The Institute for Innovation Development interview series invites innovation experts, innovative business leaders and emerging FinTech companies to talk to our readers about their latest innovation activities. The series seeks to learn from innovative business creators, uncover innovation best practices, and apply these insights into a financial services business model.
We recently sat down with Jeremy Floyd, president of BPV Capital Management, a Knoxville Tenn.-based firm that partners with other financial advisors to help them grow their businesses.We asked him to share with us the upcoming launch of BPV’s new next-generation service for financial advisors that positions them, as he states, at the nexus between investing and communications.
Hortz: Jeremy, BPV seems to have a long history of continuously evolving -- starting out as a traditional family office, growing to a more expanded RIA business, and then an asset manager offering your own mutual funds. Now, it looks like you're developing a next-generation services organization for RIAs. Tell us more about your newest evolution and how it further powers your business?
Floyd: In everything that we've done as a firm, we've always sought to support our purpose of helping families retire well. That's been our core purpose. That's what drives us. What we found was that we're really in the best situation to do that working with advisors. How our focus evolved from an RIA firm to an asset manager and now offering advisor digital services, it’s really about the deep relationships that we built with our RIA client firms.
As we listened to advisors, what we've found is the need for services and tools that really try to understand the personality types and behaviors of investors in order to better improve their outcomes, prevent some irrationality in a client decision, and make sure that they're in the right risk level portfolio. Our goal is to create a set of tools that can provide timely, accurate, and relevant communication, from the advisor to their clients, based on the client’s specific personality profile. By bringing our asset allocation investment team, our marketing communication team, and our technology team together, blending these areas together, what we call the nexus of investing and communications, that's where we believe we can bring about a new level of efficiency in the advisor practice and ultimately help improve the outcomes of the advisor's clients. This is both in the best interests of the advisor and their clients. And it can be accomplished through our focus of looking at a different side of the technology question, the human side of it. These are all tools that we are developing to help advisors manage and grow their business by better understanding and communicating with their clients.
Hortz: Can you explain a little bit more about what's involved in combining those different component areas to get to that nexus point?
Floyd: We start at the very basic level of determining what is the personality of the client that you're communicating with and how that impacts their investment decision-making over time. I think it is important to use all the information that's readily available about clients to get an accurate measurement of their risk tolerance. A lot of the standard risk surveys ask 10 questions and then, based on that, we put people into a risk category. But we believe there's self-reporting bias around that, and that risk levels move depending on what’s going on in the markets. By using digital information, using past behavior and current data, which we think we can accurately track, it will ultimately give us a better picture of that client and their true risk levels.
What this really starts to look at is the marriage of data that typically, in most organizations, is siloed. You have the investment side on one side and that's fairly separated from the communication side. What we're building is a tool that marries that data together to provide both insights to the advisor about the behavior of their clients and gives them timely notifications and recommendations. Is this person stepping outside of a risk level? Is there a potential for concern? Should you make a phone call or send an email today, all the way down to providing a means of automated communication.
That's the tool set that we're working on aggressively right now. The effort is a blend of internal collaborations between departments and external partnerships we’re working on with a marketing automation system, an investing portal, and cognitive data analytics firm. It's bringing those three external components together on the backend that puts the advisor in a situation where they have more intelligence about their client base and can match up the appropriate type of personal recommendations and communications that can alert you or takes action automatically.
Hortz: Can you tell us more about the external partnerships and FinTech companies you are working with?
Floyd: The core technology, which we are actually closing on at the end of the month, is a marketing automation and client intelligence software that helps develop client personas. What's unique about this software is its focus on determining the personality of the individual. It takes that individual approach instead of a large aggregated approach. Most marketing automation systems are about bulk. They're about very large data sets. We don't think about it from a big data standpoint. We think about it from a small data standpoint. How do we take small rich data sets to provide insights to the advisor about what's going on with their individual clients and prospects? I put that into the “marketing automation with a human touch”category.
The biggest strategic partnership we're working on right now is with a cognitive computing company that will then take this individualized data, in combination with the larger digital set, to provide a deeper level of insight. The problem with any sort of marketing automation software is it only delivers as much insight as the person interacts with you directly. Did they open your email? Did they visit your website? Did they visit a landing page? That's all the measurement you get. By using a variety of different data sets that are available online, you get a different, more of a 360 view, of the person that is interacting with you. That's definitely one of the keys.
We are also working on a strategic partnership that will bring model portfolio asset allocation services to advisors that synchronize all of the communication side then with the investing and the risk tolerance side that we were looking at.
Obviously, compliance is a part of all of this. There's a compliance acquisition that we are in talks with as well. Ourgoal is to have our first round of completions done in the third quarter, early fourth quarter of this year.
Hortz: There's a huge amount of emphasis being put on advisors to become digital. What does it mean to really be a digital firm in today's environment? What's the difference between having these tools and integrating them into your business?
Floyd: I think you hit a really important point. The problem is the human behavior involved in changing the way that people have run their business for a very long time, decades. To modify that established behavior, whether it’s a new data entry system, to begin using the CRM, or whatever technology it is on a regular basis, is quite a change. It's a major behavior change. It's like quitting smoking.
Before I came to BPV, I ran a marketing agency. I've always required any new implementation to be adaptive to the personality and the behavior of the person using the technology, rather than forcing the person to adapt their behavior to the tools. A big part of this involves trying to automate systems as much as possible. It doesn't require a major shift in behavior, orusing communication to that person in a more passive way, to automate their life. What do I mean by that? It sounds crazy. Rather than forcing someone to check a report everyday to see who's been on their website, just automatically email them a report in the morning, saying you need to do these things today. You need to call this person or email this person based on their activity or whatever the system determined.
In using technology, for us, it's about usability, not capability. Why is it different for us? Because we are not a FinTechcompany that's actively trying to build capabilities. We're trying to form usability solutions for advisors in their offices so they can more effectively build relationships. That becomes the central focus: how are we helping advisors to understand their clients better. It's the human side of technology.
Hortz: What do you see as the future of technology for advisors and how are you trying to harness this for them?
Floyd: With so many developments in artificial intelligence and cognitive, it's going to go much further. There are levels of automation that we're going to see coming down the pike in the next five years that are going to be mind-blowing. FinTech is moving at a massive rate, moving quickly, and there are brilliant developers in this space. But, technology is going to take you only to a certain extent.
My vision around this is that we are not a technology company. We are a relationship company. That is part of what makes us different. What we want to do is let our team at BPV utilize their highest and best use: make the things we are good at and form strategic partnerships to fill in the gaps. So, if a developer is continuously thinking about improvements in the experience of their software, then I want them to do that and I want to work out a partnership with them to bring that out to advisors. I want to have a team of developers here that we are bringing in to leverage the power of what's going on in FinTech and develop in-house only that software that is absolutely necessary for us to serve as the proprietary glue between some of these amazing technologies that we’ve partnered with.
When I say improve outcomes and experience for the investor, I start with the framework that the whole financial services experience can be dramatically improved from a usabilitystandpoint. We use computers, but mainly our mobile phones, to manage our financial lives. Somehow, the advisor is not always directly in that relationship. The advisor needs to be a part of that conversation and be involved in that connection, where people are managing their financial lives and playing a role in it. That's really the focus for us, is to be that integration point that allows that great, fantastic, or Steve Jobs-like, beautiful experience to happen between the advisor and their client. That's why we think there's such a significant upside and advantage, in putting that advisor in a place where they would never have the time or the resources to build out an experience that is engaging and interesting to the end user. How can we help the investor have this enjoyable, pleasurable experience with their advisor, with their finances, with their investments?
Hortz: How important do you think business model innovation is for advisors in the future?
Floyd: I don't believe it's a complete adapt-or-die. What I do believe is that there is an underestimation of the use of technology and the use of digital tools. The advantage I think for the practice that uses technology is their ability to connect with their clients on their terms. A lot of advisors will consider their website, the static website that hasn't been updated in years, to be all the digital information that they need. Many professionals have this notion that the advisor is the professional, so clients should deal with them on the advisor’s terms.
I'm saying all this to illustrate that the paradigm of the client doing business with me on my terms has changed into me, the advisor, doing business with the client on their terms. It's going to be critically important for future success to understand who's in charge of the conversation because clients have a world of unlimited options and choices that customize to their needs. Consumers now are looking for that customized experience in every part of their life.
Hortz: What specific advice can you offer advisors that realize they need to start charting this new course for their firm, to be more digital? What's the best advice you can give them on how to really start?
Floyd: I think, and this is my experience with most advisors, the thought of becoming digital feels like eating an elephant. It's overwhelming. You don't know where to start. We are big believers in the “crawl, walk, run” mentality. Understand how to engage in a way that they can actually accomplish some goals, get some wins, and feel good about it. I think it goes back to the implementation problem and being sold on benefits rather than how it actually fits into the practice. All of these things are just tools. The fit question and the use question are really important. Is this solving the problem that I want it to solve, and can I implement it?
The second part is, just as advisors have insight and expertise over a fairly complex universe of knowledge, I would suggest that they seek the consultation of someone with expertise in this area. Enlisting the counsel of someone that knows the territory well can be very important in their evolution and development of the advisor’s digital presence. Many start without a plan, dive in, and eventually give up, and move on before they actually see the fruit of their labor.
Hortz: Thank you Jeremy, for an advance look at what you are building for advisors!
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