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What Advisors Want From WealthTech

Financial advisors—not tech vendors, not consultants, not office managers—often have a better idea of how technology can best help them and their clients. Here, a selection of working advisors on wealth management technology in the near—and distant—future.

Everything will be OK

“The future is about building better trust. We will build trust through accurate models and a clear message.

I was discussing risk with a client who said, ‘I just want to know that everything will be OK.’ In five years, software will better respond to that by incorporating more robust considerations about risk, return and life scenarios. Essentially, the improvements will be merely calculators but mighty ones that gain more precision and a better ability to run through every conceivable outcome. Using the software, professionals still need to interpret results. Like now, professionals will know their clients and human behavior, which helps them give credible answers. Essentially planners rely on their understanding to say, ‘Everything will be OK.’

 In the year 2050, the software will better communicate with clients. Advisors will get a report custom-tailored to the client. The software will add detail in the report based on machine learning predictions. The technology will consider clients’ behavior to determine what they want to see. The detail-oriented, type-A personalities will get pages of data with multiple scenarios. Hands-off investors will get a printout that says ‘Everything will be OK.’ The hands-off investor will know they can learn more if needed, but they rarely do. The software has near-perfect knowledge about each client’s preference and shows them exactly what they need.

 In the end, it will still be advisors using their software to help clients. The technology will be one more tool to build trust in the financial system and build relationships with clients.”

—Robert Persichitte, financial planner, Delagify Financial, Arvada, Colo.

Linked Up and More Remote

“In the next five years, I expect for all the technology supporting our independent practices to be able to link up with ease and for account linking between providers to be improved, as every provider of account linking fails terribly.

In addition, I expect the operation of our practices to be more remote as the in-person advisor model is slowly getting phased out as our society’s concern for illness, risk of driving and their lack of necessity for a firm handshake to trust a financial planner becomes more commonplace. Evidence of this is apparent in the success of firms like Facet Wealth, Fisher Investments, etc.

By 2050, I expect for clients to mostly be able to get expert financial advice through their employer as an employee benefit but still choose to hire advisors elsewhere with expertise that matches what they’re looking for more often than not.

I expect the main differentiators to be niche specific expertise between practices, time that’s required/willing to be given to clients to counsel them through markets and their decisions, the inclusion of motivational interviewing and project management methodologies to help individuals who lack the discipline to change the way they live their financial lives actually make the necessary changes to be able to afford to live a good life.

I expect that fees will stay the same and our fee compression will slow, as it’s no longer a fees game now that Schwab, M1 Finance and others have basically made investment management free. The real reason our clients pay fees isn’t for investment management so much as counsel, prudence, technical expertise, a clean/easy technical experience and trust.”

—Blaine Thiederman, founder and principal advisor, Progress Wealth Management, Arvada, Colo.

Automation to Avoid Duplication

“Five years from now technology will allow us to avoid duplication of data and work across systems. The custodians have come a long way to moving from paper to electronic, and with that has come the efficiency of avoiding some duplication of work. I expect this to advance in the next five years as it will benefit custodians by requiring fewer back-office employees and advisors by increasing efficiency.

By 2050, I expect technology to be automating most of our low-value-add work such as reading through troves of documents to find useful information. There is already technology such as Holistiplan that will comb through tax returns and pull out the necessary information, and I expect this theme to continue in the coming decades.”

—Noah Damsky, principal, Marina Wealth Advisors, Los Angeles

The Democratization of the Financial Services Industry

“I believe we are seeing the democratization in the financial services industry and a shift in advisors’ value proposition. The days of simply ‘managing’ assets or providing access to product are over. The advisors who will succeed are the ones who will provide both the best client experience and outcomes. These needs are going to forever alter the wealth management landscape.

Within five years, every portfolio management software will have the ability to integrate with services like Zapier and IFTTT that will allow advisors to personalize and automate their practices. Private banking–style client portals that easily allow clients to connect their accounts, view and direct investment decisions, and communicate with their advisors will be required. Tools that use artificial intelligence to augment advisors and help them and their teams run lean and be hyper-focused will become essential for all firms.

 By 2050, I think most financial planning will be AI- and app-based, and planning will be done automatically for you by your employer/benefits provider. I think people will turn to a single regulated fiduciary advisor for all their investment, insurance, financial planning and tax-prep needs. I think financial planning software will become regulated, which will reduce the number of options available, and consolidate services to a few massive players. I think the players that win are the ones who empower advisors to create custom and personalized experiences for their clients—while minimizing their operating costs and maximizing their profitability.”

—Leibel Sternbach, chief technology officer, Fusion Capital Management, Dallas

Financial Planners Are Here to Stay

“I believe today’s ‘robo advisor’ is slated for a massive upgrade over the next decade. Most robos offer simple investment strategies—typically an index-based portfolio, perhaps with a factor tilt, adjusted for one’s risk tolerance. Advisors often successfully compete against robos by using more sophisticated investment processes.

For instance, many robos rely on historical return/risk data to optimize portfolios, whereas an advisor is constructing portfolios based on forward-looking assumptions. Many robos use mutual funds and ETFs to populate portfolios, while individual stock strategies may be viewed as ‘better’ by a client. Robo advisors do not adjust portfolio risk levels due to economic and market conditions, and they typically do not offer meaningful access to alternative asset classes.

Here’s the bad news. Implementing any of the above is quite doable for a robo. Capital market assumptions for forward-looking portfolio optimization can be created or purchased, stock selection can be automated (e.g., factor investing), risk mitigation strategies can be automated (e.g., trend following), and it will only take a few joint ventures with ‘accessible-alt’ companies like Fundrise, Lending Club or EquityZen to integrate alternatives into a traditional robo portfolio.

Long term, I believe most investment management strategies will become automated and very low-cost. Financial planning and integrating a plan with an investment strategy will be difficult, though, as each plan is tailored to each client. For this reason, I think financial planners are here to stay, while many ‘investment only’ advisors may eventually be headed for the tar pits.”

—Chris Diodato, founder, WELLth Financial Planning, Palm Beach Gardens, Fla.

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