How Financial Planners Can Win Back Customer Trust

Author, Dean Bernales

In 2019, the CFA Institute surveyed retail investors about investment advice. Only 10% surveyed in Singapore and 7% in Hong Kong believe their financial advisers always put their clients first. The global average was 35%. Moreover, many retail consumers feel unsure about their financial planning, unable to ascertain if they have sufficient life protection or when they can retire. Consequently, they are very interested in personalised advice. In the CFA Institute’s 2020 poll on Earning Investors’ Trust: Focus on Singapore, more Singaporeans than ever before respondents said that they want greater influence and control over their investment and 86% were interested in personalized investment products.

To be fair to the 20,000 or so financial advisers in Singapore, the quality of their financial advice matches the agent’s experience, along with their knowledge of a clients’ true needs and biases.

To rebuild confidence in financial planners, rather than replace the planner, 360F is banking that their technology will help financial planners to rebuild consumers’ faith in them.

Mr Michael Gerber, founder and chief executive officer of 360F, says: “We are aiming to revolutionize financial planning with predictive and optimisation capabilities, to gear customers for the maximum possible financial resilience and self-defined financial freedom.”

Data-driven Recommendations

To support banks and insurance companies to sell investment products, 360F has developed a suite of software that draw on the wealth of publicly available actuarial data to help agents discover a client’s financial needs, and to provide self-evidently apt, objective, and better products recommendations than a financial planner can on their own.

One product that 360F developed is the 360-NeedsProfiler. It helps identify your financial needs when you input data by answering eight basic questions: birth date, gender, whether you smoke, how many people are financially dependent on you, your gross monthly income, how much do you spend every month, what type of sports you do regularly, and what kind of lifestyle you want for yourself.

For most of the questions, you can choose from suggested answers to simplify the process and protect your privacy. The options for the income and expenditure questions, for example, are in ranges so that you do not have to reveal the exact figures, and there are only three possible answers for the desired lifestyle question: “frugal”, “stress-free” and “only the best”.

With each additional answer that you provide, the program refines its calculations, based on actuarial and other data, to display percentages indicating how relevant life, illness and disability insurance, and building wealth, are to them.

“If the data shows that many people who are similar to you, based on the way that you answered the questions, have suffered disabilities in the past, then the percentages will tell you that your need for disability insurance is very high, and perhaps more so than life insurance,” explained Ms Clarie Kwa, 360F’s chief market officer.

“If you have a high monthly gross income, the program may place more weight on building wealth since you are likely to have more disposable income. If you have many financial dependents, it may show that life insurance is more relevant to you. In that way, the conclusions are usually quite intuitive.”

The program uses a greater number of public data sources compared to most financial institutions and robo-advisors which rely on their own past claims experience and data from their reinsurers. This adds to its effectiveness, according to Ms Kwa.

Armed with the recommendations, a customer can have more informed discussions with their insurance agents or financial advisors about the policies and investments they will make. “It guides you to make smarter financial decisions,” says Ms Kwa, “because it gives both parties a better context for that conversation.”

Tech-powered goal-assessment

The more complex 360-ProVestment program, looks upon more deeply into the users’ goals. Beyond providing basic information about yourself, including your cash flow, budget and risk appetite, you are asked for details about your goals, such as the target country and year you would like to retire in if they want to invest for retirement.

“The program asks people to choose how important each goal is, because we all have unlimited wants and needs, but limited time and money. By understanding how badly you want to achieve each goal, 360-ProVestment can find the combination of products that meets your constraints and yet gets close to achieving your dreams,” said Ms Kwa.

To make product recommendations, the program cycles through up to 30 million scenarios of what could happen to you, and tests different permutations of products to see how close you come to achieving the stated goals. The best thing is that this process takes only seconds.

Say, if a woman wants to retire in 2040, it looks at all of the likelihoods that could happen between now and 2040, and assess the risk that she may need experience disability or a critical illness based on her profile, and then it assesses how that will affect the cash flow of the various products.

“The scenarios 360-ProVestment creates are not hypothetical but based on past population data,” Ms Kwa said.

“The scenarios are also multi-dimensional, at the same time they take into account many different risks, such as the probability of a market crash and the probability of critical illness,” she adds.

Furthermore, 360-ProVestment makes recommendations tailored to the laws of each jurisdiction and the rules of each insurance company or bank that is deploying it, so that non-compliant products are filtered out.

The investor can select alternative insurance policies or investment funds to see how making changes to the products they invest in could affect the fulfilment of their goals. Kwa says, “The program gives you the best options, but we want people to be able to check that for themselves.”

In this sense, 360-ProVestment earns the investors trust. They can see how the products suggested suit them personally and will help meet their needs.

Revolutionizing financial planning

Before the Covid-19 pandemic ensued, 360F won a global contract with Switzerland-based Zurich Insurance Group. Zurich worked with 360F and other partners to integrate a new suite of services that included the 360-NeedsProfiler program.

“360F’s technological expertise, entrepreneurial spirit and divergent thinking is helping us to achieve our ambition to disrupt legacy insurance rational and behaviour,” said Mr Anthony McGonagle, Zurich Insurance’s head of digital transformation.