How the ground is shifting in the financial advice landscape

To improve the client experience, wealth managers and private banks will soon combine people with digital technologies

How the ground is shifting in the financial advice landscape

Advisors who work for or with wealth managers and private banks may soon notice changes in their client interactions and advisory services.

According to a new report by Ernst & Young (EY), the combination of people and digital technologies will enable them to “deliver wholly personalized advice.” These companies will save costs by "exiting non-core areas" and instead restructure and integrate services with retail banks, the paper's authors, Jan Bellens, Mike Lee, Valerie Nott, and Mark Wightman, predicted.

As reported by ThinkAdvisor, EY said these future modifications will be defined by six factors: Automated data-driven insights that adapt to changing demands and circumstances; experiences that are personalized to the needs of the client; traditional and modern wealth products and services combined in holistic advising; transparency and trust at an all-time high; value creation that is stronger and more transparent for all stakeholders; and participation and accessibility on a worldwide scale have improved.

EY also identified four "strategic themes" that will determine the future of advice.

First, the disruption of current client expectations which includes creating "personality portraits" to better understand client requirements and better shape models to meet them. These must also be adaptive to shifts in customer investing objectives, ethical convictions, and digital appetites, which vary widely.

Second, the democratization of advice which involves a shift toward direct indexing, private assets, fractional ownership, and tokenization, allowing for the trading of private markets and physical assets.

Third, integration of people and technology. Getting this mix right means providing "high-value omnichannel advice in real time," which EY believes will be difficult because it requires firms to "incorporate" digital with tech-enabled remote advisors. However, this should improve advisor performance while also lowering the cost of serving each client, according to the paper.

Fourth, the use of data and technology in advice generation. EY reports that Asia-Pacific (65%) and millennial (78%) investors believe digital tools have enhanced decision-making. Only 51% of people in North America believe this, while 34% are undecided. Men (59%) are more inclined than women (51%) to believe this, whereas the very high net worth (68%) and ultra-high-net-worth (66%) say digital tools have helped their decision-making.

As a result, many people are missing out on this transition which means businesses will need to use AI to "create insight-rich counsel" using client data.

There are some requirements that businesses must meet to make these modifications.

The first step is to choose a model for delivering better customer experiences.

The second requirement is to make the necessary investments to attain the desired model. Technology, as well as a wider range of products and more skilled personnel, are essential.

Finally, to achieve these objectives, the correct advisor training, strong collaboration amongst business divisions, and clear communication from leaders are required.

“Maintaining organizational agility and flexibility is a particularly important priority, and one that is often underappreciated,” the authors conclude.