5 min read
Improving client experiences through collaboration
David Townsend, Halo Investing
:
6/5/23 3:56 PM
The Advisor360° Amplify program brings industry leaders together to share their expertise with the wealth management community. In this blog, Dr. David Townsend of Halo Investing discusses how having the optimal tech stack builds business.
- Today’s investor is concerned about so many risks, and they demand an advisor who teams with them to construct a personalized financial plan
- Technology plays a pivotal role in improving the client experience, and firms neglecting to invest in FinTech solutions are losing out
- Effectively collaborating with individual investors means harnessing technology and new products in today’s marketplace
A strong financial plan is not a one-and-done proposition. It is a living, breathing set of goals based on the client’s evolving life circumstances. An advisor must also partner with their clients so that risk tolerances and return objectives are constantly aligned. It’s through this collaborative approach that sustainable long-term relationships are cultivated so that generational wealth is ensured along with instilling trust and confidence with the next gen of clients.
Knowing your customers
But what all goes into improving the client experience and including them in financial decisions? After all, no two clients are alike—some prefer to be hands-off while others like to dive into the details. A good question to ask during the early innings of the advisor-client relationship is: “Do you want to know how a watch works or just what the time is?” Recognizing and understanding what each client wants out of their relationship with you is crucial.
Advisor360°’s 2022 Connected Wealth Report dives into key findings from a survey of 300 financial advisors and executives from a range of broker-dealers, registered investment advisers (RIAs), and bank trust companies. The report offers insights into the role technology plays in their business. From these findings, you can discover methods to bolster collaboration with your clients. Happy and confident clients lead to a more successful advisory practice.
The technology gap
Walk into an industry conference these days and you will no doubt hear about how a strong wealth tech stack builds better connected experiences for providers and advisors. The problem is that many wealth managers do not possess (and cannot afford) the latest and greatest tools. Legacy programs with single functional point solutions stand in the way of an advisor seeking to deepen client engagement. What’s more, today’s mass affluent and high-net-worth investors increasingly demand the best tools to not only build and preserve their wealth but also save time. The Connected Wealth Report shows there’s the appetite for the financial planning process to be as smooth as operating a smartphone, but obstacles must be overcome.
Don’t leave money on the table
Let’s begin with the sobering stats: nearly four in 10 advisors rate their firm’s FinTech platforms as “in need of an upgrade,” while just 3% view their company’s technology tools as “integrated and innovative using the latest state-of-the-art tech.” Clearly, that awe-inspiring feeling you might have after leaving a WealthTech conference contrasts the reality of an advisor’s technology suite.
But there is an opportunity at the same time. Consider that client expectations are higher than ever—the survey found that roughly two-thirds of respondents (65%) have lost clients or prospective clients because their wealth management technology did not meet client expectations. So, there’s business for the taking for wealth managers focused on bolstering their FinTech game. Neglecting to invest in the right tools is akin to leaving money on the table.
A tech refresh is needed, so say many advisors
How would you categorize your firm's technology?
Source: Advisor360° 2022 Connected Wealth Report
Growing your business through referrals
On the flip side, advisors who rate their technology as being modern were 50% more likely to see growth in new client assets over the last year, per the survey. And the key to seeing your business flourish is building a client base through word of mouth. Referrals have always been the backbone of how an advisory firm gets to the next level, and the 2022 Connected Wealth Report found that wealth managers who rated their firm’s tech situation as modern were 33% more likely to say their clients recommend them to other people.
The bottom line here is that the right tools, aimed at improving relationships and an understanding of how a financial plan works to everyday people, allow for better conversations about money—whether it be regarding saving and investing for a child’s college fund, planning for a wealth transition, or discussing Social Security strategies. Building the trust to engage in deep conversations is augmented by possessing the right technology platforms.
Customized investment solutions lead to better engagement
An improved client experience is not just about getting them to understand how a financial plan works and what steps the client must take to get to their goals. Collaboration is also key. It’s a two-way street to make sure no potholes result in costly accidents along the way. Today’s investor demands personalized, goals-based plans and advice, and there are more products available now to meet those needs. Sitting down with an individual or couple to understand their objectives is critical before offering a tailored solution that checks all the boxes.
Partnering with clients to determine their investment preferences
Advisors have also seen a pickup in investors who want to access alternative asset classes, including ESG and protective investment products. While nearly half of the advisors surveyed report a demand for ESG-related products, a high 70% of respondents voice that structured investments are either in “high demand” (50%) or “extremely high demand” (20%). Moreover, 65% of advisors say there is a strong interest in annuities. Generating retirement income with a keen eye on mitigating downside risk are popular strategies we’ve seen.
The evidence is clear that individual investors are nervous about the investment landscape, and recognizing and empathizing with this reality is the first step toward building a foundation of trust in order to bolster client collaboration. Once there is an understanding between the advisor and client, a tailored financial plan can be constructed. This personalized approach leverages a behavioral tilt known as the “IKEA effect,” which simply asserts that individuals value something more if they had a hand in its development. Thus, a unique plan fit to the client’s specifications is more likely to be stuck to when market volatility comes about.
ESG, risk-focused financial products are top of mind among today’s investors
Please rate your current client demand for access to each of the following:
Advisor rating
| Product |
|---|
| Structured invesments |
| Annuities |
| Long-term care insurance |
| SMA/UMA |
| Crypto/NFTs |
| Socially conscious or ESG |
| Direct indexing |
| Hedge funds |
| Extremely high demand |
|---|
| 20% |
| 35% |
| 10% |
| 17% |
| 19% |
| 8% |
| 10% |
| 2% |
| High demand |
|---|
| 50% |
| 30% |
| 49% |
| 29% |
| 25% |
| 34% |
| 19% |
| 8% |
| Some demand |
|---|
| 24% |
| 26% |
| 30% |
| 33% |
| 13% |
| 29% |
| 40% |
| 36% |
| Little demand |
|---|
| 6% |
| 7% |
| 11% |
| 20% |
| 18% |
| 25% |
| 21% |
| 40% |
| No demand at all |
|---|
| 0% |
| 2% |
| 1% |
| 2% |
| 24% |
| 3% |
| 10% |
| 13% |
Source: Advisor360° 2022 Connected Wealth Report
Embracing change and the promises of tomorrow’s financial technology
Lastly, building relationships with current and prospective clients must focus on multiple communication channels. It was just a few years ago when the industry debated whether technology would be a friend or foe to today’s advisor. While it is clear that tech must be harnessed rather than cast aside, artificial intelligence has augured similar debates. It’s still unknown how generative A.I. will be ensconced into financial planning in the coming years, but there is no question that FinTech is like an extension of one’s practice today—more than half of those surveyed have come to that conclusion. Fortune favors those who embrace change and new ways of reaching out to and hearing from clients. That includes social media, text messaging, and even constructing A.I.-driven planning assistance.
The bottom line
When it comes to growing your business, low-hanging fruit can be grabbed by investing in the right technology. Building financial plans is sometimes the easy part, but challenges emerge when trying to collaborate with the clients so that they feel 100% on board with how to achieve their goals. An optimal tech stack and communication prowess boosts client satisfaction and ensures a strong financial planning experience.
Dr. David Townsend, DBA, CFA, leads product marketing and thought leadership at Halo Investing. He’s responsible for helping advisors develop and articulate how portfolios can benefit from defined-outcomes and other alternative strategies.
