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The Future of Technology (and Advisors) in Wealth Management

The companies and advisors who learn to leverage technology will enjoy a competitive advantage over the market for years to come.

By Lou Schachter

Consumers today expect from wealth management companies the same level of technical sophistication, in the form of personalized services that they receive from companies like Amazon and Netflix.

Part of the appeal of wealth management services is the personal relationship and the insights an experienced advisor can offer clients. Believing this relationship is most crucial to client engagement, though wealth management services are failing to take advantage of back-end technology to drive revenue. Artificial intelligence can analyze trends and help advisors tailor advice to particular clients, highlighting connections between investment behaviors and allowing managers to provide their clients with customized services.

This technology shift isn’t on the horizon—it’s already here. The companies and advisors who learn to leverage technology will enjoy a competitive advantage over the market for years to come.

New Tech Tools of the Financial Trade

While some wealth managers think technology will replace them, the truth is that these platforms are valuable assets smart firms already use in marketing channels and as segmentation tools.

For instance, digital investing tools, commonly called “robo-investing,” act as the customer’s online introduction to the wealth management sector. Using algorithms and some customer information, robo advisors make recommendations about financial allocations and investments and, in some cases, make the transactions on the customer’s behalf.

Because these tools remove the financial advisor from the front end and streamline investing in a cost-effective way, it becomes more difficult to approach investors in the traditional manner. It also becomes more difficult for advisors to justify taking a cut of the profits and charging other fees.

Being Human in a Tech World

For wealth managers to survive this technological revolution, they must either provide other, more necessary services that warrant fees or eliminate the fees in order to compete with a technology that achieves comparable results.

Younger people, especially millennials, prefer a blend of digital investing tools and human advisors more than previous generations do, and large companies like Vanguard, Fidelity, and Schwab are tailoring their offerings to match this new hybrid investment strategy. Still, the profession of wealth management is far from doomed. Customers, even young ones, continue to want human advice on facets like a downward trending market, investment recommendations in evolving markets and complex financial concepts.

Advisors should think about robo advisors like self-driving cars. Just as drivers will not disappear because cars can autonomously handle the driving essentials, algorithms that can handle basic services won’t replace wealth managers. Individuals will always need human advisors, but they’ll need them to offer what only humans can, making it necessary that advisors shift from selling X (basic services) to selling Y (advanced market insight). Ultimately, technology tools are only as good as their algorithms, and it will take time for them to learn how to handle dynamic situations.

How Investors Can Capitalize on Robots

With technology playing such a critical role in consumers’ financial decisions, wealth management teams need to attract young, tech-savvy individuals who can help guide clients (and older advisors) through these changes and use these three strategies to facilitate the fusion of humans and technology:

  • Monitor consumer trends.To understand heightened client expectations, advisors must observe trends outside the financial industry: How do people buy luxury products? How do they make staple purchases? How do their curated subscription services operate? Where does human contact come into play in the marketplace? By answering these questions, advisors can understand the types of services clients receive in other sectors and adjust their approaches to meet those expectations accordingly.
  • Know the scope of clients’ monies. Rather than treat investments as separate from other liquid assets, investors should get to know their clients’ overall financial habits, especially how they spend in the non-investment areas of their lives. For instance, a client who purchases a Telsa likely has an interest in innovation. Understanding a client’s overall approach to consumption helps advisors know their clients more comprehensively and better position themselves during the investment process.
  • Communicate differently and for a different purpose. Advisors must evolve both how they’re communicating with their clients and how they foster personal relationships. Social media and cellphones are an integral part of today’s culture, meaning financial advisors who insulate themselves from these forms of communication and actively refrain from using Facebook or text messages will struggle to keep clients engaged and happy. Advisors also need to understand what they bring to the investment process and structure their communications around value, not simply information.

Looking to the Future

Though technology makes wealth management easier and more individual than ever, new tools inevitably render new challenges. Looking ahead to where people have invested and what their returns have been, there will likely be increasing concerns on behalf of clients regarding privacy and information-sharing. Only some financial advisors know enough to have these data security conversations today, but all must be able to have them soon.

In addition, and perhaps more consequential, technology tools have performed well in favorable markets, but how they’ll perform when consumers panic during the next major market correction is still a large unknown. Nevertheless, one thing is certain: To navigate all of these challenges, clients will need actual wealth managers who are cool-headed enough to guide them, because no amount of today’s AI can manage tomorrow’s uncertainties and complexities. 

For now, wealth managers should familiarize themselves with new technologies and integrate advanced tools into their offerings to better understand and manage their clients. Clients expect a level of service that feels both personalized and modern, and wealth management platforms that capitalize on both tech and human advisors can give that to them.


Lou Schachter is the global sales practice leader at BTS.

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