10 minute read
THE POST-PANDEMIC BUSINESS MODEL
Online service providers and those using off shore operations have been essential for advisers and accountants for many years, but in a shutdown, logged-in world they have become the indispensable tools for maintaining advice relationships. Yet, as Jason Spits writes, while advisers can do more with these services, they should also be checking where the data trail starts and ends.
At the start of 2020, working from home was a task some advice practitioners undertook on occasion, but by the beginning of March it had become the ‘new normal’, as well as an abbreviation, WFH, to describe how people would be working for the next few months due to the COVID-19 shutdown.
For advisers, and their practices, it also meant having to quickly assess what online resources they had on hand to replace what the coronavirus and subsequent government response had taken away – face-to-face interaction with clients and office-based teams.
This rapid shift to working online, and providing advice to clients in the same way, is not a new development for advice practitioners. Most have been using online and outsourced services for some time, but they are now considering how to use them in better ways and what impact they will have on the provision of advice after the shutdown is lifted.
Safe as houses
One of the issues that may have been overlooked in the flight out of corporate offices and into the home office has been security of online systems, both onshore and off shore, and what service providers and advice practitioners should be doing to maintain that protection.
Smarter SMSF chief executive Aaron Dunn notes the coronavirus pandemic has exposed some concerns about the issue of infrastructure that online service providers require to operate, regardless of whether they are located in Australia or overseas.
“Anyone who uses an outsourced service at the moment will find that prior to the lockdown the staff of those organisations had infrastructure around them and could manage security risks, but this may have changed as the world entered shutdown, which in some locations was more severe than in others,” Dunn says.
“How do businesses in those situations continue and support clients? In Australia, we have transitioned to a WFH model, but that may be harder to do overseas while maintaining the same level of privacy and security.”
This is an issue Odyssey Accountants has been addressing since establishing itself in Vietnam in the late 1990s to provide outsourced services to accountants in general practice, as well as in the SMSF advisory space.
David Carter, Odyssey Accountants chief executive, says his approach has been able to meet all the relevant and expected standards as if he was operating in Australia. As such, his business has a tax licence, professional indemnity insurance and meets Australian privacy standards.
“Looking at security from a technical perspective, we also use virtual private networks, security tokens and two-factor authentication. Unfortunately, we find that some advisers and accountants are less interested in these parts of our business and are merely shopping for a service provider based on cost,” Carter notes.
“We also see advice practitioners taking large risks with their security despite our best efforts. Systems can be well designed, but people are sloppy and will send unsecured emails, or use the same passwords, and we can deploy whatever is necessary at our end, but we can’t stop advisers and accountants doing dumb things.”
Lightyear Group director Michael Jeffries, who is also involved in the provision of online services with Lightyear Docs and I Love Accounting, says the COVID-19 lockdown has highlighted an issue he has seen many times over the past decade, and that is the lack of business continuity processes (BCP) in advice practices.
Jeffries points out there is a need to carefully choose a service provider, but advisers and accountants have not built their own infrastructure around preparing for disruptions like the current situation presents.
“We see technology that can’t handle the task, such as phone systems that lose calls or slow internet speeds that restrict the speed of users, and there are some sectors, such as legal and accounting firms, we see as being more restricted than others,” he says.
Midwinter Financial Services head of strategy Julian Plummer, a key figure in the launch of one of the first financial planning soft ware providers to operate solely online using cloud storage, says advisers need to keep up to date with their own systems while also being vigilant about their outsourcing arrangements.
Plummer adds the responsibility to ensure an adviser’s systems are up to date and capable of handling large amounts of client data sits with their licensee, according to Australian Securities and Investments Commission regulations, but advisers should still remain proactive.
“No one plans for a black swan event, but they are out there. For instance, there are groups of hackers in Ukraine that have targeted SMSFs in the Sydney and Melbourne area. As an adviser, are your systems better than their systems?” he says.
“Some advisers do not take this seriously enough. They should as a matter of urgency research and understand the laws. There should be an incident response plan in place for any breach event and IT policies and procedures must be up to date and staff thoroughly versed in them.
“The policies and procedures should not be filed away, instead the business should be run in accordance with them. Advisers are responsible for the advice and have a duty of care to their clients when they safeguard their digital and information assets.”
Signing on the electronic line
Having got their house in order, what should financial advisers and accountants consider when looking at online service providers?
This is an issue many practitioners would have been reminded of in the rapid shift to WFH and when it came to choosing an online meeting platform.
Names like Zoom, Microsoft Teams, Google Meet, GoToMeeting and Webex have moved to the fore in recent weeks, along with the decision as to which one will work best in an advice practice environment.
Any considerations used in this decision should also be worked through, but in much more detail, when choosing a service provider who will handle thousands of pieces of client data and information each week.
Carter says there are a number of quantitative issues advisers and accountants should consider, and these range from the practical, such as where the provider is based, what security is in use and how much the service will cost, to the qualitative issues of the standard of services provided and turnaround time.
To this Heffron executive director Martin Heffron adds the need to be able to demonstrate experience, consistency and a reputation for quality that has been consistently enhanced over time.
“In the same way that consumers have to trust an adviser before committing to them, the same applies with service providers, so we need to be consistent over time and demonstrate we can deal with the complexities of advice for our clients,” Heffron explains.
“Complex work also creates its own barriers to entry and being able to perform that work reinforces the brand and reputation of a good provider.”
These factors, however, should not create the impression that an online or outsourced service provider is a set-and forget proposition, according to Jeffries.
He suggests advice practitioners need to allocate time and resources to work with the service provider to ensure what they offer fits into their business correctly and is not used as a stop-gap measure.
“We are asked about the cost of our services, but we would prefer people instead asked us about how they should be allocating resources and how we fit into that discussion as a business partner,” he says.
“The cost savings are to be found at the end of the process, not the start, and outsourcing may not always be the solution that is needed because the problems may still be within the adviser or accountant’s office.”
In the event an adviser or accountant does choose a service provider, they have a mandatory obligation to disclose that decision to clients, but should not be overly concerned clients will be bothered by that fact, according to Dunn.
He says most people would be aware a single practitioner, or practice, would not have all the resources to provide the services and advice they might need and would use third-party providers, but it is how this is managed, particularly when failures occur, that matters most to clients.
“It is important to ensure service standards are maintained, but when they are not, such as a breach of privacy, it will be up to advisers to manage how that is handled and their front-end relationship will be more important to the client than the back-end systems and processes of the adviser,” Dunn points out.
“Security and compliance are tasks that have to be done well and clients understand this, and as long as they are not put at risk, they will trust their adviser or accountant to choose whatever systems or services they consider necessary.”
Returning to the ‘new normal’
While the advice sector has adapted to the WFH trend, people will be keen to return to their old routines aft er the shutdown ends and questions remain as to what the ‘new normal’ will look like for financial advice.
Carter sees the uptake of outsourced services continuing to grow among younger advisers, while those at the end of their careers will be more likely to return to pre-coronavirus approaches.
“Younger people who are used to working remotely and without office infrastructure will continue to use online service providers and some may even question whether they need to operate from a single location,” he predicts.
“Those closer to the end of their working lives have shown a reluctance to adopt more technology or outsourced services because they see it as being simpler to sell their book with active clients using the systems they already have.”
As a service provider in the SMSF sector, Heffron sees the ongoing adoption of technology and outsourced services as speculative, given financial advisers and accountants have considered face-to-face contact as an essential part of their process for so long.
He observes most of the tools advice practitioners have called upon in recent weeks have been around for some time, but many are learning to use them better or in some cases learning to use them for the first time.
“As practitioners use these tools more oft en they will become more capable and the tools will become more useful than they were at the outset, but advisers’ preferences will ultimately dictate their use,” he says.
For Plummer, the pre-shutdown use of digital tools and services was a default position from which the advice sector can leap forward and scale-up the provision of advice to many more people in one instance.
“Technology works by exploiting the single provider to many recipients model, which is why these companies have high valuations, and advice needs to go from one-to-one to one-to-many, and not go backwards,” he says.
“Clients are only interested in advice, not the service providers at the back end or how that advice is delivered, and the advisory sector should not let a crisis like this to go to waste.”
Dunn expects the return of face-to-face advice, but with modifications taken from the shutdown period, and says advisers should leap at any change directed for their own and their clients’ benefit.
“We will still see face-to-face advice, but it will be with enhanced communications using videos, webinars, social media groups and so on because advisers would be foolish to take a step back at a time their clients have taken a step forward into this reality,” he forecasts.
“There is a huge opportunity to reconsider the advice value proposition and the touchpoints with clients and what can change in terms of adding services or making them more accessible to more people than in the past.
“The reality will not be perfect to start with, but this is the first time the profession will be able to dictate what advice should look like going into the future, instead of having that done by regulators.”
