Financial Technology

Leveraging Technology to Better Understand and Communicate with Investors

A number of emerging technologies let advisors improve communication with clients and help them reach financial goals.

Holistic financial advice that informs the overall financial wellness of investors is increasingly in demand.

A recent survey of high-net-worth individuals found that while 71 percent preferred advice that helps them better manage their overall financial situations, only 40 percent were receiving advice that addressed it.

The Department of Labor’s (DOL) fiduciary rule and the advent of robo solutions are creating additional pressure on advisors to engage in open and frank conversations with investors. At the same time, demand for access to information via digital channels is on the rise, with over two-thirds of high-net-worth clients expressing a preference to access accounts, products and services and news and insights on financial markets through the online or mobile channel.

Advisors need to continue to differentiate themselves and show their value by providing holistic assessments of their clients’ financial futures using a variety of channels so they can meet the growing needs of investors in an increasingly competitive market. Luckily, there are a number of emerging technologies that advisors can leverage to build and improve lines of communication with their clients, ultimately empowering them to help investors achieve their financial goals.

The most important piece of technology that enables advisors to better communicate with investors is new financial planning software. Through a series of questions and exercises for investors, these programs help advisors get a better sense of their clients’ views on money and financial goals. While an advisor can simply ask these questions, investors themselves may not be in tune with their monetary views and objectives. The results from these surveys provide a terrific starting point for advisors to engage in a direct conversation with the investor about what he or she hopes to achieve financially. Once advisors have this information, they can then develop a comprehensive financial plan that takes investors all the way to retirement, and beyond.

A key component of financial planning software is portfolio analytics that enable advisors and investors to model portfolio performance over an extended period of time and under a variety of circumstances. In doing so, this technology allows advisors and investors to visualize hypothetical portfolio outcomes based on a number of different market climates, including shifts in the S&P 500 or interest rates. Advisors can also visualize projected performance based on decisions they make, such as when to retire, when to begin drawing from social security and how much to budget for a wedding. Portfolio analytics convey the probability of financial success over time by analyzing both simple and complex factors, which prepares advisors and investors for an educated conversation about how to reach their goals in any industry climate.

Advisors should also utilize risk assessment tools to help investors better understand their risk tolerance as it relates to financial goals. Through a number of penetrating questions, these tools quantitatively analyze an investors' appetite for risk, which gives advisors the information they need to develop a personalized, well-aligned portfolio strategy.

These assessments go beyond simply evaluating risk appetite based on conventional age-based assumptions, which assume younger investors are riskier than older ones. Instead, they leverage personalized information about a client's vision of their future lifestyle to create a level of risk that is fine-tuned to their unique goals. If a client plans to travel the world after they retire, perhaps they must incur more risk in order to achieve that objective. As a result, these tools allow advisors and investors to have a collaborative conversation about the ideal amount of risk to take on.

As the DOL rule takes effect and robos continue to expand, advisors more than ever need to prove their value through holistic financial advice. By embracing the above technologies, advisors can better gauge investors’ goals and more easily communicate the best way to reach those goals.

Source: CEB 2016 HNW Client Experience Survey

Matt Matrisian is Senior Vice President, Strategic Initiatives at AssetMark, Inc. 

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