© 2020 Arizent. All rights reserved.

Firms Missing the Mark on Millennials’ Digital Expectations

If your firm wants millennial investors, it's going to have to spend more on technology. But not the way it has been doing already.

The billions annually spent by companies on technology are weighted too heavily toward back-office and middle-office I.T. infrastructure. More needs to be allocated to client-facing upgrades instead.

That's one of the upshots of Aite Group's research into the efforts of broker-dealers and financial advisors in attracting Generation X and Y investor assets.

Some examples of the tech gap are glaring. Aite found that nearly half of the advisors they surveyed still don't have their own websites in 2015.

“CEOs and other executives must be leading the prioritization effort at a high level,” says Sophie Schmitt, senior analyst of wealth management at Aite Group. “Allocating the right amount of the IT budget towards digital innovation projects and also, at some firms, towards expensive infrastructure-modernization efforts require executive commitment and leadership.

“A common approach that firms are taking as well is to leave their legacy systems in place for now in order to focus on the advisor front-office and client-facing digital applications,” she says. “This allows firms to move relatively quickly and more cost-effectively with implementing visible digital improvements versus if they had to embark on back-office replacements.”

For example, Schwab is investing $5 billion to modernize its back-end tech, which will impact the client and staff experience. This investment is part of executives’ desire to be able to deliver a more automated service to clients and improve the front-end experience.

Most wealth management executives get that the investor profile is changing. Aite reports 72% of wealth management IT executives cite improvement of client experience as a first or second priority in their decision to implement digital solutions.

But that stated intent hasn’t translated into the kind of digital experience that all investors are seeking out.

Among the 402 U.S. financial advisors the firm surveyed in the second quarter of 2014, Aite claims it’s a mixed bag in both action and thinking.

Nearly 60% of advisors agreed that effective digital communications are important for acquiring Gen X and Y clients. However, only 55% of those respondents had their own website, which seems unbelievable in this day and age. Advisors are still playing catch-up and Aite expects that even in a couple of years, this will be 80% within a few years.

“Most advisors are over 50, have built their book of clients and don't feel the need to invest in a website to grow their practice,” Schmitt says. “Another reason for the 55% is that many advisors rely on their home-office webpage -- typically a cookie-cutter site with basic contact information and bios -- and are not actively managing the site and pushing out content.” 


Advisors’ Web presence may actually be higher than 55%, as that percentage represents the share of advisors using a website to acquire clients and service them, Schmitt clarified.

“The 70% to 80% estimate is due to advisors who don’t see the need to invest in a website to grow their practice or service clients with fresh content,” Schmitt says. “Clients are happy with the advice they receive, and advisors may not feel they need a website.

“Note also that an advisor website and a client site can be two different things,” she says. “Clients no doubt have their own site to go to where they can see their portfolio information.”

In addition, less than half of surveyed advisors (slightly more than 40%) agreed with the importance of providing digital self-service tools to young clients that offer “a combination of high-tech and high-touch service.”

“High-tech/high-touch is not necessarily a balance that a firm can define – it’s really users defining what they want,” says Chris Psaltos, vice president of product management at Scivantage, the cloud-based IT and financial software provider that commissioned the research.

“In the advent of the digital age, consumers consume information when, where, how and on what device they want, whether it’s a laptop, tablet or phone.

“As far as relationships with broker-dealers and advisors, I might have a preference for more of an arm’s-length relationship with my advisor, but you might want a more engaged relationship with your advisor,” he says. “Firms need to acknowledge that and provide a behavioral focus to interpret that mix properly for each client.”

The industry has been able to get away with their tech outreach so far without much impact. Nearly 60% of baby boomers get their financial advice from a traditional investment firm or advisor, Aite says, noting that even though that figure drops to just 27% of Gen Y investors, only a small percentage of that group (23%) are using personal finance management websites.


It might be that client perception isn't enough to prod change among some providers. But fear of digital competition is having some effect.

“It’s putting pressure on the [traditional] business model, and while the advisor model is not going to die off, an evolution is under way,” Psaltos says. “Despite the claims of some [robo-advisors], there will not be a mass extinction of advisors.

“It’s pretty universal that wealth management firms, retirement and fund companies, as well as self-directed investors, have been looking at the leaders in the fintech space, following them and improving the tools that are available to their stakeholders.”

But to be competitive will require some planning. It means evolving a digital strategy to focus on customer needs rather than a traditional operationally-driven need to build IT infrastructure.

“The demand for great technology and seamless access to investment information and banking accounts has already been set and the bar is very high,” Psaltos adds. “Firms that have been slow to build out their digital presence are rushing to fill the gap, while other firms are trying to keep up with the leaders in the space.”

Read more: 

For reprint and licensing requests for this article, click here.