Fintech: Friend or Foe?

As a financial services lawyer, I understand the trepidation some feel regarding Fintech. But as one who has observed its inexorable march onto financial services’ centre stage, I am unequivocally of the view that the upside of Fintech far outweighs the downside.

But before I get into the whys and wherefores of why I think Fintech is more friend than foe, I thought you could get some comfort from knowing that you’re not alone in being concerned about the impact of technology in your industry/profession.

Parallels with the legal profession

Yes, Fintech is ‘disrupting’ and forcing change in financial services. As a lawyer, I can tell you that competitive pressures helped reshape our profession quite a few years ago. And technology continues to ‘disrupt’ our profession, providing both risks and opportunities to this day. Clients can source templated agreements online; they can access DIY wills; they can even easily access and research the law for free via sites like Austlii and Comlaw. The technological change in the law continues at such a pace that some say artificial intelligence, ostensibly using cognitive computing, will soon be able to reliably provide legal opinions and decide cases as well as a whole lot more of what a lawyer does!

For lawyers, the real changes started when there was deregulation of conveyancing services. Long the lifeblood of many legal practices, you could imagine the concern when it looked likely that non-lawyers would be able to provide conveyancing services. But such structural changes (as with financial services) were only the precursor to more technological change.

But am I concerned about these developments? Not really. As far as I’m concerned, allowing conveyancers to do a lawyer’s traditional work is a good thing! It helped me decide (not that I needed much prompting with this) that I wouldn’t focus on conveyancing. Similarly, template documentation has successfully met a demand for non-tailored agreements. Low value work has successfully been outsourced, leaving lawyers to concentrate on the real value-add work. There’s a chance that a lot of these clients would not have paid for bespoke legal services anyway. And if, or when, these accessible solutions turn into problems for clients they turn to lawyers for their expertise in sorting the problems out.

The rise of the boutique

As technology extends its tentacles in the legal profession, one of the trends we have seen is the rise of boutique and niche law firms with deep experience in particular and narrow areas of practice. Generalist law practices are a dying breed. Indeed, imac legal itself is a product of these machinations, focusing exclusively on financial services and commercial law. I accept that technology will continue to eat into some of the tasks that I currently do. But I also have confidence that technology won’t replace everything that I do as a lawyer and compliance consultant. One of the things I consciously do is adopt technology through my practice. I appreciate the efficiencies and solutions it can bring. I also try to keep abreast of technological changes so I can try to ‘read the play’ and identify where all this change is heading and what it means for my business.

The current Fintech boom has many of the same hallmarks. In the main, Fintech is providing technology-based solutions for procedural-based and lower value work, leaving advisers and planners to concentrate on the real value-add work. But of course, especially with algorithm-based Fintech solutions, more and more sophisticated problems which were once the domain of the adviser are now also starting to be solved by technology.

There is no doubt that, as with the law, Fintech is narrowing the scope of practice of many financial planners and advisers. But the corollary of that is that, with a narrow scope, it is much easier to focus on particular niches or areas of expertise. And let’s not forget that Fintech can provide solutions to a wide array of consumers who either couldn’t have afforded a financial planner/adviser and/or are seeking low cost DIY-type solutions. In each case, these people are never likely to have been paying clients anyway. That’s got to be a good thing – more people benefiting from financial services and less tyre kickers in your practice!

As one who consults regularly with the industry, I have already started to see more ‘specialisation’ in financial services – individuals and firms with deep experience and insights in particular areas of practice. Whether that be high net worth individuals, risk only, wealth creation specialists, strategic-only advisers, retirement specialists, estate planning, superannuation, and so on. Such specialisation will, in my view, continue to proliferate if the experience in the legal profession is any guide. And naturally, many of the big financial services players are really started to get a handle on Fintech. After all, it represents a new ‘distribution’ frontier for them at a time when industry participants are starting to move away from the old distribution paradigm that put manufacturers’ products front and centre.

Fintech won’t replace people

Of course, any change can be uncomfortable, but embrace both the technology and the change and very soon you can start to reap the rewards. Yes, some strategic re-thinking regarding skills, markets and business model may be required so you can identify your real value-adds. But the outcomes can be greater clarity, focus and success. While Fintech may indeed encroach on some of your traditional markets, just like lawyers it won’t totally do away with the need for real people. Clients love to do business with other people. No matter how smart the Fintech gets, it isn’t a substitute for that human connection. No supercomputer in the world can create empathy and human connection. They can’t lend a helping hand and provide comfort and succour when required. And no computer in the world has your unique experiences and insights. At the end of the day, I think how we deal with Fintech will come down to our attitudes about it. Maybe our erstwhile Prime Minister, Malcolm Turnbull, was right: there’s never been a more exciting time to be alive.

Ian McDermott is Principal Lawyer with imac legal & compliance, a legal firm helping small-to-medium financial services businesses.

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