Podcasts Better Technology Decisions to Unlock Practice Growth

Matt van Dijk 

I'm Matt Van Dijk, general manager at distribution at Praemium, and today I'm joined by Peter Worn, the managing director of Finura Group, A leading technology and consulting firm who advise some of Australia and the UK's leading financial services companies, on their technology strategy and execution.

Peter, thanks for joining us. Great to have you here today.

Peter Worn  

Thanks, Matt. Good to talk to you.

Matt van Dijk 

One of the things Peter and I were having a brief chat about before we started today's podcast is that there are some really interesting things that are taking place around technology and how businesses are considering technology. And really the first question, Peter, I wanted to run past you and build on a little bit today was around satisfaction. Because we've really seen that satisfaction is consistently being reported both anecdotally and in many polls as a problem for many, many people. Ever since PCs became a feature in modern offices a generation ago, we've seen people saying, look, we're not happy with this, we're not happy with that.

You've really worked with a lot of advice groups, and you've been consulting on their technology health. What do you seem to find as being the root cause of this?

Peter Worn

Yes, the data certainly suggests you're right. Satisfaction has never been lower. And for financial advice software, according to the latest Investment Trends survey, it's at an all-time low. 58% or lower would just be diabolical. Platform satisfaction is much higher than that. You'll be pleased to see everyone seems to like their platform, just not their software and maybe some of the answers to that are in that question.
I think there's two aspects to this, you know the software industry for financial advisers is fairly small in Australia. So there hasn't been the same flight of capital into our sector for R&D to make products better, because the addressable market is just not that big.

It's pretty capital constrained and also in a lot of cases, advisers don't spend a lot of money on software. So perhaps a chicken and egg problem. For platforms it’s a totally different story, because there's a lot of really successful companies like Praemium and others that have built great businesses on the back of that.

Matt van Dijk

I was going to say it's a really interesting point though, because platforms aren't paid for by the advice firm usually either, unless it's a software as a service product which we do have, but it's the end investor which is paying for the platform through the administration fees, not the advice business and for the numbers nerds on the podcast like me, we're talking at circa 15,600 advisers now as at end of  August 2023. if you're going to put the capital towards developing software, if that's the size of your addressable market, that's got to put a price on software or how much you're going to be investing that can generate some very scary numbers and really, really quickly when you're looking at what you're, ROI or you return on investment has got to be for the amount of capital that you’re going to be putting in, to not only create, but then service that.

Peter Worn  

Yes spot on.  And you know, if you look at other more successful software companies in the database space, Xero is the one I refer to quite a lot. They made their software free for accountants and they charged the small business user.  you know, and that was a genius strategy because accountants are like financial advisers they don’t want to spend a lot of money and no one's quite cracked that in wealth management and maybe this is why the actual backed platforms are playing an increasing role in technology for that reason.

Matt van Dijk 

Yes.

Peter Worn 

So that's sort of the economics and I think back to the behavioural side and why people are less satisfied with software. I do like this idea of liquid expectations and it basically means that our sense of satisfaction, is often governed by our most recent experiences of something in parallel. So if I'm using Netflix or I'm using my iPhone or some of these amazing apps that my children take completely for granted today that just work out of the box and are really intuitive. We start to expect that in our daily life with the other software solutions we use. So if you go from that and then you go into use one of the more traditional financial planning solutions, you sort of go gee, the UI looks a bit old, looks a bit tired.

Matt van Dijk  

There's a lot of friction here.

Peter Worn  

It’s clunky. And you think why is this not better?  So I think that's driving it. I think the amount of effort that has to go into customisation and configuration of software is really misunderstood by businesses. I could talk to two users of the same software solution and get two really different stories on their satisfaction levels.

And what I tend to find is the user that's actually spent a lot of time on configuration customisation and training of the software is always happier. It's just by and large, and we have this, you know, view or this idea that it should just work out of the box.
Well, software built for consumers works out of the box. That's how it must work.
By design, software for businesses has never worked that way.

So in every other vertical, every other industry out there, the customer, the business needs to spend time configuring the solution to work for them, because as businesses, we do things all really differently and financial planning in particular, we have literally found millions of ways of doing these processes from business to business. This is a challenge for platform I think too.
So I think part of it is the software is not maybe reinvesting enough in the UI and experience. And I think part of it's the user as well and we just haven't got that.

What I would say is that's changing a lot as businesses are more corporatising, they're understand they got to spend money on software. But don't get me wrong, we come across just as many unhappy salesforce users, which is widely regarded as the best CRM in the world, as we do for small little CRMs with very limited functionality. It's just like everything in life, it's what you put into it that you get out of it. And I think that's driving a lot of satisfaction issues, yeah.

Matt van Dijk  

So is it really a combination of the inherent complexity that comes in having an engine room grade level of technology and we're getting very much used to these large consumer scale apps and that disconnect of wondering why can't something run as well as what I'm running on my phone that my kids use, whereas I've got to use something that's just, it's not sexy? It's not cool, it seems to add friction, not remove it.

Peter Worn  

Yes. And I think you know the economics are quite obvious in the sense that Facebook or Meta who owns Instagram, it's a $400 billion market cap company. Iress that runs most of the software for Australia now at $1.2 billion company as of this week. So the just the sheer amount of capital they have, to spend on UI and the cloud computing and the infrastructure and anyone that's in software knows how much infrastructure costs now for cloud computing, it's so expensive to do anything, so compromises have to be made. And don't forget, I mean, if these software companies don't make profit, they won't provide these software solutions for our market. This is why I do say to advice firms to strap yourself in for more expensive software, because that's the only way things are going to get better.

Matt van Dijk  

Remember when Apple hit $700 Billion market cap a number of years ago and with exchange rates, it was about a trillion AUD at the time, you could literally buy the top 20 companies if you were to liquidate Apple down to dollar coins in the ASX.

The top 20 businesses at the big end of town, and it's just the scale is, is kind of missed there. Talking about businesses though like Meta particularly so who run Instagram, WhatsApp and Facebook that I can think of. There was a saying that came out with those businesses where, a lot of people perceive them to be free and I’m reminded of that comment that there's no such thing as a free lunch. And if you're not paying for a product, it means you are the product.

Peter Worn 

Yes

Matt van Dijk 

What I've was then reflecting on was the rise of generative AI tools, your ChatGPT which is a hot topic right now. I'm keen to get your thoughts for the audience on this. There are some real challenges around how much information is being fed into these tools and privacy of information.  How that's being used and then how privacy leads into cyber security?

How as a business, you might be making rules around what's used and what's not, but how are you ensuring that's being followed by your staff and particularly for staff that might see it as almost becoming a ubiquitous part of their life?

Peter Worn 

Yes, totally. And we're literally learning daily as to what this all means.

So you're right, the free component of ChatGPT and there is a paid version which is just faster and you know different things. But the free version, the reason it's free is everyone that uses it is actually training the product to make it better. But of course that will change in time because the sheer costs of running ChatGPT, the cost per search are enormous because the computing power that's got to go behind it, look at the Nvidia share price, it'll tell you everything you need to know about why, you know, GPUs particularly to run these models are so valuable.

So if we go back a step, why does it really matter? Well, obviously, if you’re just at home writing , funny Christmas card to your  mother-in-law, that's fine ChatGPT will do that and they do lots of cool stuff. The minute you start creeping your work life and you’re dealing with consumers; you’ve got to be more mindful.

As always you can't wait for regulation, I mean crypto is only regulated a few months ago as a financial product. And literally trillions have been lost and we're only just regulating that. Don't get me started on that, but let's look at AI.

So the short answer is the regulations are never going to tell you what to do, because they’ll never be fast enough. So you’ve got to get on the front foot with your staff. So what by and large, certainly Finura, we don't believe in draconian bans like I've seen a lot of big companies ban it. It's naive. People can use their phone. You know, people always found ways to get around the stuff. The same thing happened with social media right back in the day, you couldn't use social media at work, and that's just never works. Mobiles killed that.

But I think from a work environment point of view, there are steps you can take as an enterprise to lock that down. So for example, Microsoft Bing has a search capability built into its model. There is a Bing enterprise version of ChatGPT which for example Finura uses so we're all of us, use that version. It's a locked in environment where effectively we use that large language model, but we only use it on our large data and nothing goes outside of it. So that's a simple thing.

Most businesses can turn on just to mitigate some of that risk. Now you never going to fully mitigate the risk that you know, a billion paraplanning's going to put something in his phone. Look fortunately, humans are going to do human things, but that is reasonable thing. I think a business can do to mitigate some of that, and I'd encourage you to speak to your managed service IT provider to turn on that capability. They know exactly what you're talking about.

Matt van Dijk  

Brilliant. We're starting to sort of move into some areas around what is the need of an advice practice manager or owner to understand how technologies are being used in the business and this sort of plays out in a number of interesting ways. Peter and I have just done a webinar where we've touched on a lot of these concepts. You can find that on the Praemium website. But one of the concepts that came up was around what proper due diligence looks like and how that stopped people from activating their ideal outcome when they're taking on a new form of software. And I was thinking at the time we were going through it, Peter, that I feel that a lot of advisers and advice business owners and managers don't actually know what proper due diligence fundamentally looks like.

I actually remember presenting to a large group of advisers once, and the concept of cybersecurity came up in my presentation and an adviser said to me at the time.

Look, I don't have time to think about cyber security. That's my licensee’s problem, so I remember the owner of the licence who was sitting a couple of desks away, and the expression on his face told 1000 words at that particular time. And so look, that's certainly an extreme example where someone's completely, you know, abdicating any responsibility for things blowing up digitally.

But if people are thinking about OK, I get that proper due diligence is important.
Where do I start?
How do I start?
What does my IT committee look like?
Do I need an IT committee?

Can you offer some suggestions to the audience around how they might want to consider soften that question around what does proper DD really look like and how to start?

Peter Worn  

I can't stand committees generally, but I'm going to recommend at least a working group of the willing people in your business that really enjoy this stuff, then it makes sense to utilise their talents and get them invested in it and create it. And, quite often I’ll sit as an advisor to the business and bringing that outside perspective, I'll consult the boards, I'll do different things or we'll run that process.

We always insist on an internal person being involved, but I think having some sort of forum where IT issues or software issues can be brought to the table is important and importantly, where if the business is big enough, particularly where there's representatives of different stakeholders of the business where you can get people's requirements and feedback and all those kind of things in place and actually you can make some better decisions moving forward.
I find it quite incredible that so many software decisions are made by advisers and practice owners, and the poor support staff then inherit those decisions and are not part of the process, I'm quite critical of software companies that don't spend any time with the back office staff and the sales process, who frankly are the user and the most critical eye on these things.

You want to know what good software is? Go and talk to paraplanners they’ll tell you exactly what's good and what's not. So I just think that human element of the decision-making process needs to be better.  In the same way that some advisers are great advisers, but they're not good at picking managed funds. You’d get an asset consultant for that or you know it's the same thing for me. So I just think that's logical what you can do. We have annual licensee or people like Finura do have some resources you can use to give software vendors some due diligence questions to ask. Often we'll make those questions more around how many users have they got, satisfaction levels, support levels, just that kind of stuff. Their economic viability is an important question to ask so you have your eyes wide open on that and recommendations and endorsements from people, who are frankly not shareholders of the business or advisors that are invested in it and think it's a good idea.

So you could say that about any product at the end of the day. Those for me are the right things. But I think even going up a level is, ask yourself that fundamental question. Why are we doing this again? What is this really going to address in our business? And is it going to solve the issue?

So often we just find the wrong thing put in for the wrong reasons. It’s often a combination of those factors. So Matt is not a single issue there, but I think it's a combination of, yeah, standard tickets to the game, due diligence on the provider, but more importantly, just spending time as the business saying, what are we really trying to solve here and why?

Matt van Dijk  

And I think the other key point as well is, depending on the size of the business, and I understand that there's going to be resource limit, there's resource limitations for every business no matter of size.

Peter Worn  

Yeah, definitely.

Matt van Dijk  

But saying maybe it's not me that needs to solve this. Maybe I've got staff that can do it. Maybe I can partner with someone to do it, you know, think outside of yourself.

Matt van Dijk 

When I'm thinking about risk and governance, we know cybersecurity is that key priority, but it's a bit like, when you think about investment, it's like risk and liquidity.
By the time it's a problem, it's far too late to really do anything about it.

So would be keen to get your thoughts, Peter, on what Finura has observed and what those key areas are that really need addressing in the cybersecurity space.
So if anyone's going to have a checklist, do I think I'm on the right track?

What does that really look like?

Peter Worn  

So three key things.
First one is training of staff.

Matt van Dijk  

Yes, right.

Peter Worn  

I'm on three or four different boards. I've got to do cybersecurity training for all of them, which is quite frustrating because they're all different courses, but that's part of our governance model. Every employee top to bottom director, whoever you are, does cyber training. Learning what to do and not to do.

The companies I'm involved with, we do phishing tests, we do all sorts of tests to see are employees clicking on things they shouldn't be clicking. I think you’ve got to do that.  That's probably the first thing, because most cyber incidents are generally caused by humans making a mistake.

And the second part of the equation is probably more operational and that is how do we share data with our clients, with our external partners, with our stakeholders.

So there was a question a really smart question in our recent webinar asking why isn’t email insecure and the simple reason it's not about your email security. It's about your counterparty. So often you can't control what happens to something on the other side, but ultimately it's your data. You're on the hook if things go wrong. That's why you want to create secure environments where people can access information. So we're big fans of people using document sharing portals to share sensitive stuff. So that's the processing of data.

And the third one is definitely ramp up password management protocols. You know, the number of businesses that are still trying to save money, here and there on licenses by sharing passwords. We know people do it, we know there's WhatsApp groups going around and people sharing, explained Log ins. And all sorts of stuff. It's got to stop.

Part of being a professional is paying for the tools that we use to do our jobs, right. And I'm happy to take this one on. I think multi factor authentication should be mandated and all software financial advisors use it.  And advisers are lucky that Iress haven't done this yet. I think they will in time, because I just think it's just such an obvious way something's going to go wrong from my perspective. So yes, I think to summarise that,  it would be definitely the training processes and document management and password management.

They're three really small hanging fruit, three things you can do.

Matt van Dijk  

That's brilliant. Thanks for that. A lot of advice firms that I'm speaking to are asking the question around what's the right number of technology platforms to use and where do they really start in creating a framework to evaluate that. So how do I right size my business from a technology perspective? How can I begin thinking about that?

Peter Worn

Yes. And there are variables into that equation. So it will come down to the type of business you run. Are you a pure financial planning? Wealth management businesses are you wholesale, are you retail? Are you multidiscipline? Do you have accounting lending other services?

So there's a whole bit of nuance there around those things, which will go into that and you know, certainly one would argue that as the complexity of the business changes, the software may change, the CRM use and those things will play a factor. I think though we look at what are the core pillars, what is that central source of data, the central source of truth that we use across our business to make decisions and execute on client engagement and that's the CRM component.

There's the productivity side of our business. How do we communicate internally? How do we share documents? How do we collaborate? And you know, for most businesses, it's Microsoft or Google, and 95% of the Microsoft Suites and are we maximising what we get for free or included in our Microsoft price out of that and maybe how many businesses don't use the full power of Microsoft.

Then the final component is probably that client front end piece which I think is the most underinvested and undervalued part of it. People, really underestimate their clients and how digitally savvy they are.

I mean, a year and a half ago, you couldn't go to a restaurant in Melbourne without knowing how to use an app and QR code. You couldn't order food without QR code. It didn’t matter how old you were, you had to use this and I think retirees are more digitally savvy than ever before and I think will quite willingly embrace a more digital relationship with their adviser. They still want the personal relation. That doesn’t go away, but there's so many things you can be doing via portals and things like that for the future, and I think that's really where the game should be played in the future.  

Clients don't know whether they are on XPlan or what CRM and they don’t care, nor should they. But they do care about how you share data with them, how you book appointments with them, how the video chat works. These are things I'll be spending my time on and I reckon they're really exciting things that are, well frankly the bar is pretty low. It's pretty easy to differentiate yourself on that stuff.

Matt van Dijk  

We've seen this play out in quite an interesting way where you're right, it's the experience that someone is getting in a lot of other facets of their life, whether it's booking a table at a restaurant, booking their car in for a service, almost every other business that they're engaging with has some form of digital mechanism to go.

Peter Worn  

GP doctor.

Matt van Dijk  

I need an appointment, for the Hairdresser, barber, doctor, dentist. It's almost all done online and not handled by receptionist or obviously in rare cases, and so you've got to say, well, why would we be any different?

What we're also seeing is that there's an interesting way that this is playing out with firms where they might have a slightly older demographic of client and they're starting to consider about, OK, so it's not so much about managing wealth.We're now thinking about transferring wealth to the next generation, and so it's feeding into that intergenerational wealth transfer concept. And of course, what we're seeing is the next generation of client that's going to be either inheriting or managing the wealth from the benefactor, the beneficiaries, if they're not seeing that modern interface or if they're not seeing an advice business that appears to be keeping up with how technology should be used in a professional manner. They're thinking maybe this isn't the right firm for us anymore. Let's find someone that's actually going to suit our generation or our needs.

And so I think it's a, it's a really interesting consideration there for any business that's thinking about what if I'm going to be in business two years, five years, 10 years from now, what have I got to be doing today to make sure I'm not going to be making some very painfully expensive mistakes along the way?

Peter, last question for you today is really an open question for you to I guess flag to the audience that if there was one thing that you would ask people to either think about, consider or be encouraged and excited about in the context of our profession, what might that look like?

What are you excited about or what are some of the trends or changes what's coming up around the corner that you think is going to really make technology and advice businesses really sing together quite beautifully?

Peter Worn  

It's going to be such a cliche, but I am going to say the Copilot capability that Microsoft is about to give us all.

It's just going to touch every role in a business. You know it's very, very few times in life where something comes along that really touches everyone's job. So you know when email first happened and or when mobile kind of first happened, I remember mobile, I remember my first BlackBerry.

It just changed the way we worked and I really, genuinely feel that we're in this moment now and I would encourage businesses that can afford to do it. Larger businesses. Get a few interns in in the next couple of years to work over your summer break. Kids from university, who might not want to be advisers, but that's OK, they just want some experience. People who are growing up in this new world.
And they're going to think really differently about jobs and tasks and how you do things. Get them in your business and ask, how would you use this copilot?  What should we be doing differently? What can we learn from them?

I love this saying, I follow this NYU professor, Scott Galloway, that puts a lot of content out and he says that AI won't replace people, but people that use AI will.  Just hang on to that. It's not going to be an XPlan replacement. It's not going to be this or that, those things will be what they'll be.

But I just think it's a ubiquitous change. Its happening to everyone, and I just think embrace it. Move mindfully through it and think about it in the way that how can it just make us so much better, what we do and so that for me is the big the big winner for the next three to five years.

Matt van Dijk  

So a big disruptor then. It's a case of, don't be like that person hanging on to a taxi license when Uber was coming out. You know this is going to be the way forward.

Peter Worn   

I mean, look, frankly for a lot of businesses we talk to email is dead. They just use teams and slack and these things, even at Finura, the only emails I have sent out are to clients and if they have a slack channel, I'd rather use that with them. And you know what, that's a good thing, because email is terrible. We hate it!

So I genuinely feel the roles we have in our business, the people and the capability we have in our business is really going to change and the really exciting thing for business owners and advisers is it will hopefully expand the number of clients you can serve at a much more reasonable cost.

You have less people doing horrible jobs, matching data on spreadsheets and you know, data matching commissions reports. People don't go to uni for four years to do that work. They go to uni to be creative and talk to people and build things and I think there's this wonderful change that’s going to come through the white-collar roles. The awesome thing about the advice industry is we've got a whole bunch of IFA small business run by entrepreneurs and they can embrace this stuff really quickly, so I reckon be one of those firms.

Matt van Dijk  

Brilliant. Peter, thanks for joining us for the Advice Leaders podcast today.
It has been excellent getting to work with you once again. Certainly to the audience, I'd encourage you to reach out to Peter at Finura if you think that they can be of help to you and your business and wish you all the best luck and success for the future moving forward.

Thanks again, Peter.

Peter Worn  

Thanks Matt.