Money matters: Communication and digital opportunities in financial services

With 30 years’ experience in financial services spanning PLC, private equity and owner-managed companies, Patrick Gale is well placed to talk about the sector. He looks ahead with excitement for the future, though stresses the need for careful communication as the industry evolves.

The ease with which people effectively pivoted to working from home was a silver lining of 2020. Initially deemed tricky if not impossible, IT swiftly enabled it. And this, according to Patrick, means a lot of positive changes in the future: Less office space, more flexibility – maybe more than employers would like – to allow employees to work from home, fewer air- and car-miles. “The surprise is how easy it was and how people accepted it. It’s been a real plus for the industry.”

The change was one of several for many businesses in Britain in 2020, not least in the financial services sector, which was already adapting to the changes from the end of the Brexit transition period. Many British-based European players were forced to open a presence on the Continent to ensure business continuity. He points to the example of the fund administrator he chairs, Aztec Group, which began investing in its Luxembourg office as a European hub over the last five years. “As a result, Brexit was not an issue for the business; indeed it probably drove extra revenues as we were able to take a premium service model built in the Channel Islands to Luxembourg and capture the growth from clients who had been poorly served by the incumbents.” He calls opening there “the best decision the firm made”.

Patrick remains bullish on London’s position as a powerful force on the scene.

Brexit caused some technical challenges for financial services but it’s nowhere near as difficult as imagined. And London will remain a financial epicentre; there’s such a concentration of law firms and advisers in the City that its position won’t diminish.

                   

Careful communication

The clear resilience of the sector has surprised some, and Patrick goes as far as saying financial services was a beneficiary of COVID-19. He calls the year “a good shot in the arm of confidence” for the three businesses he chairs.

The hub-and-spoke model of many firms necessitated by Brexit combined with pandemic-induced remote working has catapulted aspatial working to the fore. “The question now is whether people will continue to accept it, particularly in face-to-face business models,” Patrick ponders, citing the wealth management firm he chairs, Succession, as an example.

If you have a good customer base and can talk to them, then volatility is a great opportunity.

“Talking” is the operative word, with Patrick conceding the industry’s realisation that it does indeed need to communicate. “Five years ago, a lot of transactional advice was given; now we realise clients want communication. Our more established clients in particular want this personal service; the question is whether or not they want to accept video conferences as true communication.”

The future is digital

Policies and preferences will influence the evolution of financial services over the coming years. In the insurance space, for example, incoming regulation will drive disintermediation. “It’ll take time, and incumbents will fight for survival,” he says, with regulatory change putting an end to the sector’s age-old practice of existing customers subsidising new ones. “It’ll mean the existing book prices will go down and new business pricing will go up. The closer these come together, the easier it’ll be for new firms to enter the market.”

A preference for ease will drive change in the wealth management space. “I believe clients genuinely want to receive a more digitally enabled service,” Patrick says, adding that it’s across all age brackets, whether he and his peers in their 60s or their children in their 30s. “There’s a huge opportunity to deliver on that. A lot of building blocks were put in place over the last ten years, offering connectivity to deliver a much better digitally enabled service.” Firms that don’t adapt in this way will struggle, according to Patrick.

This digital enhancement doesn’t mean the advent of robo-advice but rather about segmenting client bases. “Well researched service offered in a simpler and personalised way is the big opportunity going forwards.”