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The shift to fee-based planning may have a fatal flaw

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SAN FRANCISCO — Wealth management firms need to do more with client data.

Legacy systems are set up to sell product, and aren’t able to effectively serve the customer standing alone, says Anton Honikman CEO of the enterprise wealth management firm MyVest. Instead, they often must take into account outside client data — like held-away assets.

To really switch from a product view to a client orientation, firms need to aggregate and collect more, Honikman told Financial Planning on the sidelines of the In|Vest West conference. Not just about specific products such as insurance, annuities or 401(k)s, but also non-financial factors such as family information, health and goals.

“To undo all of those layers of industry that were built for an orthodoxy that will one day be obsolete is a huge challenge,” he says. “Massive organizations don’t move at speed, but they’re are going to increasingly need to.”

Acquired by the financial services provider TIAA in 2016, MyVest has since launched a new technology suite to digitize advisor tasks and provide more data. For firms that create and utilize more sophisticated data, revenue can grow by 16.7%, according to research by the consulting group Aite.

However, problems can arise from a fragmentation of client portals, reliance on vendors and the outsourcing of all digital operations, he says.

Read what Honikman has to say about the importance of client data and the potential that tech giants like Amazon or Google are eyeing a spot in wealth management.

Why is data so important?
Data is part of the solution. Most of the data that’s collected is around products rather than around clients. We have to start building data around clients that span all of these silos, including held-away assets and liabilities. Then you finally are in a position to start with the client. You can build reports and dynamic advice engines and start — for the first time — to operate in the best interest of the customer.

So what’s the holdup?
Digital technology is going to allow the industry to become more customer-centric.
The orthodox legacy is very product-centric, and in part that is cemented in the fact that financial institutions have been built in very large silos around individual product lines or channels — but not the consumer’s best interest. It’s very important those silos get bridged if we are sincere as an industry [about] looking after the financial wellness of the consumer.

What are the challenges firms are facing?
The biggest source of the problem is inertia. There are decades and decades of legacy. You have antiquated core processes and siloed organizational architecture being built around them — including business units, management teams and budgets.

What about competition from truly customer-centric companies?
A lot of people say these big tech companies won’t get into wealth management because of regulatory scrutiny — but you can borrow the regulatory infrastructure. I think Netflix and Amazon and Google are well situated. They certainly have the tech chops and have the customer relationships. They are already demonstrating the ability to form relationships to help with regulatory challenges.

What should firms watch out for?
Firms can’t look at the annual results when some of these results will take multiple years to play out. To undo all of those layers of industry that were built for an orthodoxy that will one day be obsolete is a huge challenge. Massive organizations don’t move at speed, but they are going to increasingly need to.

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