Wealth management has personal service at its core and centers on the relationship between the end-client investor and the wealth advisor. This is even more true today as the industry shifts away from a traditional revenue model focused on product sales to one linked to the provision of client services – for instance, financial planning or financial wellness coaching. This doesn’t mean that investment management and portfolio performance aren’t still a key part of client satisfaction and retention. They are. But they aren’t all that matter to clients.
Moreover, as firms continue to face fee compression and competition from third parties, such as automated selfservice brokerages, adding services beyond investment management and building deeper interpersonal relationships between clients and advisors are both key to maintaining – and even growing – future revenue.
Shifting from product to experience and from investment manager to life coach means that wealth advisors are tasked to do far more with the same – or even fewer – resources. Thus, digitalization, including increasing the number of digital channels between client and advisor and automating routine advising tasks, offers advisors a way to meet rising demands for more services while continuing to grow their books of business.
The end-to-end advisor platform
Our recent research shows that end-to-end advising platforms offer a single, clear solution to many of the challenges facing wealth advisors. These front-to-middleoffice platforms include functionality that targets both the client and the advisor experience simultaneously and often offers a shared user experience. What the client sees in their end-client portal is simply a pared-down version of what advisors access via their advisor workstation. The functionality found in these platforms covers most, if not all, parts of the advisor’s journey – prospecting and acquisition, onboarding, portfolio management, reporting and accounting, client administration, and general client relationship nurturing.
Critically, the benefits of these solutions aren’t only for larger shops and wirehouses. Rather, the case can be made that comprehensive end-to-end platforms offer a clear way for small and mid-sized firms to stay ahead in an increasingly competitive industry landscape. Let’s look at three reasons why small to mid-sized firms should also consider implementing an end-to-end platform to support their wealth advisors.
Jump-starting digitalization
For the past decade or more, the industry has seen major advancements in the types of technology brought to bear by large wealth managers, private banks, and wirehouses. From artificial intelligence (AI) to robotic process automation (RPA) to hyper-personalized client experiences, the firms with the resources to devote to technology and innovation have become digital leaders while smaller firms have often lacked the ability to keep up. End-to-end advising platforms can help jump-start digitalization by providing a “one-stop-shop” technology platform suitable for smaller firms that haven’t had the resources to devote to building out an integrated technology stack. For other firms that are burdened by legacy technology or grapple with an amalgam of best-of-breed solutions, end-to-end advising platforms provide a way to get out of the software development business and refocus on core wealth offerings.
Increasing client engagement
The second reason to consider an end-to-end advising platform is that it offers a way to meet growing client demand for more digital tools and services and ultimately help drive more digital engagement by prospective and existing clients.
Not surprisingly, wealth managers reported increases in the level of digital engagement by clients during the pandemic period and their desire to use digital tools. But there is evidence that this demand for digital engagement isn’t going away after the pandemic. A recent study found that most clients are seeking a truly hybrid relationship with their wealth manager, with the majority of those surveyed answering that they wanted a 50/50 split between in-person and digital interactions with their advisors going forward.
In addition to more digital interaction, clients now want their digital wealth management experience to be hyperpersonalized. Around three-quarters of respondents in a 2021 survey stated that they would be willing to share more personal data in order to have more personalization from their wealth management relationship.
For smaller RIAs and mid-sized wealth management firms, the push for more sophisticated digital client experiences and higher levels of personalization can represent a clear challenge. For firms or advisors that are digital laggards, these demands could mean losing clients to more tech-savvy competitors or even automated investing services. Here, again, is where endto-end advising platforms can help by offering a relatively straightforward way to adopt a modern tech stack that offers an integrated client journey from prospecting and onboarding through wealth transfer and offboarding.
Driving advisor satisfaction
Lastly, end-to-end advising platforms can help increase advisor satisfaction and enable recruitment at a time when the industry’s talent war is heating up. It isn’t only clients who are generally dissatisfied with the technology that their wealth managers are offering. Wealth advisors share this dissatisfaction. One recent study found that insufficient technology is the single largest driver of advisor satisfaction. Other recent research showed that 77% of advisors reported losing business due to inadequate technology, and over half of surveyed advisors were currently thinking of leaving their firm due to technology shortcomings.
Advisor satisfaction is key to retention, but technology is also paramount in recruiting new, younger advisors. Given that some estimates expect around one-third of the current advising staff in the United States to retire within the next decade or so, recruiting younger advisors will be key to future-proofing a firm. This means that the talent wars for advising talent are heating up and firms must differentiate if they want to attract top talent. An advanced tech stack can serve as a competitive differentiator.
End-to-end advising platforms offer an integrated, holistic, and, perhaps most importantly, modern advisor experience. Often, small to mid-sized firms and RIAs don’t have the talent in-house that they would need to build out a modern UI/UX or to design a client and advisor journey that simultaneously benefits both groups while giving advisors more control and customization of their digital desktop so that they can choose how to make technology work for them.
Despite drawbacks, end-to-end platforms can help small firms stay competitive
While these types of comprehensive solutions have a lot going for them, firms will need to proceed with open eyes. Implementation is often challenging, particularly for firms struggling with legacy technology systems. Employee adoption of these solutions can also be difficult to increase, especially if advising staff are set in their current ways and have little reason to adapt.
Lastly, firms should keep in mind that the end goal of many providers in this space isn’t to offer the best digital wealth advisor toolset on the market. Rather, larger vendors in this space are in a race to become the Amazon of wealth management. They want to offer everything from financial planning to model marketplaces and outsourced back-office functionality. While this isn’t a problem per se, it can mean that small firms in particular may find themselves with more technology than they need or with a misalignment between current needs and a vendor’s future goals.
Despite the drawbacks, we believe that small shops should definitely consider end-to-end advising platforms when contemplating a new technology strategy. These platforms should not be viewed as only a tool for the big wirehouses. They can, in fact, provide clear opportunities for small and mid-sized firms to stay competitive both in terms of meeting client demands and retaining advising talent.
This article is from The Wealth Mosaic's US RIA WealthTech Landscape Report 2022. Access the full report here
