Photo: Gavin Spitzner/Wealth Consulting Partners LLC

The future of advice and wealth technology took center stage at the inaugural Wealth/Stack conference in Phoenix in early September. The inaugural event, organized by Ritholtz Wealth Management and Inside ETFs, drew a crowd of 700-plus advisors and other guests.

In his opening keynote speech, Orion Advisor Solutions CEO Eric Clarke made the case for why (and how) “technology acts as a catalyst for measurable growth.”

The executive said Orion’s 2,000-plus clients have about $900 billion in assets and most, 92%, “do not have a broker-dealer affiliation.” This means the advisors look to their technology partners “to help them innovate, disrupt and win.”

Clarke says the recipe for successful advisors includes these ingredients: a well-defined value proposition, incredible client experience, operational efficiency and the ability to execute its growth strategy. “A TD Ameritrade Institutional study found firms focused on efficiency grow twice that of other firms.”

Clients are the means to that growth, according to Clarke. That means advisors must turn clients into advocates by maintaining “touchpoints” with them and providing excellent service. He then pointed to a Pershing study showing advisory firms investing in their client experience (CX) “are growing five time that of other firms” — Carson Wealth, for instance, is spending about $50 million on it.

Other keys to success, in Clarke’s mind, are “innovating on your value prop, disrupting your business model and ‘future proofing’ your business.” These steps, he says, should give advisors what they need “to win more than your fair share.” Again, Clarke said, “Use technology to do these … things.”

Thanks to firms like Amazon, Apple, Netflix and Uber, “The expectations that our clients now have are vastly different than what they used to be,” he said. “Don’t look at the financial competition for client expectations.”

As for how advisors can best build their brands, “Think about building financial awareness and literacy via [a marketing] campaign,” Clarke said.

He then shared that Orion will roll out a pilot marketing and prospecting service for a few client firms now experiencing growth that’s “behind” their goals. “We want to enable them to do marketing campaigns” as part of a larger business-building road map, he explained. The program is set to be offered to its broader client base in 2020.

M&A Momentum

“There is an unprecedented level of activity” for mergers and acquisitions in the advisory space, according to FP Transitions President David Grau, and not just for large deals. Firms with assets of $4 billion or less are also active in the marketplace.

“More people are contemplating selling what they’ve built,” Grau explained during a panel discussion at Wealth/Stack. This month, FP Transitions has worked on about $40 million worth of sales and expects to see 20 transitions, he added.

“The buyers are lined up deep and have bank financing. Five years ago, there was no such thing,” Grau explained. “Now, everyone’s talking to banks.”

Ken Auspaker, a managing director of Evercore, says the wirehouse firms and large consolidating RIA platforms are providing financing, too. “There are lots of opportunities for RIAs.”

Rather than focusing on what price they are paying, potential buyers should focus on other terms, Grau says: “Take valuation off the table. The seller’s going to win that. How about the transition plan to get 95% of clients over [to the buyer] and getting the payment and finance terms [you want]? Don’t worry over the price. It’s the [other] terms and taxes.”

As for succession planning, advisors need to get real, the panelists said. “It’s great that there’s a bull market” for advisory-firm M&As, said Lake Avenue Financial CEO Alex Chalekian. “But you don’t want to wait until you have to make a move.”

Grau explained: “Many advisors are thinking, ‘Someday when I leave, I will find out what the 85:1 [ratio of buyers to sellers] can bring me.’ But … only one in 10 will sell, not the rest.”

In order to sell, you have to build a practice that is sustainable, meaning it has a succession plan “that outlives you,” he said, “and that lives the length of your clients’ lifecycle.”

And, Grau adds, advisors can’t just recruit, train and retain advisors overnight. “It takes 10-15 years for a good succession plan, so … start now,” he said.

Service Growth

RIA Oasis President Kristen Schmidt suggests advisors think beyond succession planning. “Lots of firms are going into M&As to acquire a service they cannot now offer,” she said.

“Mergers can bring in a [new] business model,” Schmidt explained. “We are seeing CPA businesses going into the advisor space. CPAs do not want to do FA stuff, … but they have pipelines of clients.”

For Kirsten Petras, head of sales for Oak Street Funding, “It’s going both ways: CPAs are adding advisory firms, and advisors are getting CPAs.”

For Grau, this is the way to go. “Mergers are the most powerful reshaping tool,” he said. “They’re much better than acquisitions.”

A merger might bring together several small firms with owners or leaders of different ages. “Then you have a succession plan,” he explained, via blending the financial planner, wealth manager and technology.

Just watch out, Schmidt cautions. “This can be a nightmare, considering that the [merged] technology may not be ideal.”

Outside of tech, look at what else the merger is bringing together, she adds. “Ask which one of these things doesn’t belong? Mixing and merging [business] cultures, for instance, is another issue.”

The AI World

Dani Fava, TD Ameritrade Institutional’s head of innovation, says advisors should get more tech help for their front office from artificial intelligence and other tools: “What comes next has so much to do with client experience and the front office … and AI is the way to get there.”

Robo-advisors “have really forced us to name [our] value propositions, as they’ve commoditized investing,” she said. “Where is the value? Client experience, and … that is where technology [like AI] can help you.”

1. Use AI to better prioritize clients and prospects. “We do that on our own now. But AI can predict who exhibits certain behavior and patterns, who makes the best clients and prospects based on your data,” Fava said.

2. Better communication around clients’ top concerns. The focus here is “on really personalized content,” Fava said. “Like how Netflix and Amazon scoop up data and make recommendations on what you can watch and buy, technology will give you recommendations on what to send clients as content.”

It’s a “a natural next step,” Fava said, giving a somewhat-awkward example of how an advisor seeing (via social media) that a client just joined a divorce-support group might want to reach out to offer relevant financial advice.

The aim is to contact clients based on their online and other tech-tracked behavior — in ways that are helpful but not obtrusive. “Social media knows what a person is more likely to open — a blog on taxes or a video on vacations,” she shared.

3. Get insights on how, when and where to speak and meet. Neura software, for instance, uses AI to collect data from devices build a profile of an individual’s daily routines, schedule and even locations. “It can help you bucket your [clients] … and tell you what they do and when,” Fava said.

This means advisors can identify the right time to send out a client notice about how he or she is doing on meeting a financial goal, say, as that person is walking into a casino. “This might be an [opportune] time for a nudge or reminder,” she explained.

When reaching out to clients, Fava pointed to Contently software, which uses AI to read a blog or other content and evaluate it for openness, conscientiousness, extraversion, agreeableness and neuroticism.

To help advisors figure out where to meet clients, Fava mentioned Financial DNA, a behavioral finance tool that can send surveys to prospects and tell advisors what type of personality and preferences they may have on where to meet: “In the future, AI will use email, social media, anything to do this. And your phone knows where you are in so many ways [already].”

4. Easier follow up. There’s technology to transcribe conversations — like Temi’s speech-to-text transcription app — that also can “pull out the follow-up items and [even] put that into your calendar,” Fava explained.

“These platforms are just getting better and better,” she said about developments that are both potentially helpful and intrusive. “All you say can be tracked and recorded.”

Janet Levaux is editor-in-chief of Investment Advisor. She can be reached at jlevaux@alm.com.