I had the privilege of participating in Dimensional Fund Advisor’s recent Applied Business Strategy Workshop with DFA’s Regional Director, Charles Savari. The opening question Charles posed during our session was, “What does a firm that excels at technology look like?” This led to an interesting conversation where I pointed out that, in my view, many RIAs are putting too much emphasis on technology and not enough on the relationship with the client. As I said during our conversation, we don’t ship products in the RIA industry—it is a service business. Technology should be used to enhance that relationship but should never stand between the advisor and the client. To that end, I strongly believe RIAs utilizing technology to its fullest extent, ironically enough, do not look like tech companies at all.
In the RIA industry, we want to use technology to provide white-glove service to a larger and larger client base. Technology should be used to add efficiency to your team and to cut time and energy away from certain tasks, so everyone can spend more face-to-face time with the client. For example, I don’t think Constant Contact is the answer to large-scale relationship management. It’s not the best use of technology to send a blast email to all the firm’s clients with a watered-down message that you are hoping will apply to as many people as possible. Use technology to remind you of a client’s birthday, so you can send a personalized note. Use technology to remind you that a client’s daughter is starting college, and you can make a phone call or send a note saying, “How are you doing? I know she left for school this weekend, that must be hard for you. I wanted to check in and see how you are doing.” Technology allows RIAs to work with more and more clients but should be leveraged in a way that each client feels a personal connection to the firm and feels a one-on-one relationship with their advisor.
As I have written previously, clients of all ages are not asking to interact with technology more often, they are asking RIAs to leverage technology in such a way that allows the client to interact with their advisor more often. The late Jud Bergman stated on stage at what became his final Envestnet conference in 2019, “It’s counter-intuitive that [by building a digital connection with the client] great technology can contribute to a stronger human relationship.” It is the human relationship that is paramount, and I fear too many RIAs are erroneously placing technology between the advisor and client.
RIAs should look to streamline back-office tasks wherever possible but should not be using technology to streamline their interaction with clients. Many advisors have told me, “It used to take us 10 days to execute a model change across all of our clients, entering each trade one by one in each client account … now that we have implemented a third-party trading tool, we can execute model changes across all clients within hours of the investment committee making a decision.” That results in nine days that advisors and employees get back thanks to technology tools—that’s nine extra days that can be dedicated to client service and client-facing activities. Use that extra time to provide more high-touch service to your clients.
Another way technology can be used to enhance the client experience is through the financial planning process. During a face-to-face meeting with a client, advisors can now display the financial plan on a screen in the conference room, or onto an iPad in the client’s hands (or onto a Zoom screen during a socially distanced meeting). The client can see, in real-time, how the changes to assumptions can affect their plan—as the advisor and client make tweaks and settle on a final revised plan, the advisor can save those changes and immediately email the new plan to the client following the meeting. In the “old days,” the advisor needed to jot down those changes during the meeting, head back to their office to crank out the new plan, then send the new plan to the client a few days after the meeting concluded. By that time, the client couldn’t remember what changes they had made or why they had made them, so the advisor needed to set up another meeting with the client to basically re-do the entire meeting, reminding the client of the changes to the plan and what they had discussed in their previous meeting. Historically, this led to frustration for both the advisor and the client, but thanks to technology, the client experience has been enhanced and the connection between advisor and client is much deeper.
In speaking with Andina Anderson of Envestnet Tamarac for an article detailing the use of technology and its impact on the client experience, she stated, “In today’s interconnected world, investors have come to expect seamless digital access to their advisor. (Technology) helps advisors meet those expectations with an intuitive interface that makes communications between the client and their advisor more personal and positions the advisor to operate at an elevated level of service.” It is about communication and connection with the client—that point can never be over-emphasized. The advisor-client relationship is not conducive to drone delivery or app interfaces. While technology is a key component of the client experience, it is not the sole factor in delivering financial wellness and advice to clients. RIA success is not contingent on becoming “the Amazon or Uber of financial advice,” it is contingent on building deeper and stronger human connections with your clients and prospects.
Matt Sonnen is founder and CEO of PFI Advisors, a consulting firm that helps financial advisors build more impactful and profitable enterprises. He is also the host of the COO Roundtable podcast. Follow him on Twitter at @mattsonnen_pfi