Preparing for the digital future of financial product distribution

Fasten your seat belts if you’re in the business of distributing financial products and services. You’re about to experience some severe turbulence.

Digital technology is not only transforming how we communicate and stay informed, it is also reinventing how we shop and purchase products and services – including financial products and advice. To better understand what lies ahead, let’s take a brief look at some industries that are further along in this digital transformation.

Music stores and travel agents

Remember when the music industry digitized music distribution? We used to buy our records and cassettes, then our CDs, at retail music stores such as HMV, Tower Records and Music World. Now, we buy our music online at iTunes and Amazon or we subscribe to one of a growing number of music streaming services. The traditional retail music distributors are no longer needed in order to find music to listen to.

Remember when the travel industry opened up online booking to travelers? We used to buy our airline tickets and make hotel reservations through travel agents. Now, we book our own flights through AirCanada.com or Westjet.com and we shop online for hotels and rental cars then book the best rates through a growing number of online travel sites. No one needs a travel agent to book their travel anymore, though specialized travel consultants can add value in some situations.

So, when technology and financial services companies start offering self-serve tools to investors, borrowers and customers so they can buy products, manage their investments and even borrow money, who do you think is going to lose out?

You will.

The advisors, agents, and sales reps, along with the distribution organizations, that inhabit the market space between the end client and the large financial product manufacturers will feel the squeeze – and you will find yourself under increased pressure to define your value differently.


“The less a business changed in the past 30 years, the more it’s about to change.”

Financial services are merely the latest in a series of industries that are being reinvented by digital technological innovation.

Widespread internet connectivity combined with wireless mobile tools and new modes of social interaction are producing innovative products – and entirely new business models. And this is all happening at an increasingly rapid pace. New market entrants, such as technology companies like Google, Facebook and Amazon, are looking for ways to leverage their online success and massive customer bases to penetrate the markets and distribution channels of traditional financial companies, such as banks and insurance companies.

A growing financial technology (“fintech”) sector is focused on making financial services better, faster and cheaper for consumers by applying the following types of strategies:  

  • Automation – Repetitive tasks that can be automated with software and “intelligent” algorithms drives down the cost of providing a service. The so-called robo-advisor is one such example, a service that automates key aspects of portfolio management.
  • Self-service – Customers are accustomed having access to online self-service tools and like to be in control of their finances, which reduces the need for staff and physical locations to serve customers. Virtually every fintech start-up today has a mobile app.
  • Direct distribution – The more a financial services company can directly service a customer, the less they need to spend on supporting the infrastructure of agents, advisors, offices, branches and/or other distribution partners. Crowdfunding and peer-to-peer lending start-ups match funders/lenders with borrowers, without the involvement of traditional lending institutions. 

Each of these strategies contributes to driving costs down, while offering more value and greater service to consumers.

Four strategies to get ready for the fintech future

As traditional financial services companies, new market entrants, and the fintech vanguard rush to cut distributors out and reinvent the business model of financial services, what is an advisor or a financial products distribution business to do?

Here are a few strategies that you would be well-advised to embrace in this brave new world:

  1. Focus on client relationships and how you can add value – Human advisors have one advantage over technological competitors: you’re human. You understand your clients (as human beings with human needs and concerns) and you have a relationship with them. That is a beachhead on which you can build lasting value in your business. However, if your business is highly transactional and you touch a large number of clients very superficially, now is the time to re-examine that model. 
  2. Embrace technology – There is no denying that consumer technology (eg., smartphones, mobile devices, wearable computing, etc.) is changing our expectations about the role of technology in many areas of our life. Your clients will increasingly expect you to offer real-time online reporting and transactional support that they are accustomed to receiving from other service providers. And they will expect to see you in the social networks in which they are spending their time. Don’t fall into the trap of thinking you can focus on the human elements of your business at the expense of keeping up with technological trends that are reinventing commerce.
  3. Leverage your data – Every business has valuable data about its clients. This data can be as simple as knowing where they live and work or what stage of life they are in. Accessing this data opens up many opportunities to serve clients better while driving growth in your business. The future of your business and your ability to really take care of your clients in this technological age will depend on your ability to track and leverage basic client behaviours and corresponding data.
  4. Develop partnerships – As business models change, businesses need to evolve as well. There are very few businesses these days that can afford not to adapt to changing conditions. Partnerships are one of the best adaptive strategies because they can be deployed quickly and are highly flexible. Start by choosing business vendors that act like business partners and help you adapt.  Then, find partners that enhance your value proposition and enable you to take care of your clients better by meeting more of their needs.