It wasn’t that long ago when we would call a travel agent up when we wanted to book air travel and visit a music store when we wanted to hear the latest release from our favourite band. In less than 30 years, digital technology has completely refashioned how we consume travel services and music products, along with a host of other consumer goods and services. Increasingly, we search online and book our own travel, from the airline “tickets” to the small B&Bs in the places we visit. And more and more of us are subscribing to music services, effectively renting access to our favourite music rather than buying and owning copies of it. How a vast array of consumer products and services are conceived, marketed and sold to us as consumers has undergone a radical transformation in the digital age. Plummeting technology and communication costs has placed powerful mobile devices in our hands that have completely changed how we get information, stay connected with others and entertain ourselves. This digital revolution has largely impacted the back-offices of the financial services industry, but it has notably sidestepped the distribution systems. Virtually every major financial product or service is supported by digital back-end systems. Yet, the marketing and sales of many products, such as investments and insurance, continues to be carried out through a legacy distribution system consisting of advisors, agents and salespeople. However, all of this is about to change dramatically. The revolutionary transformation that digital technology has triggered in consumer businesses is about to be felt in financial services businesses. In this presentation, I explain WHY digital technology undermines the prevailing business strategy of the past 30-40 years and HOW financial services firms as well as individual advisors and agents can adapt their businesses to the realities of the new digital age of financial services. “The less your business has changed in the last 30 years, the more it’s about to change.”

1. Surviving and Thriving
in the Digital Age
of Financial Services
By Jay Palter
jaypalter.ca | @jaypalter | jay@palter.ca

2. Digital technology is not new.
It has transformed the
consumer economy over the past 30 years.

3. Yet, the way financial services are marketed,
sold and delivered has remained largely
the same over the past 30 years.

4. Yet, the way financial services are marketed,
sold and delivered has remained largely
the same over the past 30 years.

5. This presentation
explains the
why, what and how
of the digital disruption
in financial services.

6. digital technology is changing business
strategy in financial services.
strategies financial service providers must
adopt in the digital age.
to retool your financial services
business for the digital age.

7. WHY DIGITAL TECHNOLOGY
IS CHANGING
BUSINESS STRATEGY IN
FINANCIAL SERVICES
Part 1

8. Digital technology is not new.
Let’s take a quick look back
to see how much has already changed.

9. It filled an entire room.
In 1964, IBM launched the
System 360 computer.
Also, the
year I was
born.

10. In the 1970s, Jobs and Wozniak focused on
making computers smaller and personal.

11. The personal computer (PC) era was
launched in the 1980s with IBM’s 5150.
I owned
one of
these.

12. Soon, mobile computing would
transform the personal computer.
But not
quite yet…

13. Portables got smaller.

14. Portables got smaller.
And eventually, thin as air.

15. How many of these mobile phones have
you owned over the past 20 years?
This was my
first mobile
phone.

16. Remember the technology
we used in 1994?

17. Remember the technology
we used in 1994?

18. Remember the technology
we used in 1994?

19. Remember the technology
we used in 1994?

20. Remember the technology
we used in 1994?
And now?

21. Remember the technology
we used in 1994?
And now?

22. “THE LESS YOUR BUSINESS HAS
CHANGED IN THE PAST 30 YEARS,
THE MORE IT’S ABOUT TO CHANGE.”

23. Let’s look at the impact of digital technology
on two familiar businesses
– music and travel.

24. For a century, audio technology
was basically the same.
(A needle dragged along a disk spinning on a platter.)

25. Then, music became portable and digital.

26. Then, music became portable and digital.

27. Then, music became portable and digital.

28. Then, music became portable and digital.

29. Then, music became portable and digital.

30. Then, music became portable and digital.

31. Music sales grew in the CD era…

32. Music sales grew in the CD era…

33. But have been falling ever since.

34. Ever since Apple launched iTunes.

35. When was the last time you used a
travel agent to book a flight?

36. We used to need these
to get on a flight.

37. Now, we book online
and fly ticket-less.

38. What’s left for travel agents to do…

39. …when the travel industry is online
and searchable by travelers?

40. So, what does this have to do with
financial services?

41. So, what does this have to do with
financial services?
EVERYTHING.

42. In his TED talk, Philip Evans argues that
digital tech is changing business strategy.
His argument goes like this…
Click image
to watch.

43. Modern business strategy is based on two concepts
Economies of scale, and
vertical value chains.

44. Economies of Scale
Economies of scale refer to
the cost advantages that a
business obtains due to
expansion.
By using scale to lower cost
of production, a business
can increase profitability.

45. Vertical Value Chains
A value chain is a
string of companies
or players working
together to satisfy
demands for a
particular product.
Links in a value
chain typically have
transaction costs.

46. “There are really two components to
transaction costs. One is about
processing information, and the
other is about communication.”
– Philip Evans

47. The thing is, transaction costs
have fallen dramatically
in the past 20-30 years.
“There are really two components to
transaction costs. One is about
processing information, and the
other is about communication.”
– Philip Evans

48. Transaction costs are falling
with computing costs…

49. …and tumbling storage costs…

50. … and declining bandwidth costs.

51. Plummeting transaction costs are
deconstructing vertical value chains.
And undermining the advantages
of economies of scale.

52. Vertical value chains are being
replaced with horizontal ones.
And businesses with customer
relationships are leveraging them.

53. New market entrants now
want a piece of financial services.

54. Big Retail has distribution reach
and logistics capabilities.
RETAIL

55. Big Tech has brainpower and
millions of engaged users.
RETAIL TECH

56. Even traditional media are
leveraging their readership.
RETAIL TECH MEDIA

57. And these changes
are happening. Now.
+

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

59. WHAT STRATEGIES FINANCIAL
SERVICES PROVIDERS MUST ADOPT
IN THE DIGITAL AGE
Part 2

60. For financial advisory businesses,
success in the digital age will be
all about building, serving and
leveraging relationships.
Here’s why…

61. Virtually all financial transactions
will be automated.
“Automation is going to take over every single
repetitive task,” predicts Louis Gave, co-founder
of Hong Kong–based research firm Gavekal
“The financial industry’s safe and steady
margins will come under heavy pressure, rendering
a lot of capital (both human and monetary)
deployed in the current infrastructure
obsolete,” predicts Gave.
Read the full article: http://www.cfapubs.org/doi/pdf/10.2469/cfm.v26.n2.12

62. If your business is transactional, now is
a good time to broaden your offering
and leverage your client relationships.

63. Some wealth managers get it and are rebranding
as financial life managers.

64. This is what their clients
are telling them:
A quality financial life is not only about
money, but that’s what financial industry
talks about most.
Every major turning point in life is about
having to make a trade-off.
Not enough people talk about spending
wisely, only about investing wisely.
Turning points and life’s milestones are
most important (starting a business,
starting a family, etc.).

65. Financial service providers need to
recognize the lifetime value
of client relationships.
“Banks need to make customer lifetime value
actually translate to a lifetime value
from the financial provider
– not the other way around.”
~ Bradley Leimer
(Emphasis mine. Leimer specifically talks about banks, but this applies to all financial service providers.
Source: Bradley Leimer Interview: Empowering Lifelong Customer Relationship in a Digital World)

66. How does leveraging client
relationships drive growth?

67. Relationships are your
most valuable asset.
• Keeping clients is less
expensive than getting
new ones
• Repeat clients spend
more
• Referrals are low cost
business development
• Relationships can be
leveraged for cross-
selling

68. Engaged clients refer more!

69. Factors driving client engagement
• Frequent client contact
• Broad scope of planning
• Coordinating other advisors
• Multi-generational approach
• Leading with vision & focus
• Partnering & getting feedback
Source: Economics of Loyalty, J. Littlechild, 2011

70. HOW TO SURVIVE AND THRIVE IN
THE DIGITAL AGE
Part 3

71. How do you build an advisory practice
that cultivates client engagement and
leverages your relationships?

72. 3 ways to survive and thrive
Digitize your business
Partner with everyone
Be your brand

73. Digitize
your
business

74. Digitize your business
• Capture and manage
client data digitally
The more you know about
your client, the better you
can serve and advise.

75. Digitize your business
• Market and cross-sell
efficiently
Develop a system for
turning client needs into
opportunities.

76. Digitize your business
• Protect your client’s
security
Failure to prioritize
security can have
devastating impacts for
your practice.

77. Partner
with
everyone

78. Partner with clients
• Stop thinking like a
“supplier”, “vendor”, or
“broker”
• Strive to engage and
serve your clients
holistically, as partners

79. Partner with peers
• Build an advisory dream
team to serve more of
your client’s needs
• Strive to be the
quarterback of your
client’s advisory team

80. Partner with your community
• Align your business with
the betterment of your
community
• Partner with a charity
or social entrepreneur
and tie your mission to
a cause

81. Be
your
brand

82. Define your brand and culture
• Focus on how to deliver
lifetime value for clients
• Build a process and
culture around your
client experience

83. Become a communications company
• Educate, entertain and
engage clients
• Curate great content
and be helpful online
• Listen and engage with
your clients, prospects
and audience via social
networks

84. Be your brand
• Leverage your personal
brand
• Empower your team to
be brand ambassadors
• Stop telling people
about your brand and
just build a business
that embodies it

85. That’s it.
Now, let’s do it!
Written and produced by:
Jay Palter
jaypalter.ca
Strategy &
Consulting
Speaking & Training