“You might want to take a look at this,” mused Dr. John Eatman, director of IT graduate studies at the UNC Bryan MBA program and a statistician for The Oechsli Institute. He was talking about an article* in the June 12, 2006 issue of Computerworld that describes an online financial-planning service Vanguard recently test piloted. That service has gotten such a massive response — almost quadrupling business — that Vanguard is struggling to meet demand, according to the article.
In its former incarnation, Vanguard's free planning service (offered to those with over $250,000 in assets) required customers to provide data to financial planners over the telephone. The phone-based service was generating approximately 15,000 reports a year. But the online program, which is based on technology called SOA (service-oriented architecture), is generating at least 4,000 retirement plans a month, Vanguard says.**
That's big business, and it reveals a few key things about the affluent that advisors should take to heart: They are becoming increasingly Internet savvy and have gotten over some of their mistrust of online services and information; there are a great number of affluent investors who either do not have a financial plan, want a second opinion regarding their existing financial plan, are dissatisfied with their existing financial plan or are dissatisfied with their financial advisor; and perhaps, most importantly, you've got some new competition.
Each of these issues is both a warning shot and an opportunity for financial advisors. Let me explain:
Increasing Internet Savvy: Our research continues to tell us that both the affluent and emerging affluent want a “go-to” financial advisor to help them coordinate the multiple threads of their financial affairs. That means they are searching for you. They are unsure, however, about who you are, what services you offer and what value you are capable of delivering to them. They have heard all the marketing promises and are becoming increasingly confused. This confusion, in turn, leads them to the Internet, where they can conduct more research, and, potentially, find the services they are looking for. However, just because they are becoming more Internet savvy does not mean that they are looking for a digital, high-tech, online financial advisor. You need to get to them first and let them know you are that go-to financial advisor.
Dissatisfaction with Financial Plans: If you are not providing the full array of financial products and services your clients are looking for, now is the time to deliver those services. If you don't provide what they are looking for, your best clients might begin to look elsewhere. Your better clients, those that drive your revenue train, want a comprehensive and up-to-date financial plan. If your clients don't have a financial plan, you'd better get busy. If they do have a financial plan, you had better be absolutely sure that the plan is updated, that it is reviewed annually, that your clients fully understand it, that you are making certain it is being acted upon and that they are completely satisfied — with both the financial plan and your services.
Increased Competition: The spotlight is shining brightly on your best clients. They are getting bombarded with marketing messages promising to lead them to their financial holy grail. As far as your key clients are concerned, you are the product. If you are doing the right things, the right way and for the right reasons, you probably don't have to worry about online competition. What are the right things? Our affluent criteria are a start: be proactive about contacting your clients about things that could impact their portfolio; be clear about your fee structure; get a good handle on the client's goals and family situation; bring in outside experts when your knowledge doesn't cover a particular area of concern; create a formal financial plan; coordinate and organize your client's financial documents; and help the client coordinate his or her financial decisions. Our research shows that affluent clients are most dissatisfied with their advisors in these areas. Make sure your clients are not among them.
* SOA Update Sparks Demand for Retirement Plan Application
** Computerworld claims Vanguard's program is generating 4,000 plans per week, but a Vanguard spokesperson claims it is 4,000 plans a month. The spokesperson did not otherwise challenge the veracity of the Computerworld story.
Writer's BIO: Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients.