How tech lets wealth managers focus on client relationships
By giving advisors more time to talk to clients and focus on the human aspects of their jobs, digital tools could make wealth management more effective.
Personal connections are a fundamental part of wealth management. A recent study by Morningstar found that the majority of clients keep their financial advisors for emotional reasons rather than financial ones. As the industry embraces more advanced technology, there is a strong focus on tools that can enhance and support interpersonal communication.
In a recent YCharts survey of the clients of financial advisors, 77% of respondents said that more frequent or more personalized communication could significantly enhance their confidence in their advisor, 78% said it could help prevent them from switching providers and eight out of 10 said it would make them more likely to recommend their advisor to family and friends (see Figure 1).
Conversely, a lack of communication can be a key reason for choosing to leave a particular advisor. A 2022 survey by CFA Institute found that a lack of responsiveness was the second most commonly cited reason for retail investors to leave an advisor, only narrowly behind underperformance.
Their clients might want more communication, but advisors themselves are often just as frustrated. In a separate survey of financial advisors, 28% said they did not have enough time to spend with clients – and these reported spending an average of 41% more time each month than their peers on back-office tasks such as compliance and administrative duties.
Therein lies arguably the greatest benefit the wealth management industry can derive from hastening its adoption of technology. “It will eliminate the need to do menial, mundane tasks, which will allow us to have more conversations with clients,” said Matt Reiner, Managing Partner at Capital Investment Advisors in Atlanta, Georgia. “That will deepen relationships, build trust and enhance the value that we can provide.”
Even a simple innovation like Docusign can be a huge time-saver. “I remember when I started off in this industry, having stacks of paper, and trying to find where the signature line is, or where the initial line is, and you miss one line and then you’ve got to go back to the client to sign,” said Leah Jones, Managing Director and Partner at Hightower Bethesda in Bethesda, Maryland.
“I don’t think chasing paperwork around is a value-add to the client,” she added. “A value-add to the client is being able to pull up a comprehensive view of their financial situation and give a good recommendation. There’s no doubt technology has made that whole process a lot more seamless.”
Virtually face-to-face
The proliferation of video conferencing in recent years has also paved the way for more frequent and more personal interactions (see Figure 2). “Some people who I had only talked to on the phone started doing Zooms with me,” said Jones.
Victoria Nabarro, Founder of Veda Wealth in London, UK said: “If a client has a burning question or a concern, they can jump on a call with us. To be able to have a video call is an amazing thing, rather than having to try to plan a meeting and go and drive to somebody’s house or them come to our office.”
Technology has also empowered clients. Online platforms and mobile apps have given investors unprecedented access to financial information and advisors. Because clients now receive up-to-the-minute information and analysis on their investments, they are able to have better informed and timelier discussions with wealth managers.
But all that real-time information can be a double-edged sword. Nabarro, for example, worries that “by encouraging investors to look at their portfolio moving so regularly, we also risk more panic-selling.” A 2023 Morningstar study found that as investors were preparing for a potential recession, nearly 40% took investment action without consulting their advisor.
This could reflect a failure of communication between client and advisor. According to the YCharts survey, those who received infrequent or rare communication from their advisor were far less confident (22%) about their existing financial plan in the event of a recession than those who were contacted frequently (71%).
“There's always going to be these scary moments in the market, but that doesn't mean that we change course,” said Danielle Labotka, behavioral scientist at Morningstar Research Services. “It’s not your first rodeo as a financial advisor, but it can really feel continuously like somebody’s first rodeo when it’s their money that they see going down.”
“I think that a good approach to it is making sure that you’re checking in with clients when these things are happening, and in whatever kind of way that feels authentic for your practice,” said Labotka. “It can be just an email that has some educational materials, or a phone call, or bringing somebody into the office and sitting them down. But I think what’s important is to ensure that clients have a plan in place before volatility even strikes.”
Too much information?
Technology is also benefiting clients through richer data-driven insights and recommendations. For instance, by analyzing client data, wealth managers can create tailored investment strategies that align with clients’ individual needs and objectives, according to Ashley Longabaugh, a Principal Analyst for Celent’s wealth management practice.
“Data-driven models and algorithms can also enable wealth managers to make informed predictions about market trends, investment performance and client behavior,” said Longabaugh. “This helps them anticipate market movements, identify investment opportunities and provide timely recommendations to clients.”
But wealth managers need to be selective about which and how many recommendations to present to clients at a given time. To prevent information overload, they are likely to retain control over what data-driven insights clients are shown, according to David Hurd, EY Canada Wealth Management Leader. Advisors are likely to be able to view on their dashboards a selection of various insights on each client generated using artificial intelligence (AI) models or particular applications. “They can then decide which insights to share with the end client,” Hurd said.
Deciding exactly what information will help a client – and what could potentially harm them – requires empathy. Such soft skills will become increasingly important for the wealth management industry as technology adoption gathers pace.
“I think the more digital we get, the more wealth managers need to be human to stay relevant,” said Labotka. “They need to be themselves in some way. That holistic approach of addressing both financial and human needs is really going to help ensure advisors are providing value that can’t be provided by technology alone.”
Value in communication
Despite the advance of technology, the fundamentals of the job will remain the same – “distilling information and communicating it well to clients,” according to Noah Damsky, Founder of Marina Wealth Advisors in Los Angeles, California.
Information about almost any type of tax, investment, or trust and estate strategy is relatively easy to find online, explained Damsky, “but we have to know how to distill it and give advice that’s relevant to each client.”
If a wealth manager communicates advice effectively, the client is much more likely to trust it and act on it. Moreover, effective communication could result in clients trusting more of their assets with their advisors.
And so, even as technology offers ever-greater potential to accompany the relationship between an advisor and their client, the conclusion for those who are looking to grow assets under management seems clear: talk to your clients more.
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