Far from relegating digital accounts to generic automation and focusing only on young clients, wealth management technology firms are trying to adapt planning and advice tools into their services for investors of all ages and income levels.
An influx of new clients investing stimulus dollars or other money during the coronavirus wrought the GameStop short squeeze at the beginning of the year. While less disposed toward working directly with a personal financial advisor, many of those new investors have also flocked to wealth tech firms implementing advice and long-term planning into their digital tools, according to a panel at this week’s Financial Planning Invest Connect conference.
For example, robo advisor M1 Finance is working with more women, a larger share of “newbies to investing” and additional spouses and partners of existing clients among its base, said Jessica Schnepf, the firm’s head of product design. M1 works with 70% millennials often in mid-level to senior professional roles, especially as engineers or in other tech jobs. The firm is “helping them form their investment thesis through discovery and education,” Schnepf said.
“They want to take control of their financial future,” she said. “They want to be self-directed. They want to call the shots, but they need help. They need and they want education. They need some handholding and guidance, but I think regardless of if they’re experienced investors or newbies, they’re telling us that they want a more intuitive and time-efficient solution than what a traditional brokerage has to offer.”
Such new clients and existing ones who would like enhanced tech capabilities often come from different age groups or income levels than wealth managers often perceive as digital accounts, according to Kelli Keough, head of product at J.P. Morgan Wealth Management. Firms shouldn’t neglect the employees of large wealth managers or advisors affiliated with them in developing a better tech experience, either, she said. In terms of clients, she cited research suggesting that billionaires and baby boomers use digital tools at least as much as millennials.
“We tend to think of digital as a space of just millennials or younger, but the reality is we’re seeing just as much or more usage on our digital platforms by our high net worth, ultrahigh net worth and/or those who are older,” Keough said. “Digital is a capability that is there for all. It’s really a matter, then, of bringing it down to the individual person and not making stereotypes or conclusions about different groups, because it’s really something that’s just part of the way that we do this, as part of the way our clients interact with us.”
Her team at J.P. Morgan views payment methods as part of the holistic financial process with clients, and other panelists’ firms are aiming to bring more services under their umbrellas as well. Since its launch in 2015, robo advisor Stash has grown to more than 400 employees serving about 6 million “everyday Americans” with an average age of 33 and working in such roles as teachers, Walmart and FedEx employees and military personnel, President Ed Robinson said. More than 85% have never invested before coming to the firm, he noted.
The data robo advisors have within their platforms should enable them to serve clients in a comparable way to “a good private bank” that knows when a college payment is due, whether they’re about to have children or encounter overdraft fees and if they’ll soon be visiting an ATM and would like to know where they can find one with no fee, Robinson said.
“They’re just simple things that are very data-driven that people have been doing on spreadsheets for years and years and years, and now we can do it through technology and through really, really smart solutions,” Robinson said. “It’s going to be bespoke to that customer because every person’s different. Every person on this call is going to be different. So the advice, the recommendations, the education and the advice should be tailored to that person at the center, versus it being a hammer approach.”
Regardless of how firms approach tech, they can’t afford to ignore the underlying questions involved with older investors using digital platforms and later transferring wealth to younger Americans coming en masse to robo advisors and other wealth managers, said Sonali Chatterji, head of financial services at consulting firm Thoughtworks and the moderator of the panel.
“There are multitudes of consumers out here,” Chatterji said. “Each one of them needs to be met meaningfully. And in context, this cannot happen without a robust digital platform strategy that will cater to each one of them, not just now, but for the future, for the next generation.”