By: Lizl Budhram, Head of Advice at Old Mutual Personal Finance
New generation of consumers demand customer-focused approach
The increasing pace at which new technology is being developed and adopted, coupled with changing market forces and regulatory shifts, are placing well-informed consumers at the centre of an increasingly digitalised, delocalised and personalised financial advisory landscape.
Lizl Budhram, Head of Advice at Old Mutual Personal Finance, says that this rise in consumer centricity has brought about a fundamental shift to a decades-old traditional business model that was built to support a focus on products, mass standardisation and operational efficiency.
General demographic shifts are a major driver of the changing consumer profile, says Budhram. “While the majority of investable assets are still held by baby boomers – those born roughly between 1940 and 1960 – the millennial generation represents an ever-increasing proportion of consumers. Having grown up with the internet, millennials have different expectations regarding service delivery and demand consistency in customer experience across all touch points, whether retail, financial services or entertainment.”
Increasing smartphone penetration in South Africa has been a crucial driver of this trend, Budhram adds. “The majority (92%) of South Africa’s adult population now own a mobile phone, and 60% of these phones are smartphones, providing more widespread access to the internet. Today, close to 50% of South Africa’s total population (26.84 million representing 49%) are considered active internet users.”
Budhram says that this change in the consumer landscape means traditional advisory practices are challenged to respond to a growing local market that demands customer-driven, personalised engagement, innovative products, simplification, and transparency.
While financial planning used to be mostly one-dimensional and focused on specific needs, the changing needs of consumers have led to a more holistic service.
And gone are the days of being in one steady-paced job for your whole professional life, she adds. “Switching jobs and careers have become an accepted part of a healthy career, and as millennials evolve and move through the various stages of their professional life, their financial plan should be adapted accordingly.
“Let’s take, for example, an individual who has recently left their job to pursue their dream of becoming an entrepreneur. Such a life change would call for a significant financial plan review to ensure that their cover and policies suit their new financial realities. The advice needs to be tailored and responsive to the service expectations of a millennial consumer.”
The Financial Services Board is currently taking the steps required to regulate the new financial planning environment, which has resulted in the imminent implementation of the Retail Distribution Review (RDR). “At its core, RDR is focused on improving service levels and transparency to better align the interests of financial advisers and their clients.”
Budhram concludes that she expects the rise of the empowered, informed consumer to continue, especially as technology advances and the millennial customers and the assets they hold expand over time. “The challenge for us, as insurers and financial service providers, will be to continue our customer-centric approach and provide a tailored and interactive experience with maximum transparency.”