While robo-advisors are making all the noise, there is a more broad-based technology movement afoot in the investment world that has the potential to reshape the way advisors do business and interact with clients. This includes everything from the use of intelligent CRM to content automation and dynamic content generation.
A recent McKinsey & Company report (“The Virtual Financial Advisor: Delivering Personalized Advice in the Digital Age”) served to highlight many of the challenges and opportunities associated with this shift. In the model described by the authors, “virtual” advisors communicate with clients via Skype, FaceTime, or other online vehicles from a centralized location, reducing client acquisition costs.
The target market for this service is the highly coveted “mass affluent” demographic––individuals and families with $100,000 to $1 million to invest. McKinsey estimates the size of this market opportunity at 42 million households worldwide, representing $66 billion in potential annual revenues.
While much of this research appears directed at the wirehouses and the major broker-dealers, independent FAs and RIAs should take note as well. Access to technology will very likely play an important role in competing for the business of the up-and-coming millennial generation. This generation is huge––bigger than the baby boomers––and its members have come of age in the “self-service” economy.
That means they are accustomed to conducting much of their business online. Betterment, Wealthfront, and other advice engines and technology-driven platforms are already competing aggressively in this segment. While their average account sizes may be small now, these firms believe they will grow as the younger generation reaches peak savings years.
Knowing The Client
Companies such as Amazon have conditioned customers to expect personalized product suggestions and rapid fulfillment. The bar here will only keep rising as mobile phones, tablets and, increasingly, mobile video will make it easier than ever to individualize remote interactions.
These expectations are likely to influence how millennials think about financial advice and reporting as well. For that reason, advisors hoping to make inroads with this group should be prepared to bring substantial technology resources to bear not to replace individual attention, but to augment it.
Advice, of course, doesn’t exist in a vacuum. As all good advisors know, the best advice comes from understanding the client’s unique circumstances and his or her financial goals. Here again, technology is playing a role, with a newer generation of “intelligent” CRM products showcasing increasingly sophisticated predictive analytics to anticipate customer needs.
As industry consulting firm kasina has noted, these tools don’t just improve service, they also help advisors and firms manage marketing costs, while “minimizing the waste of deploying expensive resources against unreceptive targets,” as the firm puts it. This can be especially helpful with those smaller clients with high growth potential (the millennials, again), where productivity is essential to maintaining margins.
Finally, technology has started to address what some might describe as the “last mile” in building and maintaining client relationships: content automation in client presentations and reporting. In telecom, the so-called “last mile”––the distance from a central distribution network to the customer’s house––is often the most complex and expensive to travel. The same might be said about delivering marketing and sales content to advisors and wholesalers.