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To win over advisors, don't force tech changes: Q&A with In|Vest speaker, HD Vest's Crystal Clifford

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Q: What is the most important change coming in fintech for the industry?

CRYSTAL CLIFFORD: I think its artificial intelligence, machine learning — the further embedding of that technology and really extracting the value of that technology for the firm. There’s so much room still. Many firms have made inroads into leveraging that technology, but there is a still a tremendous opportunity to not just improve the economics of the business by reducing costs, but also in improving the user experience of our offerings.

What do you tell advisors who want to know what embedding AI means?

A few firms have started by introducing chatbots to improve the service offering. Being able to ask Alexa and have a conversation that results in gaining account information or actually making trades is one way. There are absolutely consumers out there who want that experience. Whether they are sitting and watching TV or cooking dinner, they don’t want to stop what they’re doing to get on their phone or their computer when they think of something they want to do.

I also think of machine learning on the broker-dealer side in terms of being able to manage risk, helping to identify risk and really reducing your cost footprint, because you’re using AI to narrow down the number of transactions you need to supervise and the conversations you need to have with clients.

You come from LPL, where you had a top technology role. How is fintech different at HD Vest?

Certainly LPL has size and scale that HD Vest doesn’t have. LPL built more of the technology that was offered — it wasn’t 100% build, it was more of a blend. But there was more of a ‘build it’ mentality. Since we’re not of that scale, we do rely on more of a ‘buy it’ mentality.

There’s pros and cons to both approaches. The benefit of buying is the ability to integrate the best-in-class offering. We don’t have to build the best application if it already exists in the marketplace. We just recently completed a conversion, and it wasn’t just an asset conversion. We not only converted off of our first clearing platform from Wells Fargo onto Fidelity’s NFS platform, but we also implemented Envestnet as our advisory platform and introduced eMoney as a premiere financial planning tool and for our end-client portal. We really had a full-scale change in the platform and the technology of the offering to our advisors and our end-clients. (HD Vest also rolled out an advisor robo solution.)

Firms that try to build that and then try to integrate don’t always get there. So that’s the advantage in choosing an industry leader like NFS, eMoney or Envestnet, and integrating them all. Certainly technology has come a long way in the integration component. Years ago that wouldn’t have been probably all that easy. But it’s become much simpler today with [application programming interfaces]. You can more seamlessly integrate different platforms. Instead of having to create files to send back and forth across platforms, which can be cumbersome, you have single sign-on capabilities. You can now in fact offer one sign-on across multiple platforms and applications. You can in fact do it completely seamlessly, where the user doesn’t even know that they are moving from one platform to another.

Are the cultures at the broker-dealers different?

HD Vest is about the same size as LPL was, when I joined LPL in 1999. There’s a lot of similarities and I can see the growth trajectories. The main difference that I can see here is the decision for less building and more buying of product. We differentiate ourselves in how we put those products together.

Also, there's a very community-oriented advisor base here at HD Vest. Many of our advisors have been here a very long time. We have a very grassroots experience here, we have chapter meetings. Advisors are continually coming together during non-tax season. I think the relationships we have with our advisors come through with size and scale. LPL, over the years as it grew, that was definitely a criticism among advisors. They felt it was too big. They didn't know who they were. HD Vest at this point has done a good job of maintaining intimacy with their advisors.

Regarding the platform conversion, what spurred that greater integration?

It’s certainly being driven by consumers. We’re living in an age where you can do so much on your iPhone and you can pick it up and use it without an instruction manual. That’s pushed fintech along as well, in terms of how we can make a more seamless, integrated user experience available, while still providing the required functionality that we need to offer.

We aren’t quite there. The mobile conversion was in September. We previously had an internally-built application, tied into Wells Fargo’s platform. Ultimately though for our end-client, eMoney will be their portal, available on a mobile device. We’ve been working with eMoney to ensure the experience that the retail client enjoys is as intuitive as possible. Financial services hasn’t always been great at that, but we’re really confident in eMoney’s offering and being able to offer it to our end-clients.

What we gained with Envestnet and parts of eMoney were a replacement of legacy, internally-built platforms. The care that was required to keep those modernized had to be weighed against some of the applications that were available in the marketplace. Ultimately they were more cost-effective and frankly, that was something we didn’t think we would differentiate ourselves by rebuilding.

How meaningful will these new technology partners be for HD Vest advisors?

Our advisors (HD Vest has 3,700 advisors) definitely see the value in this new platform. They were highly dissatisfied with our former platform. In all of the acquisitions and transitions that I’ve been a part of, you rarely hear from your clients that they want that kind of change, because it can be so disruptive to their practice. But we had our advisors asking us. Having their support definitely helped the transition go smoother, as opposed to having forced this on them. Certainly there’s a learning curve that they’re going through — we’re a month in — and there will be change management items you’ll have to work through. But overall, the adoption of the new platform has been pretty impressive.

Does the platform help with holistic planning?

We’ve been driving to this concept of plan-based advice. The introduction of eMoney and the planning capabilities that come with it allows us to have a tool that really helps our advisors to execute against that. We’re passionate about planning being a key component of wealth management. So having eMoney now allows us to really take that forward and help our advisors become more plan-focused.

Advisory is also an area that we feel is important. We will continue to grow our advisory platform and assets and move more of our advisors to a fee-based business model. The platform will help them make that transition.

Since this platform provides a single view for clients, does it change how HD Vest advisors speak to them about market volatility?

Clients who have that access, who didn’t have that before, seeing that might generate some additional phone calls. That can actually be a great opportunity for that advisor to have that touchpoint with the client, to really explain to them the sky isn’t falling, we’re not going to sell out of everything today. And then we have that long-term vision conversation, reminding them about their goals and how their asset allocation accounts for the fact that there are going to be changes in the market over time. If nothing else, it invites further dialogue.

What’s HD Vest doing differently in fintech from other independent broker dealers?

One of the things we’re really focused on is the intersection of tax and wealth. We have a sister company TaxAct, which provides do-it-yourself tax preparation. We’re fleshing out an offering that will be available in 2019, which will be at this intersection of tax-smart investing. How do we bring the two together in a way that helps the end-client manage the implications of tax on their investments? We haven’t identified the technology we’re going to be leveraging for that yet, but we’re excited to be offering it soon.

Advisors usually don’t talk about coming up with DIY options for their clients’ taxes.

TaxAct has a retail client base. We're looking at how do we leverage that vast amount of data and access to that potentially investing population, and marry that with the wealth management that we offer through HD Vest. We do have a pilot that we’re about to kick off. It’s still in the early stages of how do we help our tax professionals gain greater penetration not only of their existing book of business as a tax preparer, and how can they offer and gain wallet share in financial services to that population, but also how do we take advantage of that TaxAct client base as well.

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