Technology can be useful for scaling advice, but investors are still looking for personalized connection
As fee compression permeates the entire financial services industry, the need for retail-focused firms to scale products and services is becoming clearer. Technological solutions can play a key part — but advisors should not take the client experience for granted.
“Technology tools can do an excellent job at helping clients and advisors through processes like data aggregation and initial assessment,” said Scott Smith, director of advice relationships at
Cerulli Associates. “But they are simply not the interface many prospects would prefer to use when working through the details of the ongoing comprehensive planning process.”
According to key findings from The Cerulli Report—U.S. Retail Investor Advice Relationships 2019: Scaling Personalized Advice, over half of investors from retail households surveyed in Q2 2019 agreed that they would prefer to interact with a human rather than use the latest technology tools.
The result held true across all participating age groups. Among household heads who were less than 30 years old, 53% preferred human interaction. The same view was held by 53% of heads of households aged 30 to 39; 60% of those aged 40 to 49; 63% of those aged 50-59; 74% of 60- to 69-year-olds; and 75% of those older than 70.
And while practices may invest in digital platforms designed to improve their investing services, the latest survey suggests that retail clients need something more. Among investors polled in the second quarter, 37% indicated that they would prefer to receive more financial and investment advice than they have in the past.
This is not exactly a new trend. According to Cerulli, the segment of investors indicating interest in a more comprehensive financial advice relationship has consistently fallen between 33% and 41% over the last 10 years.
“Top providers are spending millions annually touting their wealth management offerings to prospective clients, but many investors have yet to find their optimal relationship,” Smith said.
The way forward, then, is to find an optimal blend of hybrid advice. The report reminds advice provider firms to prioritize client experience when they design their platforms. By using model portfolios, for example, advisors will be able to spend more time on client-facing activity, which Cerulli said is highly correlated with heightened client satisfaction and walletshare growth.
Digital platforms may also provide a useful framework or barometer to help assess clients’ emotional needs, but they have been of limited use in addressing them. Advice providers must therefore use digital technology tools available to them to help human advisors address clients’ full spectrum of financial needs, both objective and emotional.
“The real value of advisors will not be in capturing excess returns versus a benchmark, but in identifying the next best action in helping improve their clients’ outcomes,” Smith said. That could include optimizing risk exposure within client portfolios, which advisors could take as a chance to foster an ongoing dialogue; advisors could also collaborate with clients to ensure that the established goals within a plan actually align with the requirements for clients to enjoy a satisfying retirement.
And from a marketing perspective, providers must also regard automated investing as a component of their offering shelf, but not the centerpiece. By stressing the diverse array of tools available to them in helping clients reach their goals, they can showcase their capabilities while still putting clients’ objectives at the centre of their promotional campaigns.