Financial advisors must learn to leverage technology instead of being made obsolete by it.
Wealth Management firms and their advisors are facing an array of opportunities and threats that will determine winners and losers in the coming years. Opportunities include the growing population of affluent and High Net Worth Individuals (HNWIs), particularly in Asia, their growing financial literacy and greater desire for control over their finances. Threats include alternative investments, peer-to-peer investment platforms and robo-advisors.
Financial advisors sell high-involvement purchases – growing, protecting and managing wealth is deeply personal, and studies have shown that people’s aversion to loss is greater than their desire for gain. To overcome this, Wealth Managers must build deep relationships with their clients to earn the status of trusted advisor. Yet Capgemini’s World Wealth Report 2016 notes that, while trust in their financial institution has improved in the last year, clients’ trust in individual advisors has barely changed.
Matthew King at Microsoft recently suggested that 95% of Salespeople Will be Replaced by AI Within 20 years. A more nuanced estimate by McKinsey suggested that the financial sector has the technical potential to automate activities taking up 43 percent of its workers’ time.
With greater self-service, robo-advisors and automated assistants, and the automation of administrative processes, the activities that financial advisors perform day-in, day-out will change. Those who can use these changes to amplify their client engagement and productivity will shine, those who don’t risk obsolescence.
So where can financial advisors continue to add value to their clients in this shifting landscape?
Sales leader Tony J. Hughes says that sales professionals “must surrender commodity products and services to focus on high value solutions where there is both complexity and risk for the buyer. The role of field sales is to proactively create opportunities with early engagement that sets the right agenda.”
The Wealth Management firm must re-assess their customers’ journey, their touchpoints and what mix of interactions will add the most value at each step, ensuring the customer journey map:
- Is built from a customer’s point of view, not an internal business point of view
- Captures customers’ perceptions of their experiences relative to their goals, needs and expectations.
- Illustrates the customers’ current or future journey across multiple touchpoints rather than focusing on a single touchpoint.
- Incorporates performance indicators.
- Visualises the customer journey to optimize stakeholders’ understanding, engagement, and decision-making based on the journey map story.
The key activities between an advisor and client are gathering information, providing information and transacting.
What Wealth Management firms need to do
To successfully leverage digital technologies, firms need to:
Build Flexibility In: The only constant is change; recognise that the optimum mix of human and digital interaction is changing, and will continue to change. Processes that lock staff into restrictive patterns of behaviour, whether current or future, are doomed. While there are specific risk and regulatory compliance requirements, firms should explore through experiments what mix of interactions works best within those constraints.
“Test and Learn” vs “Build it and they will come”: Finding what works with a particular customer segment, geography or cultural background, with a particular mix of tools, needs to be discovered rather than forecast. The firm therefore needs to adopt a continuous learning culture and make regular controlled trials of different techniques.
Build or Buy, but Integrate: Whether it’s the firm’s traditional mix of channels (advisors, agents, branches, call centres, partners, audio/video conferencing), current digital channels (social media, web/mobile) or future media, it’s critical to be able to integrate channels into the mix as painlessly as possible. More than ever before, Wealth Management firms need to be great integrators of technology.
Educate and Celebrate: As outlined in the HBR article “Convincing employees to use new technology”, adoption by senior leaders and true believers is essential to converting average performers to top performers. Wealth Managers, like any salespeople, seek to learn from top performers, so celebrating successes is essential.
The Bottom Line
As customer segment lines are being re-drawn, a new spectrum is forming, from no advice, through self-service to Robo-advice and traditional face-to-face full service.
Successful advisors will be those who bring all available resources from inside and outside the firm to bear on the critical “moments of truth” with the client, helping them to navigate the alternatives and trade-offs to best meet their financial needs.
For advisors to add value in this evolving digital environment, it’s useful to apply the “Carpenter’s Analogy”: they need to “have the right tools, know how to use them, and know when to use them”.