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Industry Spotlight > Women in Wealth

How Advisors Can Put Advice & Clients First

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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.

Is the customer about to purchase a home? Does the customer need to start a college fund?

Knowing that information and communicating with the customer accordingly can be the difference between having a strong relationship with a customer and losing a client.

Get Personal

To make the best use of this information, firms need to move away from relying on obligatory communications, such as quarterly statements and trade notifications, to sending personalized messages to customers where and when they want to receive them. This means sending e-mails to people who prefer that form of communication, having a great mobile experience and/or interacting on social media platforms or in the cloud.

Personalized advising should take a goal-based approach. An advisor should discover client goals, create a plan that aligns with those goals, execute that plan and then regularly review the outcome. Doing that across a client base that covers several generations (with different communications preferences and varied objectives) is no easy matter. Perhaps that’s why only 6% of wealth management firms are very confident about executing their advisory strategy, with 35% confident and 29% somewhat confident.

The poll revealed that a great deal of work is still needed to prepare for an advice-first approach: Only 37% of firms say they have the right technology in place today to lead with advice, although within 12 months, 85% of firms expect to have overcome that deficit.

The poll reinforces the findings of a recent survey of investment professionals from Roubini ThoughtLab, which showed that the most important thing that will keep investors happy in the coming years is receiving customized investment solutions.

The effort to make all these changes will be worth it: According to Roubini ThoughtLab, household assets will rise $89 trillion in the top 25 markets globally, with the biggest gains coming from emerging markets such as China and Mexico, resulting in more than $50 trillion in investments flowing into the wealth industry in the coming five years. For firms that can develop effective strategies to give personalizing communications, the end result should be growing assets under management.


Steve Scruton is president of Broadridge Advisor Solutions.


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