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How Financial Advisors Will Engage Digital DIYers

A high-tech/smart-touch approach positions advisors to educate investors, provide highly personalized advice and reduce frictions through regular, seamless client communications.

The millions of new investors now entering financial markets represent a generational opportunity for financial advisors to grow their businesses. For many advisors, capitalizing on this opportunity will require major changes to the way they work and develop relationships. Fortunately, recent innovations are making it easier for advisors to adopt technology and adjust their service models to appeal to a growing segment of new investors who have embraced a digitally enabled, multichannel, DIY ethos.

More than 10 million individual investors opened brokerage accounts in 2020, according to JP Morgan, and millions more entered the markets this year. Although most of these new investors are starting out with relatively few assets, their portfolios won’t be small for long. According to data from Cerulli Associates, Gen X, millennials and younger cohorts are expected to inherit more than $60 trillion between 2018 and 2042. The sheer size of the “Great Wealth Transfer” means any advisor hoping to grow their business must consider ways to connect in a highly personalized manner to a universe of investors whose expectations and preferences diverge sharply from those of past generations.

Today’s new investors aren’t waiting around for advice. Instead, they regularly share their portfolios and experiences with peers in an interactive ecosystem of social media, websites, podcasts and other digital venues. They can be voracious consumers of online research and have a very low tolerance for information that’s not highly relevant to their needs. As demonstrated with GameStop and other meme stocks, they are more than willing to listen, collaborate and act on ideas and strategies they find compelling, or even amusing. Oftentimes, they align investing with the products they consume and their values.

Many of these new investors came of age in the world of next-day Amazon delivery, asking Alexa to be their personal DJ and requesting five-minute Uber pickups. Given that history, it shouldn’t come as a surprise that only about 13% of adult children surveyed by Cerulli choose to work with their parent’s financial advisor. When new investors compare experiences with their favorite digital brands to the experiences provided by “traditional” financial advisors, the advisors often come up short. That’s not due to any lack of effort on the part of advisors—many of whom are quite comfortable in the digital world. Rather, more than three-quarters of advisors surveyed recently by Broadridge were dissatisfied with the digital tools available to them.

The challenge for advisors is to adapt existing tools and practices to create a highly personalized advisory model that’s a better fit for these investors. If fee compression continues, advisors will have to do so while providing even higher levels of personalization to a larger book of clients, a task that can be achieved only with advanced technology.

The good news for financial advisors is that they now have access to a growing array of tools that can help bridge the gap between current service models and these new high-tech approaches. By adopting a handful of these products, financial advisors can construct a new, personalized service model that enhances the client experience, improves client outcomes and builds deeper relationships with investors of all ages and types. We refer to this model as “high tech/smart touch.” A high-tech/smart-touch approach employs technology to position advisors as coaches or partners who educate investors, provide highly personalized advice, and reduce frictions through regular, seamless client communications.

The high-tech/smart-touch model incorporates products and services with the potential to enhance almost every aspect of the advisory business. For example, new systems help advisors discern the needs, plans and preferences of clients and prospects, allowing the advisor to automatically tailor interactions to the client profile. By narrowly pinpointing client objectives, the advisor can share only information that relates directly to the portfolio and its goals. Does the individual align their investments and portfolios with personal values? The advisor can send content and research about specific themes and causes or recommend a new ETF that aligns with client values about, say, climate change.

Using apps powered by data analytics, behavioral science and artificial intelligence, advisors can glean additional insights that help them anticipate client needs and tailor service. Does the client spend lots of time on social media? Does the client prefer Facebook to email? In addition to identifying the best channel, new digital tools can pinpoint the types and formats of content the client likes best. Some people prefer video to text. Some investors like in-depth research reports; others prefer short-form snackable insights.

The goal is to ensure that every client “touch” is relevant and delivers maximum value. Advisors achieve this by providing exactly the right content, at the right time, through the right channel. Armed with detailed knowledge about the client’s preferences and goals, an advisor can deliver custom content that educates and engages. For example, new apps allow advisors to quickly and easily create personal videos at scale for all their clients. Other products can convert voice to text or connect clients and advisors through online chat features.

Vendors—including Broadridge—are building platforms that assemble these and many other new technologies into end-to-end solutions for advisors. These firms are not just rolling out new technologies, they are also helping advisors integrate solutions into their practices in a seamless manner that makes them better at their jobs, while putting the technology in the background.

Financial advisors don’t need to jettison everything they’ve done in the past to benefit from new technology. Innovations like the cloud, software-as-a-service and APIs allow individuals and companies to pick and choose the tools they want to employ, and to easily integrate apps and products into their existing platforms. By assembling the right combination of technologies and strategies, financial advisors can update their service approach into the type of collaborative, customized and connected model that will win over the next generation of investors.

Michael Alexander is president of wealth at Broadridge.

TAGS: Technology
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