We hear it a lot these days: COVID-19 isn’t over yet. And indeed, after more than a year of advisors picking up the pace on digital adoption just to keep the lights on, the industry continues to learn crucial lessons about how to survive and even thrive as we move toward implementing the latest new takes on normal in a post-pandemic world.
Some of those lessons were illuminated at a Broadridge Financial Solutions webinar I participated in, joining a panel of experts spanning wealth technology, client experience and wealth consulting. We heard some surprising findings about what individual investors and their financial advisors want and expect as we move forward.
On one point, however, the panelists were united: the digital transformation of our industry has only just begun.
Just the beginning
Bowing to COVID-19-imposed necessity, financial advisors and investors alike revved up technology adoption last year. But data from a survey conducted by our firm shows wealth managers must continue to embrace digitalization or risk irrelevance. The survey found that clients who use apps and digital capabilities are more satisfied than those who don’t.
Conversely, inadequate technology poses a risk to advisory firms: almost 80% of advisors surveyed said they felt their technology wasn’t meeting their needs, and more than half of this group said they are considering switching firms in search of better technology.
The good news here, in our view, is that client preference and advisor dissatisfaction should spur continued transformation within the industry, leading to a more tech-savvy, personalized process for clients, ones that will improve the user experience dramatically over the coming year.
To address these issues, however, advisory firms will need to find ways to modernize their platforms, mutualize their investments and innovation while building scale. Firms may increase their focus on integration and create more intuitive experiences for investors by leading with relevant communications — perhaps providing an easily available app store of financial services. The ultimate experience will result in less friction and better investor outcomes.
Embedded advisors
Whether due to pandemic-induced isolation or larger changes related to how people view financial planning, clients of all ages have been asking for guidance, says Ilan Davidovici, principal of client experience at Edward Jones.
“Almost all of our clients reached out to us when the pandemic began, and that continued throughout 2020,” Davidovici said. As this year unfolds, “we expect to be deeply embedded in the lives and communities in which we serve.”
Nalika Nanayakkara, Wealth & Asset Management Consulting leader at EY Americas, said that currently, that intimate type of attention is typically given only to perhaps their top 20% of clients. The new tools “can help extend that focus” to a much broader audience.
Advisors need to feel recognized by their firms, too, when it comes to having their needs understood and receiving guidance on how to make their jobs easier, according to Davidovici, who said that digital engagement is “simply a way that we connect, it’s a way that we create community.” The firm sees it “as a tool to be able to listen and to be able to deliver different content to community types for product and service offerings,” he said.
Edward Jones is likely to rely more on this strategy, Davidovici says. “We’re in the business of doubling down on those digital tools that help us connect even deeper with the clients and communities in which we serve.”
Social media on the march
Findings from our survey suggest that investors are increasingly willing to use investment ideas posted on social media by their advisors or other trusted sources. Conversely, the broad reach of social media provides an important channel by which advisors can find out more about clients.
“There are tools using social media, using artificial intelligence that enable personalized service at scale,” Nanayakkara said. One example is a tool that identifies an increased number of LinkedIn invitations — something a person typically does before changing jobs.
“In the past, the advisor didn’t know about a client’s big life moments till the client actually told the advisor,” she said. However, “now there are tools that can anticipate some of those changes before the client tells you, even before they happen.”
Digital asset investors also tend to be more financially literate and experienced, according to data from Hearts & Wallets.
Fintech on a tear
Despite predictions that fintech companies would be a casualty of the COVID-19 turmoil that engulfed markets starting in March 2020, they have thrived, said Bill Capuzzi, CEO of Apex Clearing.
One reason for their success was their uninhibited use of social media — methods that jibe with their clients’ digital habits. “They created connections to their customers, deeper connections in ways that those customers like to communicate,” Capuzzi said. It works, he said, because when there’s turmoil in the market, that’s where clients of online financial services firms like SoFi and Stash seek out information and insight. The willingness to connect with customers in places where they gather was sensible and efficient.
Fintechs have also succeeded because they appeal to younger investors who have adopted investing ideas popularized by Peter Lynch, the former manager of Fidelity’s flagship Magellan fund. For instance: Invest in the companies that you know and understand. While some market pundits have questioned the valuations of many tech stocks, fintech clients who take this approach have so far made big gains for Tesla, Apple and Snap, which runs Snapchat, Capuzzi said.
Onto the next normal
As the post-COVID-19 period approaches, investors are fully engaged with the digital world, where they increasingly turn for information and ideas, and which many now view as their preferred channel for service and communication.
Advisors understand that digital strategies will play a foundational role in future client relationships, but in many cases also realize their current technology platforms are not up to the task. The result is an industry ripe for innovation and even disruption.
Rather than slowing, the pace of change in wealth management will continue to accelerate. Advisors must be prepared to change at the same speed — or risk being left behind.
