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Using technology to engage with clients: The view from Adviscent (part 1) - market view

Q&A with Thomas Bosshard, CEO at Adviscent

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Interactive Advisor

Most advisors in banks are overwhelmed and struggling to find relevant content and ideas for their clients. And as there is an increase in technology, mainly from the regulatory angle at the expense of the client communication, low touch experience occurs. What if you had personalized and targeted content recommendations that...

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by Adviscent
| 25/06/2020 11:08:52

What is your view on the current state of the market with regards to how wealth managers manage their engagement with clients? What are they doing well, what are the challenges and what areas could be improved?

1.1. Current status & challenges
The new regulatory requirements, which aim to ensure financial professionals work in their clients’ best interests, are leading away from a sales-based approach and the conflicts of interest this potentially generates. Wealth managers must now determine the level of protection needed in accordance with investment types, assess client compatibility with products and services, and facilitate an audit trail for compliance reporting. These processes can be fully automated, and many wealth managers have followed suit.

However, they are still grappling with the downsides. As a whitepaper I co-authored argues, one of the consequences is that there are no more stories to tell. For example, stories about exciting companies, their great ability to innovate or promising product pipelines, top-notch management, and whatnot. Besides “the numbers” such as earnings, these stories used to be the information that helped portfolio managers assess how a company would perform or, more importantly, its stock. Financial advisors would then relate these stories to clients, for example to explain the risk of a portfolio relative to its return and better relationships were built. These stories unfortunately have in most instances now been replaced by mathematical risk models that do not resonate the same way with clients.

1.2. Impetus to change & potential benefits
Today, complex statistical models do the differentiating and investment decisions are left to an algorithm, which are completed far more quickly and cost-effectively than humans, as well as compliantly. However, these decisions are difficult to communicate. Try explaining a mathematical model or modern portfolio theory to a client. The problem is the abstract nature of numbers or communicating purely mathematical decisionmaking based on probabilities.

At Adviscent, we see four main challenges:

  1. Paradigm shift for wealth advisors: There is less freedom for the advisor. The machine is doing the job, and the advisor follows the machine.
  2. Black box: The drivers for portfolio construction and optimization are more frequently not known either to the advisor or the client and, therefore, beyond comprehension.
  3. Lack of emotion: Fully automated processes are low-touch while many clients still expect a hightouch experience, with the advisor playing a crucial role.
  4. Robo-advisors do not improve loyalty: Robo-advisors, per se, do not create customer loyalty by themselves. In fact, clients may find it easier to change their wealth manager based on a commoditized capability.

1.3. Opportunities & actions
Research suggests that digital solutions that address more complex problems need to evolve into what can be called “interactive problem-solving” solutions. Interactive problem-solving requires both parties, the advisor and the client, to interact with each other when trying to understand the situation and elaborate a solution. Interacting means engaging in mutual communication to increase traceability and create awareness about how actions are linked to the overall goal of a client.

In essence, this means that digital advisory solutions are seen as a support for interactive problem-solving and should instigate a “dialogue” between the advisor and the client by bridging the gap between the investment technology, the advisor and the client. The problem with pure robo-advisors is that they do not foster such a dialogue. In hybrid advisory settings, use of technology does not intensify the information exchange between the participants; in fact, it disrupts communication between the advisor and the client. As they do not deliver explanations as to how a decision is reached, blind trust in technology is required. Understanding and being understood are both key when it comes to building trust and the development of loyalty.

Adviscent therefore believes that a dialogue must be placed in the center of every digital advisory solution, so that the joint identification of the problem, the exploration of alternatives and the decision itself can be supported. However, what are the design principles of such a solution? A dialogue in an interactive session basically requires two things:

  1. personalized information: information that is meaningful and relevant
  2. task awareness: activities that relate to the client’s overall goal and clarify the client relationship.

Access Part 2 here

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This article was originally part of The Wealth Mosaic's WealthTech Views Client Engagement Report. You can access and download the full report here: