The future of wealth management is hybrid — both digital and in-person

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As we begin to understand the lasting impact of the pandemic on wealth management, what stands out as the single biggest disruption to the market is the acceleration of digital transformation and the fundamental change to how advisors interact and serve their clients. The immediate post-pandemic response will require firms to further their transformation in order to continue to meet the needs of those clients.

This disruption provides opportunity; clients are now accustomed to digital-first. The pandemic has been a rocket ship for all kinds of digital adoption — from video conferencing, to delivery, to the endless hours of streaming TV we’ve all consumed this past year. Wealth managers now need to not just meet digital expectations but surpass them.

In many ways there has never been a better time to be a hybrid wealth manager — one who uses both in-person and digital approaches to build a relationship with clients. The tools available are more robust and accretive to business than ever.

True hybrid wealth management goes much further than the “basics” of digital engagement. Today video chat and online portfolio access have become digital “table-stakes.” Hybrid enables advisors to create holistic financial wellness for clients from mass affluent to high-net-worth. It also opens the doors to new revenue channels via a fully digital service for mass affluent investors. Hybrid wealth management also helps advisors resist the two threats facing the sector — commoditization and fee compression.

Cultivate trust
Wealth and personal finances are emotional subject matters to many clients. All the expertise in the world and even market-beating returns mean nothing if you cannot engender trust with your clients. With the current market uncertainty, investors want an advisor who can be a steady hand at the wheel. Whether educating clients about the risk of cryptocurrencies and digital assets or analyzing how a client’s tax situation may change, advisors demonstrate mastery of complex topics and the know-how to relate to their clients specific needs to build trust.

As with any relationship, one must first ensure that confidentiality and security are paramount. With the shift to increased digital interactions, this means clients pay more attention to a firm’s IT and security policies. Clients now demand steadfast monitoring and protection against threats — both external and internal. Demonstrating a rigorous program around information and security that permeates throughout the organization, as well as showing clients an attention to detail and security by design approach, creates trust at every interaction.

In establishing trust, one must also provide transparency. For wealth managers this means two important things: sharing greater knowledge about what the client is actually investing in and how the wealth manager is compensated for their advice.

While many clients are simply happy at knowing the mutual funds and ETFs are being used at a top level, more are increasingly wanting to know exactly where their money is being put and importantly that their investments align with their personal views. This means advisors must ensure the portfolio presented to the client is empathetic to the individual. Harnessing data via digital makes it easier for advisors to learn a client’s preference and implement changes based on the client. In the old days, this would take months or years, now with the benefit of digital, an ESG overlay with specific affinities can be done in seconds complete with a personalized proposal inclusive of fee transparency for the client.

The next element in trust, especially in digital interactions, is design. Designing for an empathetic, understandable, and relatable experience creates a personalized dialog that increases trust. Advisors must invest in technology that provides the core digital design fundamentals. Not only should it have the right aesthetics — look and feel — but the data underpinning it must be accurate, accessible and empathetic.

Digital empathy driven by data
As the advisor-client relationship evolves, so does the decision-making process. In addition to face-to-face (or virtual) meetings, clients make decisions based on the digital experience they receive.

This means any experience must be data-driven to help clients make better decisions — empowering them with the information needed to make decisions, learning how clients make decisions and freeing up the advisor to focus on high value work. The aim, as always, is to help people make better decisions to drive better client outcomes.

Data is the gift that keeps on giving. When paired with data science techniques, the online experience captures what a client does and with which digital elements she interacts. That data is used to evolve the user interface and generate more data. When executed effectively, data lets you learn what your clients like to see, how they take in information, what causes them concern and how to tailor your experience to their individualized needs.

This is digital empathy — showing your client what they want to see in a format they want to use. It brings personalization to a new level. This helps the client interact with the advisor more, it also means advisors can get clients where they need to be, faster – and results in smarter and more tailored financial decisions. Most importantly, it empowers advisors to have more effective and empathetic communication with clients.

Today, a wealth manager without access to data and data science tools is at a massive disadvantage.

Make it holistic
Holistic wealth management is how the industry resists its biggest threats in the long-term. It means a deep understanding of core values, how clients feel, their confidence levels in making tough financial decisions, and how they shape their goals against values. By understanding clients at this level, advisors create a lasting relationship that extends throughout the client’s entire life and across generations.

By going holistic, clients see the advisor relationship as less commoditized. It is about becoming central to the client’s financial life and beyond, understanding what they truly value and facilitating outcomes that align with those values. This doesn’t have to be a burden on the advisor from a time or energy perspective. Digital tools will automate the heavy lifting, delight clients and give advisors the ammunition needed to create a service that is exactly what the client needs and wants.

Beyond 2021
The most important lesson learned from the past 12 months for advisors is the need to evolve and adapt.

But you can’t do this once. To attract, retain and grow, wealth managers must constantly evaluate how to build trust and develop empathy, transparency and holistic advice in the digital space alongside the traditional human approach.

To do so, advisors must adopt hybrid approaches. The digital component relieves many burdens — using data to help know clients better and automating many service functions, while delighting them with personalized experiences. This compliments the high-touch human service your clients are used to, and future-proofs against competitors.

It’s a win no matter which way you look at it. It’s time to adopt hybrid wealth management.