Technology is the Key for Financial Advisors to Grow Their Books

In today’s blog, I want to continue our current conversation about how technology can change the way financial advisors do business for the better. If you haven’t yet, take a look at our first blog article – an interview with Lester Tiro from Website Advisors. He discussed best practices on building your online presence and why it was so valuable. Part two, found here, discussed the value of process for becoming a top-performing financial advisor.

Originally, this blog was going to expand on part two, focusing on the technological trends that would help advisors build winning processes and grow their books of business. However, an amazing report came out earlier last week backed by PWC, a global accounting and consulting firm. The report was titled “Sink or Swim: Why Wealth Management Can’t Afford to Miss the Digital Wave.” If you have a chance, I highly suggest you read it. Due to this report, I decided it’d be worthwhile to turn this blog post into a two-parter. The first part, what you’re reading right now, will focus on the threats to wealth managers that have been created by new technologies. Unfortunately, this post will have its fair share of doom and gloom. Whoops. Thankfully, the next blog in this series will focus on light at the end of the tunnel. That is, which technologies wealth managers will have to adopt in the short, medium, and long-term future to thrive.

Before we get started, let’s talk just a little bit about the report. It is broken up thematically, much as these two blog posts will be, between the technological risks and the technological opportunities of wealth management over the next few years. To generate this report, PwC interviewed 1010 high net worth individuals (HNWIs) and 100 wealth managers. Now, before we get any further, please note that I will discuss some differences between HNWIs and middle class individuals, as well as the advisors dealing with both. In my opinion, anything said about HNWIs and wealth managers, in terms of risks facing them, is doubly true for financial advisors dealing with less affluent clients. I will explain my reasoning in detail at the bottom of the post, but for now, let’s just set aside this objection to the results of the study!


Deconstructing the Report: The Problems in Wealth Management

So what did the PWC report tell us? Well, first off, high net worth individuals were very rarely net promoters. If you recall from our previous blog on the difference between your sales funnel and sales pipeline, a net promoter is a client who is willing to evangelize on your behalf and recommend you to others. Only 39% of HNWIs said they would recommend their wealth manager to a friend. In a business which relies entirely on relationships, less than four out of every ten individuals believe that their advisors provide enough value to merit a referral. In fact, only one-third of high net worth individuals were found to be very satisfied with their wealth managers, and 18% of clients under 45 were actively dissatisfied. Yikes!

Now, if clients had no other options, this lack of strong relationships would be bad but not disastrous. After all, even if you’re not thrilled with your advisor, where will you go? However, with the advent of robo-advisors, this lack of optionality is going the way of the dodo. First generation robo-advisors such as Betterment, Wealthfront, and Wealthsimple are the forerunners of this market shift. Even though they currently focus only on basic ETFs and upfront risk assessment, they are still appealing to one-third of HNWIs who have never used robo-advisors before. And that number goes up to 47% of HNWIs under 45-years-old. Now, imagine a future where these platforms are using data to offer much more personalized financial plans and investment options. In a future such as this, is there any question that a much greater proportion of HNWIs will be willing to trade in their wealth advisors for robo-advisors?

Financial advisors looking to grow must tackle the challenges presented by robo-advisorsWhy are wealth managers struggling to build strong relationships with their clients? For one, this is not an issue of price sensitivity. HNWIs are happy to pay for the services of their advisors. In fact, 70% of the HNWIs surveyed were willing to pay for expert advice on financial matters, and 64% were willing to pay for expert advice on non-financial matters (e.g., related to life goals, how to get their kids into a certain private school, etc.). Likewise, time-savings was not a factor in the decision. Only 28% used a wealth manager to save time. That is, they are not working with wealth managers due to convenience, but because they value the service. This is an important distinction, because it means that all things being equal, HNWIs are happy with spending money on expert advice and believe it is valuable.

So if it isn’t an issue of price and there is a fundamental belief in spending money for expertise, what is the problem? Where is the disconnect between what clients want and what wealth managers are offering? In a word: technology. In a few more words: wealth managers have underinvested in technology on the incorrect belief that their clients don’t care. Yet, surveyed clients showed an incredibly high level of technological uptake, using technology over five hours per day on average. Likewise, 98% access the Internet on a daily basis, 85% use three or more digital devices every day, and 69% utilize mobile and / or online banking. When surveyed, just a touch under 60% of HNWIs (and significantly more in the under-45 category) said that it was important for wealth managers to have a strong digital offering. However, wealth managers have consistently ignored this, offering subpar services in the realm of technology. For example, only 25% of wealth managers connect with their clients over digital channels outside email and only one in ten wealth managers use social media. This is the large disconnect. Many wealth managers are only now investing in web portals for their clients. Overall, wealth managers have critically ignored the technology that their clients have become accustomed to across the board.

Overall, I will let conclude with this quote from the report speak for itself:

“Taking all these factors together, it is no longer tenable for the wealth management industry to suggest that their client base does not need or want digital functionality in the management of their assets. Digital and mobile services are now as normal and expected in HNWIs’ lives as cars and phones. Firms that do not acknowledge this are now putting their business at risk.”


The Key Insight: Technology is the Answer

Growing a book of business for financial advisors requires technology What is the big value of technology for financial advisors? Well, consider this. For HNWIs, rapport was cited as the second most valued differentiator. Clients felt that this human touch was highly valuable. Those with lower touch-points were much more likely to want to try robo-advisors. High touch insulates! Yet high touch requires a few things. It requires serious organization and strong processes in place. It also requires multiple channels of interaction, from quick text messages to video chats and everything in between. Without technology, none of this is possible. Instead of omni-channel communications, you end up relying on the occasional time-consuming one-on-one meetings or emails that are just as often ignored as read. Instead of organized processes, you end up struggling to remember details about clients or what you promised to do after a meeting.

For example, consider streamlining back office administrative processes. By doing so, two things happen. First, wealth managers are better able to organize their books, allowing them to ensure clients don’t slip through the cracks. They can be reminded of follow-up tasks, send out client birthday cards, and ensure consistent touch-points. Second, it allows wealth managers to reduce their time spent in the back-office. Instead, they can focus that saved time on client interactions, building more rapport and stronger relationships. Likewise, by digitizing their client-facing processes, financial advisors can increase touchpoints and interactions. Imagine a portal where your client could ping you to meet over a video chat easily when they have questions, or where you could easily schedule a follow-up meeting with them. Technology, used in such a manner, can augment financial advisors’ strongest advantage – personal touch. Done right, digitized processes can give you more time to spend with your clients and more opportunities to reach them, strengthening your relationships.


Financial Advisors Not Dealing with HNWIs

Mr. Moneybags is not the client for most financial advisors looking to grow their book of businessNow, many of this blog’s readers are not wealth managers dealing with a high net worth clientele. You are insurance advisors selling group benefits, or financial planners working with young professionals and middle class families. Why should you be concerned about the struggles wealth managers have with HNWIs? These are clients with millions of dollars in assets (though they are not considered part of the ultra high net worth group). They have different needs, wants, and opportunities compared to your clients. However, I would like to argue that this report is the canary in the financial advisor coal mine. If this situation is happening to wealth managers dealing with HNWIs, those of you dealing with less affluent clients are going to be feeling it even worse.


Well, a few reasons. First off, wealth managers servicing high net worth individuals have a higher level of resources to invest in their operations. That is, they can afford to hire more administrative help to streamline their operations. I’ll give you an example. I was recently doing customer discovery with a wealth manager who deals with high net worth clients. His clients’ median assets under management were around $2.5M. The firm he worked at employed three financial advisors and 14 administrative assistants. That is almost five administrative assistants for each advisor they had on staff.


Now, this firm did an incredible job with their clients. They had processes built in place to ensure consistent touch points. Client files were kept updated and accessible. Advisors had touch points scheduled months in advance. The administrators helped find up-sell / cross-sell opportunities, and, in general, left advisors to do what they did best: take meetings. The firm understood that they would need a high touch approach to keep clients happy, and it worked. From all the customer discovery I have done, as well as the PWC report, the level of sophistication this firm had was a definite outlier. And, again, it required five administrators for every advisor.

But think about that for a moment. If this firm was an outlier, then most wealth management firms are not getting this right. This failure is occurring even with their vast resources. And if that’s the case, what hope does a financial advisor dealing with non-HNWIs have? A financial advisor with less resources (i.e., fewer or no assistants) has an even greater need for technology to help streamline and organize the back-office administration. After all, he or she simply cannot hire more assistants to pick up the slack when business gets, well, busy. Instead, what ends up suffering is the client experience as follow-ups are forgotten and old clients are ignored. Much of the inspiration behind Finaeo was the question of how we could mimic the work of five administrators for any given financial advisor through technology.

A second reason why financial advisors not dealing with high net worth individuals cannot ignore this report is in the nature of the client. As mentioned above, a HNWI and a middle class family will have vastly different priorities, opportunities, and needs. Arguably, one of the bigger differences revolves around price sensitivity. A small family worrying about their next emergency is going to be more price sensitive towards paying for expert advice than a high net worth individual. That is, both will likely pay for it if positioned correctly, but the former will be much more likely to leave as soon as they no longer find value in it. Recall that almost one-third of high net worth individuals are thinking about trying out robo-advisors. If that is the case, imagine what that number is for less affluent individuals. These are people with less money to spend and likely less complex financial matters. Again, this is not to say that non-HNWIs do not want expert advice as opposed to robo-advisors. It is to say that financial advisors dealing with them need to be on top of their game, as their clients are more likely to go to alternatives based purely on cost.


The Silver Lining: Rapport

Financial advisors must build rapport with clients to grow their booksThankfully, there’s no reason to suspect that rapport and relationship-building is any less important for non-HNWIs. Likely, it is of similar value. People like being heard, they like being helped, and they like having an expert guide them through big financial decisions. Rich or poor, if you’re trying to write the map to reach your goals, you want a cartographer there with you.

Ultimately, if you are a financial advisor who is not dealing with high net wealth individuals, you need technology more than any wealth manager. You are disadvantaged both by lacking the resources to support administrative assistants and by clientele who are noticeably more price sensitive. This means that you must offer your client a much better experience than ever before. And the solution to that?


So stay tuned. Next week, we’ll talk about how technology can help financial advisors win!



Think about the biggest challenges in your business. If you had a magic wand, which headache would you want to make go away? Take some time thinking this over – in the industry, we call this the wand question. It helps you drive down towards what your biggest pain point is. Sometimes, this pain point is something that is out of your control (e.g., I wish prospects would be more receptive to cold calls), but very often, it is actually completely controllable (e.g., I wish I was more organized with my clients and never forgot a follow-up touch point). If you have one of those controllable pain points, spend some time searching around for a technological solution to simplify it. Let me know what you find in the comments below, and, as always, please subscribe to the blog for future updates!