Digital trends in wealth management mean the traditional wealth advisor has a "narrow path forward to opportunity," according to Celent's latest report on the state of the industry.
"Advances in digital technology have empowered clients to expect omnichannel and flexible delivery of low-cost services across the preferred channel regardless of firm segmentation, with collaboration tools, reporting, and aggregation,” says Will Trout, a senior analyst with Celent’s Wealth Management practice and co-author of the report.
But even as human advisors adopt more digital tools to stay competitive with robos, the Boston-based consulting firm notes "there is some risk that they undermine their already weakened claims to differentiation."
The advent of robos has commoditized a number of functions performed by traditional advisors, the report notes: "Rebalancing, reporting, investment strategy and performance are not differentiators."
Whatever digital tools an advisor selects, they must guarantee the ability to connect in real-time with clients, Celent adds, as the one advantage advisors have over robos is that financial planning is still very much an emotional exercise.
"Automated advice, although making great strides and improvements, still tends toward a cash flow-based approach," the report notes. "Thus 'robo planning' may fill a void in servicing the mass market, but is not yet a viable alternative for investors with more complex needs."
Still, Celent's report took aim at an industry attitude to focus on high-net-worth and ultra high-net-worth clients, warning that segment will reach saturation, and mass affluent "represents an underserved and most obvious opportunity to wealth managers."
Examining technologies being implemented in the industry, Celent advises that advisory firms need to better synchronize their technologies, both front-facing and back office systems.
The report also argues the industry needs a better approach to implementing technology, positing that the term disruption is used too often, "in danger of becoming a meaningless buzzword."
"Clear opportunities for advisor-led financial planning remain, provided that financial planning adapts."
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