A decade of disruption

Technology has become so ubiquitous that it is hard to imagine a time before smartphones, digital assistants, and artificial intelligence (AI) became a daily part of our personal and professional lives. Today, the pace of change is accelerating so rapidly, it is even harder to imagine what our world will look like a decade from now. 

This is especially true in the financial advice industry. In just 10 years, advances in financial technology (FinTech) have fundamentally changed how investors view themselves, their goals, and the markets. And it has changed how clients want to work with their advisors. 

At the same time, it has delivered a new generation of tools that give advisors unprecedented insight into their own businesses and into their clients’ greatest financial aspirations and fears. In the right hands, these tools can help advisors build deeper relationships with clients while driving more profitable, scalable growth. 

The challenge is knowing which innovations will gain traction so that you can prepare your business and your clients for the risks and opportunities that lie ahead. For a clearer perspective on where we are going, it is important to first identify the core disruptions that have revolutionized financial planning over the last decade. 

Investor perceptions and expectations have been reshaped by both technology and the financial crisis. In the aftermath of the meltdown, investors have become more wary of the financial services industry in general and of advisors in particular. Instead of being sold investment products, today’s clients are looking for a more hands-on role in managing their investments. 

Advances in FinTech have made it easier than ever to do just that. From online trading platforms to robo-advisors, investors have access to more tools and information than ever before, and they are increasingly comfortable in using technology to manage their investments.  

Recent research from TD Ameritrade Institutional shows that investors not only welcome the idea of technology, such as AI, to help to manage their portfolios, they now expect it. More than two-thirds (79 percent) of the investors surveyed say they are fine with technology using data from previous behaviors and other personal information to make investment recommendations. 

More importantly, most investors are willing to share personal information about their finances if they believe that the data they share will lead to better advice and better financial outcomes. 

This increased comfort with technology, though, does not mean that investors prefer computers over human advice. In fact, the opposite is true. While most investors prefer a computer’s ability to use all of their data to make the best recommendations, the vast majority of investors still want a trusted advisor to talk to when they have any questions or concerns. 

It makes sense that the same investors who expect their digital assistants to know what station they want to listen to in the morning would want the same level of personalization and ease-of-use from their investment advisors. It also makes sense that clients who are not receiving that level of personalized engagement from their current advisors choose to look elsewhere.

To find that level of insight into every client, tech-savvy RIAs are using advanced customer relationship management (CRM) systems. Over the past decade, CRM has evolved from a glorified Rolodex to the backbone of an advisor’s customer engagement and prospecting strategies, pulling every aspect of a client’s plan into a single dashboard and optimizing lead generation.

When integrated with an AI-driven platform that combines financial planning, implementation, and portfolio management, advisors can create more precise, customized plans with greater confidence and with higher efficiency. Consider advancements in account aggregation software: User-friendly client portals make it faster and easier for clients to connect all of their financial accounts through one dashboard. 

With a more holistic view of every client’s total financial picture, advisors can provide better, more strategic and timely advice on everything from planning for a child’s education to making sure they have the right life insurance. Seeing a client’s total financial picture also helps advisors better demonstrate their value vis-à-vis other investment options and, potentially, gather a great share of the client’s assets.

AI is also powering a new generation of risk assessment tools that can help advisors and clients better identify, measure and manage risk tolerance. For example, with access to all of a client’s financial accounts, these tools can highlight any gaps between where that client aspires to be and how they are actually behaving in terms of saving, spending and investing. These deeper insights can lead to more powerful and productive client conversations. 

Robo-advisors are probably the biggest disruption in the investment advice industry since mutual funds.

The attraction is obvious, especially for younger investors. Robo-advisors have significantly lower (or no) account minimums, making it easier for younger investors just starting out to get their foot in the door. They are also cheaper than most other investment options, with lower trading and management fees.

That said, research shows that the majority of U.S. investors prefer the hybrid approach that combines the digital tools they want to manage their own investments with human advice.

Further, Accenture’s research shows that firms that combine access to self-service/robo-style investing with highly personalized, trusted advice from a human rank higher in customer loyalty and client satisfaction.  

This quest for a hybrid solution helps explain why the percentage of U.S. investors working with multiple investment advisors is at an all-time high. As consumers seek different levels of advice and self-directed options, more than half (56 percent) of U.S. households have two or more investment-related relationships. Moreover, affluent consumers with $2 million or more in assets are more likely to have multiple investment accounts. 

Looking ahead, it is clear that providing digitally enabled advice will be key to future growth in the financial advice industry. Firms will need to leverage new technologies to make the advisor smarter, more efficient and more productive to prove their value to clients. Advisors also will need the tools to engage the client on their terms, such as offering intuitive, easy-to-use client portals and access to self-directed portfolios. 

The key will be designing the right IT infrastructure that can help advisors scale quickly. That means firms will need to implement fully integrated platforms that will help advisors manage every part of their business from a single login. 

The right platform will automate rote tasks, such as client onboarding and plan implementation and monitoring. Mission critical tools, including financial plans, personal financial management, account aggregation, secure document sharing, and collaboration tools, will need to work together in a seamless, frictionless environment. 

Imagine walking into your office in the morning and asking your digital assistant if any clients deposited cash into their accounts overnight, then taking a video call from a client on your phone while the you start the coffee. Over your first cup you can collect key market data from a variety of sources and screen that information against client portfolios and investment policy statements. With a couple of taps you can prepare a personalized, regulatory compliant report for each client before your 9 AM meeting. While you are at a lunch meeting your CRM is analyzing client profiles to identify high-priority prospects. 

This is not the future. These technologies already exist. The question now is whether advisors are ready to harness this power to drive growth and remain relevant to today’s—and tomorrow’s—investors.

To learn more about NaviPlan financial planning software, click here