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August 25, 2014 at 08:00 PM
Financial planner Alan Moore works from a guest room in a basement apartment in Bozeman, Montana, where he shares office space with a queen-size bed. His uniform today: jeans and an “Eat Clean, Train Dirty” T-shirt. Ruby Receptionists, a virtual receptionist in Portland, Oregon, takes a call while Moore Skypes with a virtual client in Milwaukee. Their discussion: all business.
Each and every one of Moore’s clients is virtual—a business model he solidified in May when he moved his firm, Serenity Financial Consulting, from Milwaukee to Bozeman so that he could ski 80 to 100 days a year.
“I slowly and deliberately transitioned all of my clients to virtual,” says Moore, 27, a co-founder of the XY Financial Planning Network. “We hardly even talk on the phone. My clients are, for the most part, small business owners and they’re busy. They prefer email or video conferencing. Everything’s electronic. The reality is we don’t have to be with clients face to face. And I haven’t lost a single client. I haven’t had a complaint, not even a question. The people who ask the most questions are other financial advisors.”
A Market Forms
Moore is at the forefront of a trend that is extending the reach of traditional advisors onto digital platforms. It doesn’t diminish the advisor-client relationship, advocates say, but enhances it. It’s also cheaper, faster and more efficient—a win all the way around.
And it’s not just millennials who are looking for digital services; it’s millionaires. A new study from Spectrem Group and Millionaire Corner, as an example, shows 50% of those surveyed want “face-to-face” financial advising through video chat.
Despite the burgeoning demand for digital, a lot of advisors are pushing back. “I don’t think advisors get it at all,” says Cathy McBreen, managing director of Spectrem Group. “Most of the time when we talk to advisors, they’ll say: ‘My clients aren’t like that.’ They need to work with technology as opposed to separating themselves from it. This whole event of going to see your advisor and sitting in their office twice a year—that whole vibe is going to change.”
Boston Consulting Group, in another survey, found that 40% to 60% of high-net-worth investors want to be able to video chat with their advisors and receive customized investment recommendations. However, fewer than 20% of advisors offered those options.
Similarly, recent research from Capgemini and RBC Wealth Management found that 57% of affluent people over age 40 and 80% under age 40 would consider leaving their advisory firm if digital services—including mobile apps and video chat—weren’t on offer.
“Demands for digital capabilities know no boundaries when it comes to age, wealth or geography. Clients want their touch points with wealth management firms to be seamless and fully integrated every time,” said Jean Lassignardie, chief sales and marketing officer for Capgemini Global Financial Services. “These findings reinforce the importance of recognizing digital as a truly disruptive force in the wealth management industry, requiring firms to adapt their business models to meet client expectations.”
The rising popularity of video chat, in particular, is contributing to the demand across demographics for a digital channel.
As financial blogger Michael Kitces, a partner at Pinnacle Advisory Group in Columbia, Maryland, puts it: “This whole world view that using technology is only about working with 20-year-olds is a total farce. This whole idea that only people under 30 use tablets is ridiculous. The fastest growing demographic on Facebook is baby boomers. And what grandparent do you know that doesn’t Skype or FaceTime with their grandchildren? If they can do it, financial advisors can do it.”
At the moment, Kitces says, the industry is still figuring out the tools and the platforms to support a virtual advisory relationship. “Stage one is we get more and more comfortable working with clients online. That’s something we’re evolving as a culture,” he adds. “Remember when we swore we would never put our credit card information online?”
The next stage will involve actually starting the relationship online.
“That will be a big change when it comes. Now you are really into a different realm: How do we build a relationship and establish trust in an environment that starts online? We’re seeing the front end of it now,” says Kitces. “But we’ve got a long way to go before it becomes a mainstream standard thing.”
Emerging Models
What are the early adopters in the digital space doing? For starters, they are working hard to build a brand and, along with it, a strong service offering.
“The most important thing we faced when we launched is we wanted to marry together the best parts of the online experience with the in-person relationship,” observes financial advisor Steven Geri, director of eSavant. “We didn’t build a technology solution. We’re not a technology company. We simply said: How can we use technology to better serve our clients and prospects?”
Bera does most of her work from her living room couch or kitchen table. She also does a lot of work in coffee shops. Bera recently sold her desk on Craigslist because she never used it. She calls her laptop bag her office.