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Thriving in Tomorrowland: How Advisors Can Adapt to Change

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One of the great comic scenes in early television starts with Lucy and her best pal Ethel, of “I Love Lucy,” wrapping chocolates on a production line. “If one piece of candy gets past you and into the packing room unwrapped, you’re fired!” threatens the supervisor.

All goes well until the conveyor belt picks up speed. Within moments the hapless duo realize they can’t keep up. In a panic they grab the chocolates whisking by and stuff them madly into their mouths, caps and blouses just before the supervisor returns. “You’re doing splendidly,” she says, and hollers off camera, “Speed it up a little!”

Life in the financial lane has been a lot like that lately. Among the new developments zooming toward independent advisors are enhanced services from deep-pocketed competitors: Schwab Private Client, Merrill Clear, Merrill Edge and Vanguard (full service for 0.3%!). In the first quarter of this year, Fidelity Investments announced the acquisition of eMoney Advisor, followed by Schwab’s rollout of Intelligent Portfolios. Meanwhile, robo-advisors like Wealthfront, Betterment and FutureAdvisor have marched across the Internet like a zombie apocalypse.

These changes represent a threat to a business model that many financial advisors feel comfortable with and profit from. It’s human nature to wonder, “Is this the end of a golden era? Have I staked my career on buggy whips?”

Note, however, that while cutting back on retail locations, JPMorgan Chase plans to add more offices over the next two years for advisory and wealth management services. After studying the challenges of this brave new world, Jamie Dimon clearly has no plans to give in to the robos or expanded asset management firms. Nor should motivated advisors.

However, the key question in developing a strategy to deal with accelerating change isn’t really “What am I going to do?” It’s “Why am I here?”

‘Why Are They Calling You?’

“One of the first things we do [in a new relationship] is get to the ‘why.’ We ask, ‘If someone is calling your organization in five years, why are they calling you?’” Tyler Sweatt said.

Sweatt is corporate development director at Toffler Associates in Reston, Virginia, a strategic advisory firm that has built a business around helping organizations deal with change and disruption. Founded 18 years ago by futurists Alvin and Heidi Toffler, authors of the ground-breaking books “Future Shock,” “Powershift” and “The Third Wave,” the privately held consultancy focuses on analyzing problems and formulating recommendations for clients in a wide range of industries. One factor is common to them all: “The volume and velocity of information is phenomenal,” Sweatt said. “Everything is real-time now.”

Toffler himself suggested 45 years ago in “Future Shock” that technology was both a cause and an enabler of this “roaring current of change,” allowing multiple quantum leaps to occur at the same time. He surmised that people fall into one of four camps depending on the way they respond to high-speed change:

  1. The Denier blocks out reality until it comes crashing down in a catastrophic life crisis. (“Young people are always acting up. It’s nothing to worry about.”)

  2. The Specialist stays up to date in her own field, but is clueless about the bigger picture. (“Why are people so upset about a few whooping cranes?”)

  3. The Reversionist wants to go back to obsolete decisions and habits. (“We should all live in communes.”)

  4. The Super-Simplifier focuses on a single basic idea to explain current change. (“It’s those Republicans/Democrats.”)

Technology and Trust

The speed of technological innovation means both disruption and opportunity for many of Toffler Associates’ clients. However, it’s not the most significant factor in shaping the future. “We’ve found that the most important aspect in the loop is the human,” Sweatt said. “It isn’t that technology is bad. With younger generations, we see their fondness for technology all the time. But sometimes you just need to look somebody in the eye.”

He pointed out that a purely robo-advisory relationship commoditizes investment management. “The generational forces behind new technology are coming from your future clients. But what’s being lost is a true, tangible relationship in which there is real trust. When I’m assessing a potential investment or large opportunity, I can count only a few people I trust enough to call them up and say, ‘What do you think of this?’”

That, Sweatt said, is where human advisors have an edge. “At Toffler Associates, we believe a tool is only as good as the person employing it,” he observed. “Technology can only enable a goal if you know what the client wants to achieve.”

In his view, advisors of tomorrow will combine the efficiencies of tech with the power of personal relationships. “Use the emotional desire for human connectivity to your advantage,” he urged. “If people feel comfortable with you, they will stay with you over the longer term. They will call you because they trust you and know you can provide advice to support their life goals.”

Your current and prospective clients do know how you’re different from a robo-advisor or a big-brand asset manager, after all. Don’t they?

Why Are You Here?

Advisors’ value propositions are often generic—something along the lines of “We provide comprehensive wealth management tailored to your needs,” as Pershing Advisor Solutions’ Mark Tibergien suggested in his March column for Investment Advisor, “Why Do You Exist?”

Can you explain why your business exists? What is it you offer that a prospective client couldn’t find at a firm that’s bigger, nearer or cheaper? “If you don’t know why you do what you do,” Tibergien asked, “how will your clients?”

For example, do prospective clients understand the difference between your fiduciary responsibility and the less rigorous suitability standard required of a bank or brokerage investment rep? Do they know that they can expect customized advice from you, not an impersonal “one from Column A, two from Column B” download?

Ditch the generic description and try to specify the distinctive value you offer. As Toffler Associates’ Sweatt suggested, “You may want to reposition yourself in the value chain as someone who reduces client stress, provides peace of mind, looks at solutions in a portfolio or serves as a life coach. In any case, you need to know why you exist. Without that, you can’t develop a strategic plan.”

The value proposition you determine can become part of your firm’s DNA—something you work to strengthen over the long term, instead of creating a different marketing message whenever a new competitor comes down the pike.

Balancing High-Tech and High-Touch

The difficulty of dealing with change also concerns Kim Dellarocca, managing director of Pershing LLC in Boston. Recognizing that today’s advisors are confronted with the challenges of different demographics, a shrinking pool of accounts, morphing business models, new economic drivers and more complex client needs, she sees them responding in one of two ways.

Some feel stressed and overwhelmed by the urgency of responding to new needs and regulatory requirements on top of day-to-day business management. Others, she said, see the changes as a big opportunity and want to know, “How do I leverage all these developments to my advantage?”

In spite of all this change, Dellarocca added, we have enough history as a society to know that the fundamentals stay the same. “Even though millennials are quick to say they want digital,” she observed, “once their assets reach $100,000 or $250,000, they have a parent to care for or someone else’s money to manage, they want a real person. The human aspect never stops being important.”

The often-used analogy between physical and financial health is a valid one. When you’re young with no serious medical concerns, the nearest clinic may be fine for treating the occasional ache or pain. When you realize that good health can’t be taken for granted, though, you’re more likely to value having a personal relationship with a medical advisor you know and trust, and whose knowledge and experience you can rely on.

Dellarocca suggested that advisors who are ambivalent about adapting to change first consider it from a positive standpoint: “How can a digital office benefit my business?”

Improved technology “isn’t just a matter of attracting millennials, but of offering more choice to clients and prospects,” she said. For example, how many full-service clients really want to sit down with you for a review every quarter? Whether retired or working, they’re short on time. Many—perhaps most—would rather be offered a quick, accurate online update. Can your technology do that?

It’s not an all-or-nothing proposition, she emphasized. “If you look at being 100% digital and think you have to get there [right away], you can feel overwhelmed. Just make incremental changes. Ask yourself, ‘Where can I correlate digital with my business?’ Go step by step. You don’t have to boil the ocean.”

For example, you might begin by automating your account opening process. If you see positive results in terms of greater client satisfaction, more productive employees or increased profit, you could take a next step by using technology to “touch” your clients more often.

If you choose, you can update your process in a way that doesn’t affect traditional client relationships. “Digital technology doesn’t need to be out front,” Dellarocca explained. “Use it behind the scenes in a way that helps you become more efficient. You can be high-tech without giving up high-touch.”

Pershing views digital advice as part of the digital wealth management experience. “We help our advisor clients assess their readiness for these key transitions, and give them the ability to digitize some or all of the functions of their enterprise,” Dellarocca said. It’s up to each advisor to determine the balance of high-tech and high-touch that best suits his or her clients, workflow, growth plans and long-term profitability.

I’m a Robo-Advisor and I’m Here to Help You

Jemstep was early to the robo-advisor party in 2008. Now, having pivoted its very capable technology to serve advisors, the Los Altos, California, company “appears to have the inside track with the robo-advisor-as-RIA-facilitator” model, according to an industry observer.

Launched late in 2014, Jemstep Advisor Pro is a technology platform for client engagement, onboarding and service delivery that is designed to integrate with advisors’ CRM and portfolio management systems.

“We’ve listened to what advisors want and have worked hard to ensure that Advisor Pro hits all the high notes,” said Kevin Cimring, Jemstep’s CEO. “By incorporating the best of robo-technology with the human touch, this hybrid can help advisors create operational efficiencies while offering a wonderful client experience.”

According to Jemstep President Simon Roy, in its first two months, Advisor Pro generated 600 new accounts with an average size of $70,000 (and some in the millions). The average client’s age was over 40.

The advisory world was initially skeptical about the benefits of adopting an online platform. However, said Cimring, “there’s been a massive sea change versus even six months or a year ago. Advisors are recognizing that clients want to engage online. From Amazon to Netflix to daily banking transactions, everything’s online. Clients now also seek financial advice in the same way, and it’s not just the millennials. A whole swath of consumers, including high-net-worth individuals, are looking for an online digital advice experience. That’s a large demographic of potential clients that advisors can now efficiently reach.”

What’s in it for you?

A big advantage of robo-advisors, Cimring said, is the ability to automate time-consuming services such as onboarding. In contrast with the classic situation of a client walking into an advisor’s office with a shoebox full of forms and reports, Advisor Pro’s ACAT-enabled self-service process lets clients open an account with your firm within 12 minutes of entering their financial data online.

To give prospective clients a foretaste of potential benefits, the advisor-branded platform provides a free analysis of their current portfolio, plus an idea of how they can benefit from your advice in terms of investment strategy and model portfolios. One distinction of Advisor Pro is that it can be customized with your models and value proposition, differentiating your offer and reinforcing your brand.

Prospects can then use the online platform to open an account with you if they wish. After onboarding, they have a 24/7 online dashboard to track performance, review their holdings and implement service requests.

Although the entire experience can be “online from A to Z,” Cimring said, “at some point your client will probably want to speak to you. Unlike with typical robo-offerings, clients can reach out to your firm with questions and you’ll be there behind the technology to help them.”

Younger clients who start out with small accounts will grow their assets, and their financial lives will become more complex, he observed. “Advisor Pro can help you start the relationship online and give those clients a way to graduate to higher levels of service as the need arises.”

When a relationship does graduate from high-tech to higher-touch, the scene is set for an easy dialogue between the client and the financial advisor. “You’ve [already] traveled the road together,” Cimring said. “Your firm won’t have to start the relationship from scratch.”

Interestingly, the initial absence of human involvement appears to make people more forthcoming about outside assets. Advisor Pro’s account aggregation functionality allows advisors to view 401(k) and other “held away” assets that they otherwise might not have access to.

Finally, all prospect and client information is stored in real-time on your Salesforce or other CRM system, making it easy to follow up on potential new business. Automated email and marketing campaigns complete the picture.

“Technology is the great enabler,” Cimring pointed out. “While making it easier for clients to engage with you, it provides operational efficiencies that can help you scale your growth.”

Are robo-auxiliaries like Advisor Pro the wave of the future? Naturally, Jemstep is convinced of it. “As automation makes life easier for advisors, we see this closely integrated hybrid technology becoming commonplace among advisory firms,” Cimring said. “We think it will be driven on the one hand by clients who have come to expect a modern online experience, and on the other by the tangible benefits that the technology provides. Whether you call it ‘robo’ or simply best practices, we believe that any investment advisor who wants to grow or remain relevant with high-net-worth and younger audiences will be adopting this within the next few years.”

‘Accept That Nothing Is Constant’

Technology isn’t about to turn personal financial advice into buggy whips. In fact, it was Jemstep’s Cimring who pointed out that clients needed advisors to remind them not to sell everything in 2008. No algorithm can steer people away from their emotions and encourage them to make decisions based on fact and reason, or inspire them to plan further ahead than next quarter or next year.

“Accept that nothing is constant,” advised Toffler Associates’ Sweatt. “When change occurs, look at it as an opportunity—for example, a way to free up your time so you can do more valuable things.”

His recommendations for financial advisors and planners: “Whether you’re a mom-and-pop or a 200-person firm, you need resiliency, agility and, I would add, curiosity and courageousness.

“There are always going to be swans—of any color. You’ll need to recognize them and be comfortable with making a strategic pivot to adjust to them. Recognize what change can mean to you. Embrace it. Take the leap!”

In other words, prepare yourself for the future. As Alvin Toffler foresaw, it’ll probably be speeding up a little.

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