Som Seif believes advisors still can’t answer their clients’ most important question

‘Am I going to be okay?’ That is the question that almost every single client needs their advisor to answer. Yet, somehow, it’s the hardest question to answer definitively. According to Som Seif, Founder & CEO of Purpose Unlimited, that difficulty is not a failing on the part of advisors, but a systemic issue, one that stems from the wealth management industry’s roots in stock trading and its uneasy transition into a planning business.

That tension was highlighted in a recent survey of Canadians, Canadian High Net Worth Investors, and Canadian advisors conducted through a new initiative at Purpose called the Canadian Momentum Project. The survey identified a clear demand for advisory services, 70 per cent of Canadians surveyed said they want to take an active part in growing their wealth, 67 per cent want to learn about new ways to grow their wealth, and 75 per cent want strategies that help their money last longer. Advisors reflected this desire back, with 89 per cent saying financial planning and plan creation is important. However, 63 per cent of advisors said that clients regularly require more support than existing tools provide and 43 per cent saying that creating tailored advice for each client is difficult. This gap between ambition and service delivery, in Seif’s view, is a product of this industry’s roots and structure.

“The industry itself has a lot of frictions, and it’s been an industry that hasn’t prioritized innovation, hasn’t prioritized operational rigor and structure to allow for a reduction in friction. And as a result, it also hasn’t therefore supported the kinds of things that end investors and advisors need to deliver the value they want,” Seif says. “Advisors ultimately want to deliver more value to their customers, but the way the industry operates today has bucketed them into being a portfolio manager and ultimately leading with product as opposed to really thinking about the clients at the core and solving their long-term journey with financial services.

“What clients start with is a hierarchy of needs, which begins with, ‘let me know if I’m going to be okay.’ That’s the first question that they need answered. The industry, both from how advisors can articulate it to their clients and how investors are hearing it, is not getting that answer.”

Why answering the question is so hard

Seif blames the difficulty advisors and clients have in answering that question on the infrastructure that exists in the industry. While he acknowledges that the industry has come a long way in making advisors into planners, there are still technological difficulties that come with planning at scale. He says that plans are often delivered as single transactions, and what the client largely experiences from then on are a series of account statements. They see columns breaking out investment returns and contribution limits, but they don’t see how all the pieces fit together for them. While the plan offers clients a snapshot answer of their fundamental question, the updates they receive are wrapped in the symbols and signifiers of a stock brokerage. The updates feel alienated from that initial plan.

What Seif believes clients and advisors want is a more ‘holistic’ financial relationship. He says that advisors should be able to work with clients on their daily spending, their mortgages, their lines of credit, and all the other aspects of a client’s financial life. Right now, however, he says that advisors largely lack the infrastructure to interact with clients beyond the realm of investment management. They lack the systems and the data to do more.

“That’s why advisors feel like they’re working with one arm behind their back,” Seif says.

Clients’ alienation from their plan is not the only consequence of this siloed financial services industry. Seif believes that because advisors are still rooted firmly in the world of investment management and product, they end up failing to fully grasp their clients’ goals and plans. People are inherently dynamic and as they change, advisors don’t have tools that can update their plans at the scale required for a practice. As a consequence, they become alienated from the client.

Solving for the industry’s silos

On an individual and practice level, these challenges have been identified and solved for before. Many advisors will pursue more credentials, adding a CPA certification for example, or they will build a larger team with more expertise. Seif describes those as “band-aid solutions,” noting that many teams lack the scale and capitalization to bring on dedicated planners, insurance specialists, and estate planning experts.

Seif says the solutions have to begin with the back-end of the business, with data integration and the linkage between planning and portfolio management software. He believes that if those backend pieces can talk to each other and factor in an understanding of the client, then their periodic statements become genuine updates on their progress towards critical goals, not abstract lists of accounts.

This call for renewed investment in infrastructure and innovation comes at a time when markets at historic highs and the wealth management industry is doing incredibly well. The industry has doubled in size over the past decade and looks set to double again. Large, established broker-dealers are not incentivized to make these kinds of investments. Seif, however, appeals to a sense of customer service and satisfaction arguing that customers are not yet fully satisfied by the industry’s offering. He uses the example of Wealthsimple to show how rapidly a service that’s better aimed at customer satisfaction and experience can grow.

“We’re in a time today in Canada where our leaders are asking us to be more ambitious, our industry is asking us to be more ambitious, Canadians are asking us to be more ambitious, I think it’s a real call to action for us as an industry,” Seif says. “Financial services plays such an important role in the economic wealth creation of Canadians, and we have a huge opportunity as a country.”