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Fintech Is a Tool, Not an Obstacle, in Client Service

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As the true value of financial planning shifts away from pure investment management to more comprehensive life planning, technology that would seem to disintermediate financial advisors empowers them with more options for communicating with and serving clients, according to a new report by William Trout at Celent.

“In the new world of financial planning, value is derived from the ongoing dialogue as much as from the end product or plan,” according to the report.

While technology plays a role in forcing that shift through the commoditization of some aspects of planning, it also supports it by giving advisors more ways to communicate with their clients more frequently.

(Related: XY Planning Network Launches Digital Platform for Its Advisors)

“Financial planning has always lent itself to delivery through an advisor due to its innate complexity,” Trout wrote in the report. “Demographic realities have brought to the fore the emotional considerations inherent in addressing topics such as retirement and estate planning.”

Underneath all this is the massive generational wealth transfer from boomers to their millennial children. While advisors are trying to find their place among competitors that are more likely to be technology firms rather than financial firms, they’re also having to navigate new client attitudes and behaviors.

“For a business long understood as mature, financial planning technology is now approaching the future at lightspeed,” Trout wrote. “A longstanding vendor arms race, built on the increasing complexity of solutions, now tilts toward ease of use. This focus on a more intuitive workflow reflects the preference of the advisor, as well as that of an end client increasingly engaged through digital portals.”

The paper outlined five D’s the financial services industry must address to serve clients:

  • Digitization: Integrating physical and digital channels for both advised and DIY investors
  • Data: Seeing (and protecting) data as an asset that can be monetized
  • Demographics: Boomers are drawing down retirement accounts or transferring assets to a generation of tech-savvy investors who want to be in control.
  • Distribution: End users have more control over how they access investments and what they pay for it.
  • Democratization: Asset classes formerly limited to wealthier investors are more available to mass affluent people, and clients are more engaged in the portfolio decision making process.

The report acknowledged the difficulty in addressing these issues, but argued the long-term benefits for firms that take a dedicated approach will outweigh the challenges. “Indeed, the more firms invest in strategy now, the less repositioning they will need to do in the future,” Trout wrote.

— Read New Solutions for Familiar Retirement Challenges on ThinkAdvisor.


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