Are You Set to Embrace Automation for Your Client’s Sake?

Originally written by David Benskin for Financial Advisor IQ on April 28, 2016

Now that robo automation advisors are a mainstay on the wealth management technology landscape, new strategic questions arise for human advisors, broker-dealer technology executives and, really, anyone running a financial-service business these days.

And that fundamental question is: how can legacy firms embrace the best of robo automation to enhance the client experience and drive operational efficiencies in order to increase revenues? Particularly in a post-DOL, post-robo world, pricing pressures will become yet another reality that will hinder growth going forward, creating urgency for executives to act now.

While initially, the industry’s reaction to the entrance of the robos was one of denial and hope that the early robos would just fizzle out and go away, these online advice purveyors proved more resilient than most critics thought and now have a foothold in wealth management.

Not so much from the tiny, annoying, VC-backed upstarts, but rather driven from the mainstream acceptance by the giant online brands Schwab, Fidelity, and Vanguard along with the massive asset managers Black Rock and Invesco making large strategic bets on automated advice through their acquisitions.

The reasons why are clear to see.

While the idea of an algorithm managing and rebalancing portfolios is absolutely not a new idea, the robo advisors’ front-end interfaces with their simplicity, self-service abilities and aggregated views on any mobile device are transforming the client experience in wealth management.

In today’s world where consumers buy products and services with a few swipes on their smart phones in order to get it now, who in the future will want to drive to their advisors’ office, fill out 35 pages of paper account forms and agreements, just to get started with investing or switching advisors? Or have to peruse and manually reconcile statements and account information held at multiple institutions just to make sense of their entire balance sheet, net worth and financial planning analyses?

The message is clear: in order to succeed in the post-robo wealth management world, advisors, broker-dealers and their executives are now playing catch up in client experience technology and need to level the playing field or risk being left behind – a true Kodak moment if there ever was one.

According to a study by global consulting firm, Cap Gemini, 64% of affluent individuals, including high net worth investors, expect their future wealth management relationship to be digital.

Additionally, 65% of affluent individuals, including high net worth investors, will leave their wealth management firm if an integrated technology experience is not provided.

Industry experts all agree that to succeed in the post-robo wealth management world, advisors and broker-dealers need to solve for the new client experience technology gap.

Which brings up the key strategic question, do you build it, buy it or rent it? Clearly the mega-asset management firms and online brands have the trillion-dollar asset bases to be able to build it themselves, or outright acquire these capabilities.

However for the typical advisory firm or broker-dealer, dropping hundreds of thousands or even millions of dollars on a technology project that can become obsolete the minute it is released has many sitting back, debating what to do.

Unfortunately for the industry, many of the independent platforms that used to provide these types of client experience tools have been acquired by competitors, such as Fidelity’s acquisition of eMoney and Envestnet’s acquisition of data aggregator Yodlee.

Strategically, do you as a financial services’ executive want to place the future of your firm’s technology with a competitor? Do you really want to be at the whims of those institutions that may change strategies down the road?

We’ve seen the disruption that this can cause.

Case in point: Schwab recently killing its relationship with Salesforce and discontinuing a bundled solution, leaving hundreds of firms adrift that now need to replace their entire back office in a short period of time, creating tremendous disruption and pain.

Additionally, there are now multiple ways to bring client experience functionality through extensions of CRM, financial planning and portfolio management system’s client portals. But which one do you choose? While all of these may provide aspects of an online experience and data aggregation, none of these systems specialize in client portals, rather they offer them more as an add-on, and not as a core system.

How can firms go beyond just data aggregation to provide a compelling visualization of a clients’ financial situation that presents actionable ways to provide advice, gather additional assets and add value in a high-touch way?

So, given this client experience technology gap, what can firms do?

Our experience as former high net worth advisors and technologists working with hundreds of institutions have found that the key to success for firms is to have access to both a complete client portal system if they need to get started, as well as a modular, widget-based platform that can either stand alone, or be used as “plug and play,” to enhance existing systems.

This independent, client experience technology-flexible model lets firms enhance – not replace – their current capabilities through a menu of visual-aggregated displays of clients’ entire financial situations, real-time integrations with existing financial planning and performance reporting systems, all available on a compelling mobile-ready platform that includes concierge-level service to help clients and advisors get up and running quickly.

Firms don’t have to spend resources to build and replicate these capabilities themselves and risk obsolescence in this fast-moving space, or rent them from competitors and risk disruption down the road. They can get to market quickly with a superior client experience technology platform that will continually be enhanced with the latest and meet the robos head on.

As you consider your options, don’t wait. The client experience technology gap is only going to widen for firms that sit on the sidelines as the big online brands continue to innovate.

Robust client experience technology is here to stay; the question is – are you?

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