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The Three Traits Every Digital Leader Shares

If you’re not doing these, you and your firm are going to get left behind.

By Bill Capuzzi

The future of wealth management is digital.

Now, that doesn’t mean automated advice will displace human engagement models. Instead, what I anticipate is the integration of human and digital capabilities in almost every aspect of the business, transforming the industry for the better.

The new era of “digital wealth” offers faster, more efficient and cheaper investing services for people everywhere. This is good news for consumers, many of whom today can’t access affordable, convenient financial help. It’s also a huge opportunity for advisors and companies who embrace the transformation.

The question is: Who will be the leaders in this next phase of wealth management, and who will be left behind?

In working with both the earliest pioneers of digital wealth and a second wave of more established firms reinventing themselves, I’ve seen firsthand the attributes and behaviors of successful innovators. Apex Clearing also conducted proprietary research to understand the overall financial services market and to discern how different segments—such as registered investment advisors, banks, insurers and independent broker/dealers—are approaching the future. 

Here’s what we discovered: there are no individual segments or channels that are better positioned than others to advance. Instead, within each category or business model there are emerging leaders who share three traits that allow them to approach digital transformation constructively. 

1. Focusing on the Customer

While almost everyone talks about “client experience,” digital leaders are fanatics about understanding their customers and using a combination of facts and informed intuition to meet their needs today while anticipating where their behaviors and preferences are headed. They tend to be obsessed with the last mile—the moments of truth when consumers interact to open accounts, transact, solve problems.

Certainly, firms like Robinhood, Stash and Betterment introduced a new level of speed, transparency and cost effectiveness for investors. Now, more established wealth managers are realizing that digital standards—the kind of experiences people are getting every day from other industries—are the new norms of a great client experience.

When our researchers were recently conducting industry interviews, one of the most telling questions was about small accounts. Digital leaders most often responded that small accounts are a growth opportunity and focus, while other firms see them as a profitability challenge or simply something to avoid by having high minimums. 

For companies that aren’t interested in small accounts, young investors are “someday later” prospects—with the hope being they will mature to a point that the established value proposition becomes a good match for them. Digital leaders shake their heads at that notion, and work on making themselves attractive for young investors now. This is a striking difference we observed as a dividing line between leaders who look to the future and those who are stuck protecting and defending their old models. 

2. Challenging the Status Quo

Just as digital leaders see small accounts differently, they tend to look for the upside rather than the downside of trends that challenge our industry. They’re curious and open-minded. When they see a disruptive idea, they don’t get defensive. They’re not attached to protecting the status quo.

As an example, one large and influential organization I work with views dormant accounts as possible gold nuggets rather than an overhead problem. They asked themselves: “If a person took time to open an account with us, why haven’t they engaged in the relationship?” Mining their data for insights, they’ve successfully activated relationships using digital engagement models. Since they can serve small accounts profitably, they’re able to triage millions of customers with unique experiences rather than treating dormant accounts as a dead segment. Curiosity pays off.

Digital leaders think in high orders of magnitude about how to improve service, efficiency, profitability and scale. Instead of incremental improvement, they seek radically better outcomes. At the same time, they can be completely pragmatic about realities, like price compression. They know that price transparency and a shift of power to consumers are at the heart of all digital revolutions, so they don’t fight it, they build for it. Open-minded and optimistic about what’s possible, pragmatic about what’s true—this is how they challenge conventional wisdom.

3. Adopting a Technology Mindset

By far the strongest shared trait among digital leaders is what we call a “technology mindset.” In our research we found that leaders are more likely to have a comprehensive digital strategy and feel it’s important to build domain expertise, even if they plan to outsource many aspects of the execution. They simply see digital skills as a required muscle, the way accounting skills, operational skills and general technology skills are all givens. Companies like Robust Wealth, Trizic, Investcloud and Quovo are investing heavily in this area.

Indicators of a technology mindset include a track record of automation—to improve processes or cut costs—and a desire to create an ecosystem from the best available tools. When the organization builds a digital wealth strategy, the focus shifts from using technology for a project to thinking about technology as part of a seamless, end-to-end experience for customers, and even for the internal workforce. While they may choose one place to start, their long-term assumption is that everything will eventually have some digital transformation and integration.

That said, digital leaders consider their options when they build strategies and execution plans. They may focus on a new business channel or the re-imagination of a mature service model. They may decide to invest in custom solutions or access more bundled offerings through third parties.

Are You Ready for Digital Wealth?

Change is hard, but also exciting. Assess your organization for client focus, willingness to challenge conventions and a technology mindset. Digital wealth is a consumer-driven, predictable evolution that will integrate with—not displace—human advice.

The wealth management transformation is not about technology, it’s about leadership, and there will be winners and losers. Which side of history will you be on?

Bill Capuzzi is the CEO of Apex Clearing.

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