Wealth management: The future of advice

by AM admin on February 13, 2017

By Thomas J. Holly, US Asset & Wealth Management Leader –

For all of the focus on AI, machine learning and algorithms that hit the news almost daily, they give (at least for me) a break from the charged political climate, fuel the existential debates about the society’s eventual role in a robot-dominated future and allude to changes stemming from the fourth industrial revolution.

One thing, though, that’s rarely mentioned is the human touch that propels these changes forward – and how both will remain tightly integrated as these developments continue.

These developments reverberate and ricochet across all sectors and industries, so I found myself (naturally) thinking about the wealth management industry’s future, which looks something like:

Let me explain.

Over the last two or three years, there’s been an explosion in automated advice platforms (the so-called robo advisors) as a play to offer reach a new client base, offer a new capabilities and capture assets as the larger asset management industry has been pummeled by unrelenting fee pressures.

With this innovation comes a change in the industry’s operating model, a wrinkle in the industry’s fabric if you will.

A fundamental perception — and expectation — of wealth management as a service offering is, and needs to remain, a human-led business. But that doesn’t mean the future of advice will exclude the digital advancements seen in the financial services industry. Instead, firms can capitalize by investing in digital capabilities that complement the role of the advisor — leading to an evolution of sophistication in the service.

The human relationship, coupled with a robust digital underpinning, can enable firms to keep up with the pace of innovation, leading to faster and more effective ways of doing business and truly seamless client service.

The irony is the wealth management industry’s perception of being a technology laggard, as opposed to a leader. What’s the irony? It’s newer clients, the so-called digital immigrants, who are are directly at odds with those who have essentially grown-up with a face-to-face, personal relationship with their advisor. We’re seeing the confluence of high net worth individuals coming to expect the ease and convenience of digital functionality in their everyday lives replicated within their wealth management relationships.

I was fortunate enough to speak in greater detail about these developments and other trends with our clients during PwC’s recent Assets & Wealth 2016 conference in New York.

Here are my most important takeaways:

  • FinTech disruption cannot be ignored, and the next wave is critical. We’re at a time where “see no evil” just isn’t going to cut it anymore. With respect to fintech innovation, turning a blind eye to the advancements of FinTech puts firms at risk of being left behind. While robo-advisors originally focused on low balance accounts, offerings have matured and capabilities are becoming more and more sophisticated to meet the needs of wealthier clients. To keep pace with innovation, firms face the decision to build, buy, or partner with innovators. The next wave of disruption, at the intersection of human capital and technology, will likely reshape the wealth management industry completely, for years to come.
  • Digital technologies can scale advisors’ core competencies. The average advisor talks to about 8-10 clients per day, one at a time. This is all well and good in the normal course of business. However, we’re living in extraordinary times and clients need to know developments at the same pace and the same time. This is absolutely ripe for innovation if one mouse click could deliver personalized outreach while leaving more room for higher-value, white glove, highest and best use activities. Firms can use this opportunity to address the long tail that historically may have been uneconomical to serve.
  • Big data plays a critical role in digital advancement. The sheer amount of data generated by users perusing their social media platforms, shopping via e-commerce or checking their bank balance, among other activities is absolutely stunning — and lends insight into consumer behavior, assuming it’s extracted, aggregated and analyzed properly. For Wealth managers, this is an enormous opportunity to gain insight into their clients by enhancing their experience virtually or digitally, backed by a strong and secure data architecture.
  • Advice is — and always will be — a key differentiator. The definition of advice continues to expand. High net worth individuals strongly believe in paying for expert advice to achieve their financial and non-financial goals. Investors are placing greater value in the ability to solve their needs tied to key life events — expanding beyond 529 accounts and accurate retirement forecasting to selecting a nursing home for an aging parent or helping a child finance his or her first home. Compounding this is an increased emphasis on reducing conflicts introduced by regulations such as the DOL Fiduciary Rule. Regardless, the right advice commands a premium. While this comes with the territory for a relationship-based industry, current digital platforms focus primarily on the asset allocation side of the equation, neglecting the personal aspect.

I’m expecting to see faster, more and better innovation for the wealth management industry in the coming year–leaving those who are falling behind even further behind. But I’m glad to be here for the ride.

What’s your take? I’d love to hear from you.


Print Friendly, PDF & Email

Previous post:

Next post: