How Advisors Can Put Advice & Clients First

Wealth advisors who want to separate themselves from the crowd should be laser focused on one thing this year: giving their clients better advice.

Advice is already the meat and potatoes of any wealth advisory firm, but too often the quality of that advice takes a backseat to things like commissions and the need to sell certain products. But as products like mutual funds and ETFs become commoditized (everyone basically offers the same products), the quality that is going to make a difference is how useful your clients find your advice.

That’s the conclusion of a new poll of wealth management executives conducted by Broadridge and CEB that revealed an evolving business. Among respondents, 50% said they are already evaluating changes to their advice and guidance strategies to better address client life goals.

What’s driving the shift to advice? Most advisers surveyed (44%) said retaining clients by having deeper relationships with them was the main reason for the shift, while 19% said the change was motivated by an expansion of wealth and private banking assets under management.

Client retention isn’t the only reason to put advice first. The move also fits with the U.S. Labor Department’s new fiduciary rule—the biggest change facing the wealth advisory business in a generation.

The rule requires that advisers give clients the best advice on investments at the lowest prices, setting aside their own incentives to earn high commissions and fees over clients’ interests. While some think the Trump administration may not support the rule, many observers think it makes good sense both for advisers and their clients regardless of the administration’s stance.

Robo v. Advisor

Improved personal advice shouldn’t come at the expense of better technological offerings. Investors are demanding things like robo-advisors (which use algorithms to manage accounts), but those cool new toys can’t operate in a vacuum. To effectively manage their clients wealth advisers need to take a hybrid, or bionic, approach.

The poll revealed that only 21% of advisers today use robo-advice, although slightly more respondents expect to add such capabilities in the next 12 months. When paired with data and analytics, robo solutions can help advisors gain invaluable insights into how best to serve their clients.

Today, a stunning amount of data is available—for example, proxy data shows financial holdings and credit data, marketing/demographic data and automotive records shape a detailed model of each client.

Combining information gleaned from data and analytics will help advisers give their clients better advice because they will know more about them. This can have a ripple effect — especially when it comes to offering clients new investments.