What You Need to Know
- Automation and other tech can free advisors up to focus more on clients and less on mundane tasks.
- Advisors must offer more value to clients with their advice because it is no longer enough to bring financial products to the table.
- It's crucial to make more Americans financially literate and to attract younger advisors to the industry.
Technology has enabled advisors to offer better advice to their clients and spend more time communicating with them by making it possible to spend much less time dealing with mundane tasks, according to Michael Kitces, head of planning strategy at Buckingham Wealth Partners and co-founder of XY Planning Network, and Ram Nagappan, chief information officer at BNY Mellon’s Pershing.
“Our industry really is in the midst of just a huge evolutionary shift,” Kitces said Wednesday during a virtual keynote panel discussion on technology at the Pershing Insite conference.
Amid the rise of self-directed, do-it-yourself investing, advisors have largely shifted away from selling products to focusing on selling the advice itself that they provide to clients, which is a “fundamentally different business,” Kitces pointed out.
“It wasn’t that long ago that consumers couldn’t get insurance and investment products — [they] literally couldn’t access them” on their own, he noted. Now, however, clients can “get pretty much any financial product they want on the internet with the click of a button,” he said.
There is “pressure on us to add more value on top” as technology “keeps moving forward and makes more and more financial services and products available to consumers,” he said.
However, “the advice business is doing better than it ever did before,” he said, adding: “I don’t view the technology as the threat but the thing that is continuing to push us up the line” to offer clients more value. It is “not enough to bring a product to the table” for clients anymore, he said.
Technology has also freed advisors up to focus on their clients by simplifying such previously time-consuming tasks as making a stock trade, Kitces said.
Similarly, Nagappan pointed out that ATMs did not lead to the elimination of tellers at banks.
Technology including artificial intelligence and automation can be used by advisory firms to “amplify our operational efficiency, transforming client experiences and enabling our business growth,” Nagappan said.
For example, predictive analytics and data science can be used by advisors to better understand their clients and build relationships with them, Nagappan said. Advisors can start to have a “more meaningful conversation” with a client if they are able to receive data allowing them keep up with clients’ major life events including childbirth, a job change or the purchase of a new house, he explained.
Advisors should also be automating the “mundane tasks that you’re doing,” Nagappan said.
A ‘Surprising‘ Year at Pershing
On Tuesday, during the Insite opening keynote, Emily Schlosser, who joined the firm just under a year ago as its chief operating officer, said the one word that summed up her first 11 months with the firm was “surprising.”
“Everything that’s happened to us over the course of the last 11 months has been surprising in one way or another,” she said. “We are sitting here, 11 months from the day I started, still in a work-from-home environment.”
In addition, “there’s a lot that’s been going on around us that I think is having a really surprising impact on our business,” including social unrest in the U.S. and “the way that that’s really changed our dialogue on diversity is something that I think has been incredibly surprising,” she explained.