The effects of COVID-19 global pandemic can be seen in the change of finances for many. Prolonged loss of income, heightened awareness of the need for health insurance and begrudged acceptance of the changed landscape of life milestones such as child’s tertiary education, relocation and retirement – the pandemic has indirectly created strong interest in financial markets and financial advice, especially among the layman.

But interest alone is far from enough. The financial advisory industry is unfortunately a very noisy one. Despite the same customer profile and product portfolio, a disconcerting range of variance is easily observed among the financial advice given by different financial advisors.

Nobel Prize-winning behavioural psychologist Daniel Kahneman explains noise as unwanted variability. With high levels of noise, something as random as the last-read news, personality or weather could affect professional judgement which should have been consistent.

Where noise is not controlled, financial advisors are not interchangeable. Financial advisory firms cannot scale their business. Customers cannot rely on a single opinion.

The layman customers have the excuse of not knowing any better. Financial advice, up to recently, cannot be self-verified easily. In fact, it is not even accessible freely.

To clear any doubts, financial advice does not simply constitute identifying financial needs and gaps.

High-quality financial advice takes holistic consideration of all the financial objectives and profile of the customer in tandem.

This means customers should receive solutions that are optimised, enabling them to best fulfil their prioritized financial objectives in view of their profile such as risk tolerance, constrained budget, and time horizon.

But if financial advice cannot be self-verified, how can customers ever know if the advice offered to them is optimal, motivated as they are?

We can reduce noise

Market-leading advisory firms and product carriers are starting to acknowledge the need to reduce the unwanted variability in financial advice and that customers must play the collaborative role in the advisory relationship.

Over the last fourteen months in Southeast Asia and the Middle East, 360F has seen a multi-fold surge in the institutional take-up of its flagship advice solutioning optimiser, 360-ProVestment®, and its sister module, 360-HappiU®, a financial scoring system that helps anyone forecast their financial future and verify the impact of any given advice.

Built on the backbone of Nobel Prize-winning research in behavioural economics, namely Prospect Theory, 360-ProVestment® processes all of the customer’s insurance and investment priorities and profile including loss aversion and constraints within a mathematical function that ultimately quantifies the customer’s self-defined financial satisfaction.

The solutioning optimiser then stress-tests possibilities before generating solutioning options based on the financial advisor’s accessible product universe, i.e., it customises virtual bundles of insurance and/or investment products that yield the highest financial satisfaction for the customer.

The sister module, 360-HappiU®, standalone or add-on, forecasts the customer’s financial future with respect to the ability to fulfil the financial priorities even if personal crises and stock market risks should occur.

A self-explanatory scoring system, the 360-HappiU® spearheads buyer empowerment in financial advisory as it provides a simple and reliable reference for customers to gauge their financial satisfaction, on the basis of their personal values, priorities and desired lifestyles, throughout their lifetime.

Both modules engage stochastic simulation where all the conceivable risks specific to the customer’s profile are simulated across the planning horizon. Such robust stress-testing minimises noise, and therefore room for subjective judgement in financial advice.

Notably the demand for 360F modules also comes from carriers who have huge but legacy-ridden advisory sales force, giving rise to use cases ranging from pure engagement via consumer-facing apps to hybrid advisory which empowers prospects to custom-generate their potential solutioning options and decide for themselves when they want to engage an advisor.

360F releases major software upgrade

Noting the trend for personalised but consistent and self-verifiable financial advice is here to stay, 360F has released a major software upgrade that will enable insurers, banks and advisory firms to launch in as quickly as ninety days and enjoy a substantial increase in their advisory effectiveness.

New features include low-code configurability, HappiU score insights generator to increase customer engagement and pricing sheets transformation to enable product carriers break free from legacy architectures and give their captive and third-party digital distributors the ability to automate real-time solutioning options.

Virtual advice in the near future

We foresee the rise of digital advice. Not to be confused with advice from robo advisors, digital advice retains personal service from the advisors but uses technologies such as 360-ProVestment® and 360-HappiU® to build advisor capabilities with scale economics.

Any customer should be able to receive high-quality advice and enjoy top-class customer experience, anytime and anywhere.