What is the single greatest threat to advisors?
On one hand, you have a client demographic that is quickly evolving. It’s not the traditional client base of the aging Baby Boomer anymore. There’s been a huge growth in millennial women investors that are accumulating more wealth than ever before. It’s a totally different demographic than ever before and likely needs to be serviced in a slightly different way. On the other hand, there is all this disruptive technology enabling innovation at a much more rapid pace. So, how do you make sure you’re staying on top of that to service a much more diverse population of clients who are ultimately expecting a lot more from technology. With an aging advisor population, keeping up with some of these trends and staying relevant with a diverse population is going to be a huge challenge.
What technology tools are advisors asking for?
Our advisors at the end of the day are asking for us to make their lives easier and simpler. On one hand, they want to be able to remove the administrative burden while being able to deliver a richer client experience. Technology is delivering solutions that enable comprehensive planning and better product solutions like investments or credit to help advisor offer more complete wealth management advice.
The biggest tech that advisors or asking for is a highly integrated experience to minimize all the fragmentation across multiple applications. The data is key and how you can deliver easy access to information becomes paramount whenever and wherever advisor are.
What technology is enhancing the client experience?
We’re looking at how non-financial firms are creating user experiences and how they’re developing those technologies because that is the bar. Clients aren’t just using apps in financial services but technologies from every industry. They’re using an Uber app right on their phone and then switching to a banking app and we need to be on par or even better than some of the other technologies that clients have. That has definitely been a huge challenge for the industry. It’s all about meeting the higher expectations of our clients.
Are the FAANGs threats to wealth management firms?
They are already in the financial services and are flirting with entering wealth management. If they choose to compete, they will look very different from the established firms with traditional wealth management models. They have a lot of information about clients and out in the marketplace. They would be able to provide advice on a massive scale through personalization, better targeting and characterization. If Amazon, Facebook or Apple came out with wealth management products, various industry surveys suggest there is a high percentage of customers that would make the switch. But it depends on how they approach the market. Would they be a direct to consumer servicing the masses? Probably. They will play to their strengths. They’re not targeting HWN clients with highly personalized needs. They will likely start on the exact opposite end.
Schwab recently switched to a subscription fee for digital clients. Will other firms follow?
Pricing in the industry will evolve overtime. We have definitely seen examples of different models like a pay-per-use plan to conduct a one-time fee for a financial plan. The movement from AUM-based pricing is not going anywhere. That is still going to hold because it has been such a prevalent model for advisors. But the notion of tying prices to fees and overall value is going to become a bigger questions overtime. The old model was based on asset allocation and that is now changing into one based on financial planning. How do you start to price in those types of areas that match the level of service and the level of value firms are providing? Schwab is just one indication. Pricing is evolving.
What is driving competition?
New fintechs are offering cloud-based technologies that allow firms to now operate at scale and at pace right away which allows smaller firms to get up to speed with more modern stacks that are not tied to legacy systems. That is very attractive to the advisor population. The competition is not just coming from large, scaled firms. The reason for a lot of the disruption is because of low-cost technology, like AI and the cloud, that is allowing smaller firms to compete.
