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Soundings—The New Wealth Management Proxy Chapter

December 9, 2019


We are about to see a seismic demographic shift within our industry. Four out of every ten advisors will exit in the next ten years.

How are enterprise wealth firms going to retain investors who have formed an intimate relationship with these advisors? What is the model for the next-gen advisor? What will define relevance for advisors and their investor-customers?  Forward-thinking enterprise wealth firms and advisors are thinking about differentiation. What transformations are needed? Three, in our thinking. Included are the adoption of fintech, rethinking advisor value-add services, and demanding operational/economic efficiencies.

Starting with FinTech—technology is transforming like never before. Slow to act enterprise wealth firms and their advisors are being left behind while those firms that are proactive and changing the narrative of investor-customer relationships are increasing their relevance points. Progressive firms that are reconfiguring themselves with evolving technology, evolving advisor interaction strategies, and greater transparency are winning the relevance battle. Ask the Private Equity firms who are investing aggressively in our wealth space—the “smart money” that sees a significant opportunity in this transformation.

Every discussion we have within our eco-system is demonstrating that the technology paradigm shift is in full bloom. We are working with enterprise wealth firms on developing differentiated strategies, building more effective operational processes, and helping firms choose technology partners that align with their need for efficiencies, innovation, and better cost management. We are seeing these wealth firms and their advisors’ technology stacks bursting with functionality and complexity like never before.

At the same time, while technology is currently being obsessed over, we see the need to help advisors evolve their business model thinking. Why? To appeal to the new expectations that investor-customers now have yet continue to ensure a balance between the typical investor customer’s need for technology and personalized service. What should an evolved advisor service model look like? For a subset of advisors, this is a huge opportunity. Why? Three reasons: we are seeing a significant drop in investor loyalty; fee-compression demands that are driving lower fees and increasing interest in cost transparency; and, the impending exodus of older advisors.

How are advisors to reach their investors and their investor customers’ families in ways that appeal to the individual? Technology only? Traditional service models? No to both. The current need is to balance functional technology and the advisor’s evolving service model scaled to deliver a personalized investor experience. Balance self-serve tools with meaningful hand-holding is an art, not a science. Recent research shows that beneficiaries typically move away from their benefactors’ advisors over 70% of the time. Why? Younger investors do not believe their parents’ advisors are very adept at technology, and thus the service model is broken. Today’s investor-customer want a curated experience that balances technology and transparent advice.

The question is, can an advisor practice morph and achieve the flexibility to support a more personalized experience?  Other verticals such as medicine and transportation have been forced to evolve and adapt or face obsolescence.  Many enterprise wealth firms are currently rethinking the advisor’s “value add.” Working to help advisors explore new services in search of an incremental basis point of value. For the investor-customer, the new value equation may come in the form of an advisor helping them surmount existing psychological fears about money. And, or, helping them to understand their perception of money better and how they view financial risk. It may be helping to build better financial plans and manage the investor customer’s economic well-being the way the customer wants to be managed, and not how they fit in a traditional advisor investing box. In short, an advisor’s role may be to be their investor customers’ financial coach who protects their best interest. That idea is not new, but the journey map is.

So, the current evolving strategy for firms looking to increase their relevance is working from their customer-investor’s needs and behaviors back to what they offer in the relationship and service delivery.  Those enterprise wealth firms and advisor shops that are currently growing their ability to connect have done so by achieving a better understanding of their investor-customers desired journey maps.  These firms and advisors are challenging themselves; how do we supply the best experience to the customer? By challenging the traditional business and disparate operational service models. The result is a transformation that weaves together technologies that enable the advisor and the investor customer – and deliver a good bit of “cool” factor. The omnichannel platform supports the advisor with an optimized process, precise customer segmentation of services, and technology tools that help inform advisors of their investor- customer’s needs, alignment with risk and goals, and potential flight exposure. In short, the enterprise wealth business is evolving to a service platform that balances do-it-yourself access with a supportive knee to knee service from the advisor.

Advisors are financial coaches and always have been. I have one whom I feel sorry for as she has to try to wrangle me. Yet today, like yesterday, the best advisors are helping to manage their investor customers’ life goals. The new normal is that there are a great many more technology tools to help lead an investor to those goals. The challenge is evolving the advisor “value-add” thinking and finding the right balance of technology and interactive service for the investor-customer.

Our observation – the advisor that balances personalized sage wisdom with the delivery of the expected technology tools, is the new anticipated norm for investor customers. A model that is built on smarts is now a “Must-Have.”