How Techology Affects Wealth Advisors - Views From The Frontlines

Jackie Bennion Deputy Editor 9 October 2019

How Techology Affects Wealth Advisors - Views From The Frontlines

Among the observations, conversations need to move away from age, segments, Millennials versus non-Millennials to really understanding where the resistance is to change and adapting to clients’ needs.

Consultancy firm Capco last week assured wealth managers that there is a no winner-takes-all strategy when it comes to the role of the advisor. “Successful wealth managers will be those who keep client relationships at the heart of their thinking, and view digital innovation as an enabler rather than a silver bullet,” the firm said in a latest review of industry practices. It said client relationships are just as important as investment performance and digital services.

With that in mind, we spoke to a number of wealth managers operating in Europe, Asia, and the US about their digital priorities on the client and advisor side as part of our continued look at tech's influence. Below is a round up of comments from Olivier Capt, head of innovation at Pictet Wealth Management – the group has taken strides to expand in Asia, where digital is seeing some of its fastest uptake; Rod Sayegh, head of digital strategy at Fiduciary Trust Company International, owned by the Franklin Templeton Group, which has around $75 billion under management; and Rod Klapprodt of US wealthtech provider Vestmark, who joined as VP of products and is now its corporate strategy officer working with a host of advice firms in the US market.

Where have been the biggest changes they have seen?
A common thread for all of the firms was using technology to streamline administrative tasks so that advisors can focus on providing more value-added services to clients. Pictet’s Olivier Capt, as innovation lead at the Swiss bank, said that the most important factor for them is having “the capacity to deliver the banks’ knowledge and intellectual property to clients in an efficient, tailored and easy to understand manner.”

Most significant for Rod Klapprodt at Vestmark was how technology has shifted the advisor’s role from portfolio manager to "wealth management quarterback." Managers are much more focused now on client needs and "orchestrating a network of resources and expertise to improve client outcomes." Klapprodt said the shift has become particularly noticeable in portfolio construction: “There was a time when advisors, especially those at smaller firms, would build portfolios themselves or perhaps rely on a portfolio manager within their firm to completely manage the portfolio. Technology has completely changed this dynamic. Now, firms of any size can easily access a network of research providers, investment strategists, and third-party portfolio managers."

For Sayegh, head of digital strategy at Fiduciary Trust, the flood of digital services has created a two-speed adoption, with clients as rapid adopters and advisors trailing behind. “Advisor teams have always been about service, doing what the client is asking them to do and keeping detailed notes on their likes and dislikes. What most are failing to do is asking (not telling) the client how they want to work with their advisor, how they want to interact, receive information, meet, conduct transactions,” and highlighting all the ways of interacting that are available to them. He argues that advisors need to be as versed on digital offerings as they are on advising on asset allocation.

How does technology affect recruiting?
One aspect of this digital solutions Tsunami sometimes overlooked is how much technology has become a calling card to woo and retain wealth management talent. We asked contributors whether the tech tools that firms provide now are an important part of the overall job package and HR conversation?

Vestmark’s Klapprodt thinks so. Innovative technology is becoming ”table stakes” for firms, using a poker analogy, especially when recruiting wealth advisors. In his view, advisors tend to weigh up two specific areas of technology that firms have to offer: “Client-facing tools and what they will use to manage and grow their client relationships.” With expectations constantly on the rise among clients to understand their wealth more comprehensively, any technology that feels antiquated will make it difficult for advisors to attract, manage, and retain clients, he said.

For Sayegh, promoting the level of tech integration at a firm is the biggest conversation that is missing when managers are trying to attract new talent. “Companies don’t see their technology as a driver of acquisition,” he said. "Managers are comfortable talking about the value of products and services but rarely ever talk about the tools. My advice to any advisor thinking about changing jobs – ask to get a demo of the technology and make sure it will support your business.”

Hyped or must-have tech?
We also asked managers what is the most over-hyped aspect of the digital changes they are seeing? All demurred apart from Fiduciary Trust’s Sayegh who said “the most over-hyped change is robo. When it comes to money, it is personal at any level and replacing the human interaction on advice works for some but not the majority."

For Klapprodt, it was more about acknowledging technology’s wholesale stamp on the industry. “The entire lifecycle of a client relationship – the prospecting, planning, account opening, portfolio management, reporting, and ongoing monitoring – has been digitized.” The same goes for the internal operational aspects of running a practice, where technology is driving more automation and a range of flexible outsourcing options across the front, middle, and back office. “Advisors who embrace these realities will better serve their clients and grow their practices than those who do not.”

Klapprodt also noted that technology is making it far easier for advisors to meet clients in locations of their choosing: "Only the laggards are lacking web-enabled client reporting at this point, and most firms have mobile-friendly client reporting capabilities at their disposal,” he said.

“It is no longer sufficient to simply provide electronic statements and performance reports monthly or quarterly. Clients increasingly expect information updated in real-time, not just security pricing and valuations, but also performance and other portfolio analytics,” he added.

Eye on AI
There has been robust debate about the degree to which technology such as artificial intelligence is going to replace people or make them more effective, or possibly a bit of both, as wealth managers shape up for the future. Pictet’s Olivier Capt, stuck to the line that “technology will ultimately make our bankers more effective, precise and targeted in the way they work." He emphasised the highly personal nature of wealth management. “It takes extensive discussion and interaction person-to-person to develop the relationship and nuanced understanding necessary to tailor solutions to each client or family’s specific needs.”

Another area broached was the different levels of tech adoption by advisors of varying ages and backgrounds. Capt thought by client-type "by age, region, or investment expertise” was a better way of determining what technology is appropriate for them.

Sayegh saw no obvious adoption trends based on segmentation but more "varying degrees of willingness to adapt to change and a stubbornness to resist change.” He suggested conversations should “move away from age, segments, Millennials versus non Millennials, and frankly the rest, to really understand the resistance to change and adapting to clients’ wants and needs. By no means does it mean every client or advisor needs to be doing everything 100 per cent digital, but they sure do get upset when email is down, don’t they.”

All agreed that technology has made it easier for advisors to work out “in the field” and that knowledge can be distributed internally and to clients more easily than ever before. "However, the risk is information overload – there must still be a focus on what is most relevant,” Capt said.

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