In April, BlackRock added independent broker dealer LPL to the roster of large financial firms signed up to bring its FutureAdvisor digital advice platform to its adviser force.
Though the firm had the resources to build its own digital platform, LPL Chief Information Officer Victor Fetter says his firm weighed a number of factors before deciding on the asset manager’s digital offering — a process that he adds every firm has to make.
“What customer experience do you want to have? Fetter says. “Make sure you understand how you want to go to market and what you show your customers,” he tells Money Management Executive.
In an edited transcript that follows, Fetter delves into LPL’s digital strategy and provides insight for every asset management firm. There are three areas for LPL’s tech strategy, he says: automated advice, big data, and cloud computing.
Why add a digital advice platform?
Look at areas like processing transactions. The industry at large years ago was faxing forms back and forth. Now an e-signature is coupled with an automated platform and you can see the velocity and the quality of those tranactions going through the system much faster.
Bringing those tools into the marketplace has freed up an adviser’s time. If you look at where we’re going, you see that coming through in the automated advice platform. You see us overhauling our account open process — again, just trying to make the process of opening accounts more seamless — and you see that coming through the engagement portals we make for our advisers to engage with our investors. The online portals, you see things happening there around how we show performance results, how we show mapping against goals, how we report on performance and ultimately go green, all through that lifecycle.
You’ll see a lot of evolution happening. I think the opportunity for advisers that you’ve alluded to is they’ve got to embrace those tools in their business, and what we’re doing at LPL is walking alongside them to say, this is how you can change your business.
We have something called technology ambassadors and we’ve asked advisers to name an ambassador that can keep up with marketplace technology, and more importantly what we’re doing at LPL so they can reap the benefits of that in their practice. We do that with training, we do that through our business consulting team; all those resources come to bear to make sure all our advisers are maximizing the tools that are available.
Is it difficult for advisers and financial firms not to see technology or any innovation as a threat?
We’re proven through our big data and analytics work in-house the correlations between adoption and utilization of technology and business growth, and that’s been pretty helpful to help advisers understand — I’m not sure if you can make an exact linkage, but if you can say, ‘Look at the broad book of business and here’s people we see using technology to its maximum, and here’s what their growth pattern looks like, could you join in the same journey?’
We did something recently that we call the adoption index. Everybody knows their credit score, and everybody knows , “How much do you need to retire? What’s your number?” I said is there a way that we can translate that into, ‘How efficient your practice is in using technology?’
We took a number of our capabilities and we matched them up, and said, “Based on how well you’re using technology, this is your index.” What that does is give advisers a benchmark for their offices and you see advisers rallying around this and setting new goals for their own practice efficiency. They can take advantage of technology in a different way and free up that time and grow the business.
Is that what you recommend for advisers who might feel some trepidation or confusion about what’s happening in the industry?
It is. We want our advisers to feel like they’re being supported, and we could’ve picked many different adoption measures. We chose four or five just to start the conversation, and I think that it is important. I think advisers are overwhelmed. You hear about robo advice today, or this fintech, or this startup, or this solution; how many CRM providers or goal-plan providers are out there? They get overwhelmed, so what we want to do is say, “We don’t want to you to be the chief technology officer; we want you to give good wealth management advice.”
That’s the role we want to play; take that complexity out and give them a simple platform to run their business. It’s through that simplicity that we can help them pinpoint and help them say, “You don’t have to bite the whole apple,” or whatever the expression is (laughs).
As a technologist, would you tell advisers that they don’t have to be chief technology officers, but they do need to be knowledgeable about technology from the practitioner’s perspective?
Oh yes, they have to be knowledgeable, and we fully support them in being aware of what’s going on. What we’re advocating is that we are going to bring the solutions in an integrated fashion to help you maximize your business so that you don’t have to figure out how to stitch it all together yourself.
From a technologist’s perspective, if millennial investors grow up and are nurtured on utilizing the automated format, why would they ever abandon that when further advances in digital advice are almost guaranteed?
As a technologist I think that there is a point that you will turn to personal advice. I think where the industry, or market, eventually figures out what that benchmark is, I don’t know. I’m, not a futurist that can predict the size of assets that could tip you over.
But I can make the analogy that this happened in the medical space with the Internet. You have some symptoms of a cold or allergy, you type it in and take some medicine, but then if you really feel sick enough you are going to go to the doctor. That is because there are some challenges that force you to say, “I am not an expert.”
As a result of that, you do want someone that can give you that confidence that your wealth plan is going to hold up so you can buy a lake house, send your kids to college and retire, and all of those goals and dreams that are out there. I think it’s a part of the equation, but I don’t think it will ever get to the point of replacement.
People still hire tax preparers, however TurboTax has become very advanced since its original release. At what point when we’re developing all of this technology does it become a self-fulfilling prophecy and replaces us?
There has been positive progression and we have all gotten benefits from those developments, but you have never seen a complete disruption. You have never seen obsolescence come out of the tax industry, out of the physician space or out of the computer space, and I think the same holds true in the advice space.
Will you see some shifting landscape? Yes. But I don’t think you’ll ever see complete obsolescence.
But the adviser will have to understand that the way they do things now will not be the same in 20 years.
If I can use our advisers as a benchmark, and when we speak to our advisers, they recognize the change. They recognize we are different from 20 years ago and there is going to be a difference 20 years from now. I think our advisers are fairly progressive in that view. When we talked to our adviser council and they give us feedback, I think they give these macro shifts — whether it be in technology, or regulatory space, or whatever the case may be — and recognizw that they need to be agile.
What I like about what we do, and why I’m passionate about LPL, is we’re willing to walk along side of them. We’re willing to help them through those changes and we helped them through the downturns of the markets, we helped them through that with new technology and we’ll continue to help them no matter what comes ahead.
From a CIO perspective — what do other executives in your position need to consider regarding building, buying or investing in technology?
For us, a couple of key points. What customer experience do you want to have? Are you sure you understand how you want to go to market and what to show your customers? There is definitely a time dimension and time to market and understanding that, and that’s beyond automated advice; really any decision we make, there’s a cost associated with it… and all of those come into play when you make those decisions.
The one thing that trumps them all to us is, ‘Where are we unique, and where do we want to manage and own IP for the core of an experience?’ That has to enter the equation as well.
So, we look at different providers out there, different fintech offerings that are emerging, our own ideas and it’s a complex puzzle. You have to put all of this together because you have to make sure that you can find the right solution for all of those different levers.
What is the future for LPL’s technology strategy beyond this partnership with BlackRock?
We continue to evolve, taking advantage of the technologies available in the marketplace, in each of those areas that we have been talking about: automation, automated advice, big data, cloud (we run our own private cloud). Whatever that may be, you will see continued evolution.
One of the things that our advisers see the most is continued change. Once every year there’s a big announcement, that’s it, and check back next year.
You see this continued evolution of solutions being deployed, so they know that we are making significant investments in technology and we are doing it in all of the areas that you would expect.
One analyst said had LPL kept up (early in-house digital platform) NestWise, there would be no reason to rent a solution from BlackRock. Could it have become the solution and negated the need for FutureAdviser?
That was a little bit before my time, and I am not an expert in NestWise, but I think what you do see us doing with the culture of the company is we are making various R&D decisions and plays to address different parts of the market and different strategies.
I think we learned a lot through NestWise, a lot of those learnings fold into not only the robo strategy, but all of what we do in training new adviser development, etcetera. But, it would be premature for me to make a statement on whether or not that could or could not have met that specific need.