Norden: This is an interesting question. The average Freewheel Score, which is the underpinning of the study and is a holistic measure of digital adoption, was 25 for the largest advisors and 36 for the largest asset managers (out of 100). That’s anemic from an overall industry perspective. Still, there are firms we can point to that are prolific users of technology and it’s evident that they have created a competitive advantage for themselves.
There are two major factors holding investment managers back from modernizing their business models. The first is that financial services has historically been very insular, and I continue to hear objections about how the rules don’t apply. For example, “we only work with institutional investors” or “we only work with high net worth individuals.” I guess the implication is that these types of people don’t know how to use an iPad? But as Don Draper said, “if you don’t like what they’re saying, change the conversation.” So in many respects, our study sought to change the conversation. Rather than engaging in a push and pull on the merits of digital marketing, we wanted to be able to demonstrate that there are firms having success in this way. Then the conversation changes from an abstract dialogue to “do you want to keep pace with your competitors?”
I wish I had something more profound to say, but the second factor holding most firms back is, unremarkably, their leadership. For boutique investment advisors, it is often the successful advisors or portfolio managers that graduate to the C-Suite. However, just as Michael Jordan was not able to parlay his success on the court into success as an executive, a former portfolio manager may not necessarily be the best CEO. The problem is compounded if you consider that marketers have historically not had a seat at the big kids’ table in our industry. But their roles have grown far more sophisticated, so this must change. The new CMO must be part engineer, part data scientist, and part content marketer. Incorporating these disciplines will be paramount in a firm’s ability to demonstrate relative superiority.
Hortz: In your interviews with financial services leaders on digital marketing, what have been some of the most interesting perspectives you have uncovered?
Norden: As it relates to marketing technology, the objective should be to scale your audience, automate routine tasks, and use data so that any subsequent communication is personalized and within the appropriate context. This approach should increase sales velocity and otherwise strengthen client relationships. After all, financial services will always be about relationships.
The Managing Director of Digital Marketing of a major bank, whose wealth management arm had the highest Freewheel Score, reminded me of this recently. Her firm’s philosophy is not to use technology to enable its advisors to handle more relationships, but rather to automate certain tasks so advisors can spend more time deepening their relationships with clients. Similarly, the CEO of Alexandria Capital, Augustine “Gus” Hong, told me that he wants his website to do the selling, so his advisors can spend every moment acting as a fiduciary for their clients, and nothing else.
Hortz: Any final advice or words of wisdom you can impart to advisors on pivoting from traditional business development efforts to a technology-based approach?
Norden: The mergers of Standard Life and Aberdeen or Janus and Henderson are likely to foreshadow a broader trend as margins continue to erode and competition intensifies. On the advisor side, it’s a fantasy to think that Betterment and Personal Capital haven’t changed investors’ expectations. So the best advice that I can give to an advisor is to prioritize user experience because, whether you know it or not, you’re in the middle of a two-front war. With giants like Goldman Sachs and BlackRock on one end of the spectrum and nimble Silicon Valley upstarts on the other, the status quo is not an option if you are a going concern.
If you look at asset flows, demographic trends, and fintech itself having gone from a cute concept to a wrecking ball, how can you possibly expect to compete if your marketing strategy is predicated upon factsheets, a booth at a conference, and a PowerPoint deck? It’s the equivalent of bringing a knife to a gunfight. There are over 35,000 independent advisors and asset managers, some of whom are actively trying to entice your clients with websites that are rich in content and will nurture their engagement. Our study demonstrated that these managers are being rewarded for this approach. We believe the opposite is true too, as antiquated managers will increasingly find themselves swimming against the tide. But, it’s not too late to pivot!
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