Creating the Blended Adviser Experience

Much has been written about the surge of the “robo-adviser” and the impending doom it signals for the traditional financial adviser business model. Such press is giving many advisers and clients alike pause: is this simply a short-term fad, or is something bigger happening? Like most things in life, the answer likely lies between the extremes.

Aside from the myriad of investment return-based studies, other industry trends have contributed to the rise of online advisory platforms. The rapid expansion of transparent investment product has made it easier and cheaper than ever to buy tax-efficient investment vehicles. Pure technology advancements have played a critical part as well—namely, robust, readily available portfolio modelling/rebalancing software (scalable implementation) and the rise of the Internet and proliferation of mobile devices (scalable delivery). Together, these facts and trends tell us that investment management is ripe to be commoditised.

For a moment, let’s assume that investment management is in the beginning stages of being commoditised. Given that, how should financial advisers best position themselves to thrive?

The good news is that many successful advisers are already doing it: offering financial planning and guidance/advice to clients. Whether they acknowledge it or not, almost all clients need more than just investment management (asset selection, asset allocation, rebalancing, and the like); they need a plan and someone to help choreograph how they’ll carry it out. And executing a solid financial plan goes way beyond a simple goal calculator—it balances art and science, emotions, and execution.

Most people would agree that, even with all our great technology advancements, life is busier and more complicated than it was 10 years ago. Is there any reason to think that it will be simpler 10 years from now? Clients’ lives will continue to get more complex, and the more complicated things become, the more difficult it will be for a computer program to address them. This is not because computers aren’t amazingly fast or good at handling tons of variables, but because, at present, they need human beings to program them to deal with life’s nuances.

Financial planning software tries its best to handle those intricate details of peoples’ financial lives, but even the most advanced software doesn’t cover everything—and it certainly doesn’t implement and monitor the plan for a client. It also doesn’t do a great job guiding a couple through an issue that they disagree on, or convincing a client who’s terrified of dying to get a will drafted.

If investment management is well on its way to being completely commoditised and true financial planning is not, then the key for financial advisers going forward is to ensure that planning and service are front and centre in their business model.

In terms of offering the commoditised services, advisers will need to take a page from the robo-advisers’ book, leveraging investment management technologies in order to help scale the process.

As far as offering value beyond the commodity, it’s important to note that investments are nothing more than a means to an end. Understanding the goal of the investments, how to get the client to stay invested, how to structure and protect assets, how to leverage capital and income strategies, how to meet legacy wishes—that’s where the human aspect of planning comes into play and where advisers outshine their computer counterparts.

If history has shown us anything, it’s that those who are about to be disrupted by technology typically live in denial about the impact the impending change will have on them. For forward-thinking advisers, this presents a great opportunity, as many of their peers will invariably fall into this trap. Advisers who embrace and leverage technology to the fullest—so that clients don’t know where the adviser ends and the technology begins—will enjoy the best of both worlds, giving clients better service and driving costs down.

Systems such as model management/rebalancing software to scale the investment process, CRM/social media software to scale client mass communications, and interactive and easy-to-use planning software are now must-haves for financial advisers aka “back-stage” technology.

The “front-stage” technology needs to shine even brighter, and offering a robust portal that allows clients to view their accounts is quickly becoming the must have scenario. Soon, all of these portals will allow clients to self-service, to answer their own questions on their own time, and to play with what-if scenarios before collaborating with their adviser online. Furthermore, most of those features will need to be mobile device-enabled. The technology/mobile-first habits of millennials are certainly real, but studies have shown that older clients want this, too.

I refer to this impending change as adviser/technology convergence—or, more simply, creating a blended adviser experience. And although the pure robo-advisers will certainly have a place for some clients, the future for business- and technology-savvy financial advisers is brighter than ever.