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How to Stay Competitive in Today’s Digital World

We now live in a world where anyone with a bank account can be an investor. Gone are the days when thousands of dollars are required to obtain the best possible managed financial services advice. Thanks to the rise in low-cost, easy-access, self-service digital solutions, the entry point for professional financial advice is now next to nothing. This paradigm shift is particularly appealing to the next wave of investors, millennials, and soon Gen Zs (those born after 2000). A new demographic has emerged, which we refer to as “anyone with discretionary income.” And, this new wave of investors is creating new challenges for wealth management firms, forcing them to rethink their business models and digital strategies.

Meet the Millennial

Comprising more than 75 million individuals in the United States alone, millennials are often dubbed the “digitally native” generation. Born between 1980 and 2000, millennials grew up alongside the latest and greatest technologies, from smartphones and Facebook, to touchscreens and the Apple Watch. Now, as baby boomers retire at a rate of 10,000 per day and millennials begin to plan for their own retirements, the wealth management industry is poised to experience a dramatic change in client demographics.

How do wealth firms attract these digital natives? Many millennials admit that they are more comfortable using automated apps to handle their finances and obtain advice, according to Nielsen. Offering anytime, anywhere, any device access, robo advisors are not only convenient (no driving to an office or waiting for an appointment), but are also available at little to no cost. With more than 200 robo advisors on the market today, it is exceedingly easy for millennials to settle for automated, algorithm-based financial advice on their phone, and forgo any type of personalized, human interaction for basic investment allocation services.

If financial advisors want to remain competitive, they must embrace the millennial demographic and capture these potential investors now. After all, it is expected that $30 trillion will be transferred to this generation over the next few decades.

A Fast Route to Capturing New Investors

The Internet of Things (IoT) provides a fast route to attracting digitally native millennials. By offering low-cost, anytime, anywhere, digital self-service platforms, financial services organizations can get their foot in the door and begin building a rapport with the new customer base.

Millennials aren’t the only ones gravitating toward more digitized financial experiences. A recent study we conducted in partnership with Roubini ThoughtLab revealed that 49 percent of Gen Xers, 50 percent of baby boomers and even 54 percent of ultra high net worth individuals also expect to use anytime, any device technology over the next five years. As made clear by the Roubini research, investments needed to better serve millennials will positively impact other wealth investor market segments.

We expect hundreds of millions of new entrants to the financial system by 2020. This will drive a new wave of wealth management opportunity via micro-investing, fueling IoT innovation and putting more margin pressure on traditional wealth management services. That said, this is not a developing world opportunity. The Wall Street Journal recently reported that 68 percent of Americans don’t have a professional wealth advisor (citing a Northwestern Mutual survey).

Balancing IoT Innovation and Traditional Services

Embracing digital innovation is certainly a key differentiator and will be crucial for wealth management firms who want to retain tomorrow’s investors. However, the real competitive advantage will come from the ability of advisors to create a hybrid advice service model. Automated apps are essential for attracting new, tech-savvy clients, but tiered offerings will allow advisors to retain those clients. Hybrid advice models will also help firms better serve existing clients as they become more digitally proficient and begin taking on many of the same characteristics as millennials. Ideally, a hybrid offering should encompass the IoT, collaboration platforms and anytime, anywhere access, in addition to personalized, human service and support.

Robo advisors will not replace humans anytime soon, unless advisors are adding little value beyond asset allocation. One banker said that a robo advisor could never hand a client a tissue. This powerful statement distills the value proposition of a human advisor. Some first-time investors may actually need a higher level of personalized attention and advice. Providing a greater service level, empathizing with the client and understanding their needs from the get-go will increase the likelihood of that customer staying for the long run.

Software, in many cases, is more effective than people in some areas, such as asset allocation, at a fraction of the cost. However, the true value of automated advice platforms is that they can equip advisors with the analytics needed to better serve clients, making them smarter, more relevant and more efficient. Those who leverage the IoT to augment their own human advisor capabilities—using judgment, planning life events, honing trust and conveying emotion—will have greater success in retaining customers and creating market differentiation. Advisors who do not embrace the IoT to add value to their services are at risk of being replaced by software in the next three years.

The firms who become the true market leaders will be those who establish an optimal balance between technology and people in their service offerings. Ultimately, the winners will be “omni-providers,” with the ability to seamlessly serve customers across channels. Wealth firms who implement digital transformation strategies that leverage the IoT today will set themselves up for long-term success.

The new vision is that wealth managers should be present in the financial lives of their clients any time, any place, on any device and across any channel. Those who deliver on this vision will be the market leaders three years from now.


Joseph Pagano is the digital transformation and cybersecurity business outcomes leader at Cisco, advising large enterprises on digital vision, transformation, cybersecurity, strategy and solutions that deliver high-impact business outcomes.

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