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How Advisors Can Simplify Tech Decisions (Part I)

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Advisory firm owners today are deluged by the rapidly increasing number of technology choices and their broad array of functionalities. To help my advisor clients focus, I suggest that they think about technology from the perspective of how it’s used by their firm.

There are two basic ways that today’s tech benefits independent firms: increasing employee productivity and increasing client service and communication. In this piece, I’ll discuss technology that benefits clients; next week, I’ll address using tech to increase productivity.

There’s no question that technology can greatly enhance advisory clients’ experience, or that advisors need to keep up with the latest client technology to compete. Yet, I’ve found it’s a mistake for advisors to focus solely on these innovations.

Instead, when making tech decisions, firm owners need to take a step back and reevaluate what key services they and their firms are currently providing to clients.

For most firms, the answer boils down to three key services: providing financial advice, changing client behavior and connecting with clients. If you think about it, everything else — from estate planning to financial planning, and portfolio management to risk management — falls into one of those categories.

Consequently, the key question firm owners should ask, but few do, is: How does my present technology, and any new technology I’m considering, increase my firm’s ability to deliver those three services?

To answer this question, you’ll have to spend some time thinking in detail about how your firm delivers each of these functions. You might ask the following questions:

  • How do you provide financial advice?
  • What data do you collect?
  • How do you use that data to create a financial plan and/or an investment portfolio?
  • And how do you communicate these conclusions to your clients?

Break It Down

Let’s look at each of these issues.

In the area of portfolio management, digital investment platforms (also known as robo advisors) automate the portfolio creation and management process — usually for a lot less cost than human investment managers.

But are those digital portfolios really better, or even as good, as human asset managers? It’s true that they often recommend the lowest cost investments. But are those funds always in the best interest of the clients?

What about risk? Are “digital advisors” really as good at assessing portfolio and market risks as well as human advisors? And do all robos always act in the best interests of the clients at all times? How do you know?

These days, with best interest and fiduciary duty on the minds of many investors (and regulators) — and in the marketing messages of many advisory firms — questions about the quality of portfolio management have taken on a whole new level of importance.

There’s also the issue of collecting client data. For most seasoned financial advisors, the initial, and ongoing, collection of client data forms the basis of their client relationships. Traditionally handled in person, advisors will spend hours with new clients asking questions, listening to answers, and following up to clarify some of the more important of those answers.

As a professional financial advisor, do you really believe your client interviewing process can be replaced by a pre-conceived generic list of questions that’s delivered online and answered in a client’s spare time?

Finally, there’s the issue of how to deliver investment advice and changing the behavior of your clients. It’s true that delivering financial advice digitally — online or via email or text — is much more efficient than time consuming face-to-face meetings.

But so is calling on the phone. and how many advisors do you know who deliver their advice that way?

The point is, when it comes to providing clients with the wisdom of your financial advice, it’s far more important to deliver it the way they want to get it, rather than the way you want to provide it, regardless of any cost savings.

Don’t get me wrong. Some clients actually do want their advice delivered in an unconventional way. For instance, most millennial investors prefer to get their financial advice via the phone.

My point is that it’s essential to your advisory business to know how your clients want to receive their financial advice — and that you then give them what they want rather than what some platform wants to provide.

The best test is to look at how your clients communicate with you and then communicate the same way. And if you don’t know how your clients communicate, you need to find out — now and well before you make any decisions to change your current client facing technology.

In the advisory business it is essential to let your clients drive your client-facing tech — not the other way around.


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