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The Future of Household-Level Planning Is Now

Clients expect integrated tech solutions, and financial services firms finally look ready to deliver.

If you’re tired of hearing about all of the upcoming integrated wealth tech solutions that are going to change the industry, well good news, they’re here.

That’s the main takeaway from the report published today by the Money Management Institute (MMI) titled “Modern Wealth: The Roadmap to Improved Investor and Advisor Outcomes.”

According to the report, optimized, household-level wealth management has moved from the realm of “The Next Big Thing” in advice to the new standard. This shift brings new complexities and opportunities for financial services firms in coordinating client data, digital tools and processes to better serve clients. The research also highlights the importance of connecting multiple technologies and data sources as an integral part of this change. It stresses that advisors and enterprises must move from a siloed technology and product approach to more coordinated technology and investment platforms.

“Many leading firms will be introducing comprehensive household-level platforms in 2019,” said Jack Sharry, co-chair of MMI’s Digitally-Enhanced Advice Committee and executive vice president and chief marketing officer at LifeYield, LLC, one of the paper’s authors. “These advances help investors improve after-tax returns and income. We’ve already entered this new era—now the battle will be fought over who has the best system.”

The financial industry has lagged noticeably behind for the past several decades in the area of technology. Craig Pfeiffer, president and CEO of the Money Management Institute, explains that the reason for this malaise was largely twofold: “The first reason is technology is really expensive, and the firms have come this far with fragmented systems that weren’t designed to integrate. So, some 60 to 70 percent of the cost to catch up is unwinding these existing systems, which is extraordinary. The second reason is that it just wasn’t being demanded. It’s rapidly shifted from something clients want to something they now expect.”

However, now that technology has infiltrated every aspect of clients’ lives, and they can get pretty much anything they imagine delivered directly to their doors just by hitting a button on their phones, they’re noticing just how poorly their customer experiences with financial services firms stack up to every other industry. According to Pfeiffer, “Financial services has always been a B(usiness) to C(ustomer) world. What has happened pretty quickly is that has flipped from C to B. Clients have shown that they’re going to go somewhere to satisfy that C to B element that better matches up with the rest of their lives.”

According to the report, 80 percent of consumers are more likely to do business with a firm that offers a personalized experience, while 90 percent indicate they find personalization appealing. More pressingly, 65 percent of high-net worth individuals are prepared to leave their wealth management firm due to the lack of an integrated, omni-channel experience.

That all being said, the report is quick to point out that while the future of financial advice lies in technology, there remains an important role for the human advisor going forward, it just may be a difficult transition for some. While digital investment advice platforms (robo advisors) rose to prominence by promising an improved digital experience, adoption has remained decidedly low. An overwhelming majority of investors still prefer some degree of human interaction to make investment decisions and life choices in the face of increasing complexity. Human advisors will have to pull themselves away from crunching the numbers—a task that is increasingly better performed by technology—and be prepared to be this empathetic face for the client—or risk obsolescence.

Evolution in the expectations of investors and consumers for automated, all-in-one systems and recommendation engines similar to those they enjoy in other aspects of their daily lives—from shopping to entertainment—has forced the financial services industry to take a hard look in the mirror. And, after far too long, the industry may finally be ready to put its best foot forward.

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