A new graduate capstone research project will apply analytics and artificial intelligence to financial advisor client testimonials in order to calculate a metric called "relationship alpha."
The program will track customer feedback from thousands of reviews from advisor directory Wealthtender and will use methods like natural language processing and machine learning to quantify the value of the relationship, according to
With a growing focus on how
Additionally, relationship alpha could represent an alternative to traditional industry rankings
"My argument is, just because you're a big firm with a lot of AUM, that doesn't mean you're adding a lot of value for your client," Rao said. "So we want rankings of advisors based on the perceived value of the client."
READ MORE:
Fertile research area
Planners frequently criticize the industry's fixation on AUM, as well as what they view as a misconception among the public, and even some fellow professionals, that portfolio management is the main reason to work with an advisor.
The research should help refute those misperceptions through analysis of anecdotal data reflecting that what "really matters in a people business is how people respond to it," said Matt Regan, president of Richmond, Virginia-based independent advisor services and registered investment advisory firm Wealthcare. Advisors will benefit from more digital tools that show that they are more like "life coaches" than investment managers, while firms recruiting them can more easily pitch their abilities to manage tasks like compliance and trade execution that don't contribute as readily to perceived value, Regan said.
"All we're saying here is that we'll free you up to be able to spend more time with clients and more time with prospects," Regan said. "The deeper client relationships are built around the planning process, not the investment process."
This research likely wouldn't have been possible
The idea for the research came up after Thorp met Rao, who connected him with Michael Sury, the director of the master's program's financial analytics courses. Wealthtender has signed on as a $10,000 sponsor for the Wealth Management Center's third annual conference next month, and Thorp paid for some drinks at a student event. But he said there are no underlying financial arrangements for the capstone program.
Besides the fact that the new relationship alpha statistics could shed more light on "all of the value that advisors are creating outside of investments," Thorp sees potential for the professionals themselves and their firms to use the data to find their strengths and weaknesses.
"You can start to see, 'This advisor that we have is really good at creating feelings within their clients around these particular areas,'" he said.
READ MORE:
Industry-academia collaboration
Those types of lessons could begin to emerge later this year from the school's Wealth Management Center. The center got its name in 2024 after a gift by Candace and John Langston, a husband-wife duo who are respectively a managing director and the CEO of investment banking and M&A advisory firm Republic Capital Group. The school's advisory board includes some big names in wealth management, such as Tom Bradley, a managing director of Charles Schwab's Schwab Advisor Services; Rajini Kodialam, a co-founder of Focus Financial Partners; and James Poer, the CEO of Kestra Holdings. The board and the "wealth management network partners" listed on the program's website include representation from Dimensional Fund Advisors, LPL Financial, PIMCO, Steward Partners and Corient Private Wealth.
At 239 students, wealth management is the fastest-growing minor at McCombs, Rao noted. Through other collaborations with the industry, the students have learned BlackRock's Aladdin portfolio management software, visited Morgan Stanley's headquarters and gained access to courses on private investments through the Investments & Wealth Institute. The school also participates in research on cognitive decline and elder fraud risk and neuroscience in wealth management, and it is hosting a student competition in client analysis and case studies judged by industry professionals.
The Wealthtender research comes at a time in which "everyone in the industry believes there are some drastic changes needed, but they're not exactly sure what they are," Rao said. Just as the looming "
"Advisors have to show how they're contributing value in other ways," Rao said. "'Wealth' is defined very broadly to include not just the money you have in your bank but also what you can do with the money to achieve your life goals. … When the clients are changing, the professionals have to change."
