is running out.
As McKenna points out: “I think a lot of consumers are ready for it now and I think the part of the adviser market which doesn’t think so secretly hopes that it doesn’t happen. Consumers are increasingly comfortable with online services. You just have to look at the explosion in other areas, such as auction sites, to see where the market is going.”
Therefore, being able to offer the growing army of confident online shoppers a comprehensive proposition in cyberspace should be something that is on your radar. The world is changing and the adviser who climbs out from under his desk to embrace this will ultimately reap the rewards.
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