3 Reasons Why Synchronizing Digital Advice Can Help Advisors Win the Gold

Published by Craig Iskowitz, CEO and Founder of Ezra Group, LLC
September 22nd, 2016

Diver The Olympic Games are an amazing showcase of human potential and mastery. An event such as synchronized diving is particularly impressive, as the athletes have to work together in perfect unison to win the gold.

There is a lesson to be learned here that is highly relevant for wealth managers: the whole can be greater than the sum of its parts, especially when it comes to incorporating technology into the advisory workflow. In order to maximize results, digital and traditional advice channels must be coordinated and work together seamlessly.

More and more wealth managers are paying close attention to the role technology can play in expanding their reach and generating better results. According to Cap Gemini research, 56% of firms list digital as one of top 3 priorities in the short term, and 69% list it as one of top 3 priorities in the medium term.  As technologies mature, they are forcing executives to take action or risk falling behind.

However, just throwing money at the problem is not a sound strategy. A study of IT in wealth management by Ernst & Young showed that leading wealth managers spend less on IT than their peers, yet they are able to generate above-average operating incomes. Effective IT spending seems to be the key, where strategic alignment must be considered along with costs.

While firms must make many decisions on the way to considering a digital offering, one of the key crossroads is whether to integrate digital advice into their existing wealth management platform. Should digital advice be a stand-alone offering, or is it better to build it as a natural extension of the traditional practice?

Who’s Afraid of the Robos?

While most advisors no longer see the digital trend as a threat, many have concerns over adding a digital offering of their own. There are three major fears that can surface as an advisor firm considers integrating digital advice into the workflow.  Robot

  • Brand dilution
  • Weakened client relationship
  • Low profit potential

Traditional firms have built their reputation on creating a personal connection with their clients. Adding a robo to the mix may feel to some like a step backwards – fewer opportunities for personal touch, more boilerplate automation. The monetary appeal of the digital offering to a traditional firm may not be obvious, especially with many stand-alone platforms initially targeting Millennials who as a group are notoriously asset-poor and debt-rich. On first glance, the drawbacks of an integrated offering may seem to outweigh the potential benefits.  

However, new research combined with innovative experiments is turning those fears around.

Traditional Firms Powered by Technology

The reality is that technology innovations, when designed strategically and implemented with discipline, have the power to elevate wealth management firms.

Far from diluting the brand, integrated digital interactions can enhance client relationships. Multichannel offerings allow firms to deliver a seamless and intuitive client experience across devices. By improving client interaction and enabling the natural flow of conversation to take clients from ideas to analysis to execution, advisors can create greater engagement and grow service offering to households.

Clients are increasingly asking for the convenience and ease of access that comes along with digital offerings. When Cap Gemini asked high net worth investors why they would be interested in working with an automated advisory service, 48% of HNWI respondents reported convenience as a key decision factor. Far from creating a first mover advantage, digital integration is now the price of playing in the wealth advisory arena.

The Many Benefits of an Integrated Solution

Many industry experts believe that integrating technology into the traditional advisory offering is the best strategy. “A robo-advisor in a box on the side of the firm will not work,” shared Simon Roy, the president of robo technology platform Invesco Jemstep. The philosophy is that digital advice service can be an effective and logical extension of the traditional investment advisory service menu.

Grow wallet sharewallet

Research by Boston Consulting Group indicates that 75% of wealth management clients want more interactive multichannel offerings, yet only 25% of wealth managers provide customized advice online. As clients and advisors continue to benefit from the data analysis and interactions enabled by technology, the wealth manager’s ability to offer timely and pertinent advice increases exponentially. That, in turn, can create deeper trust and lead to the advisor capturing a greater share of each household’s financial assets.

Access new clients

Digital advice may offer traditional firms a cost-effective way to reach currently untapped client categories. Millennials and others in the accumulation phase of their life are attracted to digital solutions, especially if they offer a cost-effective and largely self-directed way to help them make progress towards financial goals. Those same client groups will benefit from the upcoming generational wealth transfer in the next two decades. By building these relationships early, advisors will be well-positioned as account balances will grow over time.  

Leverage greater efficiency

Technology allows advisors to create scalable and cost-effective service models for accounts of all sizes. By tailoring the service level and the fee to match the underlying client needs, and taking advantage of automation and process streamlining where appropriate, advisors have the ability to add value and contribute to their bottom-line.

An integrated solution also comes with potential for greater efficiency. A stand-alone digital platform forces the advisor to work in two or more different programs to access relevant data. However, an integrated digital platform means that the advisor does not have to switch between different screens to manage digital and traditional accounts. Add the possibility of lowering the front-office costs through the use of web portals, video conferencing and instant messaging, and you have a compelling case for integrating digital advice into your wealth management platform.

Blueprint to Digital Implementationmoney

In order to maximize the benefits of investing in integrated technology, wealth managers must follow a disciplined process of planning and implementation.

First, advisors must enter the conversation with an understanding that digital advice is here to stay. Far from being a temporary bright and shiny distraction, this technology is becoming the new norm in how advice is delivered and consumed.

The best starting point is performing a complete strategic assessment of the existing wealth management platform. The objective of the assessment is to identify gaps and areas for improvement. Interviews with advisors and key clients can offer valuable insights into current pain points.

The digital advice component of the platform can be built in-house, developed through a partnership or acquired from an existing provider. Whether building or outsourcing the digital advice component, firms must focus on creating a compelling and engaging client experience first. Keep things simple, and err on the side of introducing basic functionality. An intuitive and value-added interaction will strengthen client relationships, create advocacy and encourage early adoption.

Lastly, keep in mind that continuous improvement is critical to delivering exceptional client service. The best way to accomplish that is to create a cycle of ongoing evaluation of client support levels, pricing and technological capabilities. The goal is to create a digital offering that is a natural extension and an effective enhancement to your value proposition.

 

About the Author: Craig Iskowitz is CEO and founder of Ezra Group, LLC, located in East Brunswick, NJ. Ezra Group is a management consulting firm providing advice to the financial services industry on business and technology strategy, software development, and marketing. Craig has over 20 years of experience in wealth management, retail and institutional brokerage, market data and front and middle office operations. He previously worked for ADP Brokerage Services (now Broadridge Financial) for almost 10 years before becoming a consultant. His clients include many Fortune 500 firms such as The Bank of New York, Fiserv, Standard & Poor’s, and J.P. Morgan Chase. Craig is also the editor and publisher of the Wealth Management Today blog (www.wmtoday.com), which focuses on news and information for the wealth management industry with focus on fee-based advisory platforms. Craig is also available to speak on wealth management trends, participate in industry panels, or present one of his industry classes such as, Managed Accounts 101. Craig can be reached at craig@ezragroupllc.com

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