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Take a page from robo advisers: Use the same digital tools

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Advisers are rightfully concerned about the growing adoption of robo advisers among new, younger clients, as it also coincides with the wealth transfer from an aging generation, according to a report by Deloitte Consulting.

In addition, the newer generation expects to be treated as unique individuals, wants control of decisions, accesses on-demand advice, seeks data independently and perceives risks as downside, according to the report.

But there are ways to succeed with these clients, using many of the same digital tools.

For one thing, technology has lowered the cost of client engagement and data analytics.

At the same time, wealth analytics technology can help advisers identify the unique human capital factors in a client’s life and correlate them to a portfolio’s exposure, allowing them to tailor recommendations. This technology also allows advisers to evaluate the upside and downside of multiple options interactively to help clients make informed decisions.

It is no longer sufficient to offer generic models. Advisers must get to know their clients deeply while also using technology to customize portfolios that consider more than age and income.

It is also important to quantify risks and adjust the portfolio as personal circumstances change and the market environment shifts.

Platforms that consider a range of human capital factors such as geography, work sector, health, family, real estate, balance sheet and time until retirement help advisers maximize financial results for their clients. Additionally, this holistic approach allows them to differentiate their proposals and surface risks of which clients may not be aware.
For example, for a high-income software engineer in her 30s living in Silicon Valley, where the tech industry drives property prices, a robo adviser or a traditional risk tolerance survey will most likely recommend a growth portfolio based largely on her age and income. But these tools wouldn’t identify the concentration in technology within her career, property and portfolio.

As another example, consider two clients of the same age and gender.

One is a lecturer with modest income living in college-subsidized housing and leading a healthy, low-stress lifestyle. The other client is a highly paid, overworked investment banker with much higher expenses.

Traditional tools would recommend a higher risk approach for the investment banker who has a higher income, when the lecturer, in fact, has a greater ability to endure market crises.

Clients need different risk assessments as they move through different phases in their lives, such as possible layoffs, marriage, the birth of children, and possibly the care of aging and sick parents. With a platform that analyzes human capital factors, advisers can help individuals fully understand their distinct financial situation in any stage of life.

The ever-changing market environment can be challenging for the most experienced advisers. Available technology can help them mitigate market fluctuations by providing intelligent recommendations.

Platforms that adjust the risk exposure portfolio and compare results over various market conditions allow advisers to propose targeted solutions in a more engaging context.


Although human service is what distinguishes human financial advisers from automated investment technology, advisers shouldn’t complacently think that robo advisers will never be able to deliver such service.

Advisers must embrace new technology. It will help them better understand their clients, while also monitoring and measuring risk metrics and attributions within portfolios.

These tools are no longer solely in the hands of large institutions. They are accessible to registered investment advisers and even wealth managers of banks, demonstrating the evolving future and potential of wealth management.

As a diverse generation of millennials accumulate and inherit wealth, advisers will have to cater to a new era of needs and include clients of all ages, ethnicities, genders and asset levels. The wealthy white male client has given way to a new clientele of minority small-business owners, young startup entrepreneurs, specialized immigrant tech workers and self-employed female web designers.

Technology will be critical to engaging those who are accustomed to the benefits and prevalence of digital technologies and devices. Younger clients have incorporated technology into every aspect of their lives and expect businesses with which they interact to do the same.

Advisers who leverage these new wealth analytics tools will be able to manage their practices more efficiently and free up resources to focus on the personal coaching and strategic advising that robo advisers can’t offer.

Through analytics, advisers can offer personalized investment strategies to help the newest generation achieve their goals, while also allowing them to navigate life's ups and downs. By expanding their technological capabilities, human advisers can successfully build a sustainable business in an increasingly competitive market.

This story is part of a 30-30 series on ways to upgrade your practice. It was originally published on Jan. 20, 2016.

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