The Rise of the Connected Advisorpost by Chris Curran on July 18, 2014
Guest post by C. Steven Crosby
Due to their central role in client relationships, advisors are at the heart of traditional wealth management models. However, the need for advisors to guide clients through options in an opaque market is increasingly being called into question. As information proliferates and technology expands, potentially disruptive new competitors are coming online and forcing wealth managers to reconsider the role of the advisor. New channels for obtaining investment advice and selecting and evaluating advisors are emerging—all with the backdrop of a rapidly changing regulatory landscape. This is broader than just toolsets. It is a fundamental reshaping of the industry as it addresses the demands and appetites of different demographic constituencies.
New market entrants are focusing on specific market niches with unfulfilled demand to gain a foothold, and then expanding offerings to capture high-growth, high-profitability segments. For example, they are offering clients the opportunity to join online investment communities to share data and insights, while others provide automated financial advice tools and models to deliver new levels of sophistication in financial recommendations. These entrants are differentiating their offerings by target markets, intergenerational cohorts, sub-segments of wealth and life stage and by the degree of human involvement in driving investment decisions and analytics.
We see firms/investment advisors responding in several different ways:
1) A traditional relationship based advisor who elects not to adopt digital
2) A traditional advisor who becomes much more technology-enabled and digitally engaged with clients as a part of day-to-day activities
3) An advisor who is embedded in the social network of the self-directed investors, whose opinion and views are highly sought after and followed by members of the community
4) Automated advisors that actually replace human advisors to manage an investor’s portfolio
Disruptive digital and social technologies are bringing new competitors and channels to bear with established wealth managers. To meet this fundamental challenge, firms should position themselves to better exploit digital opportunities for connectedness within the client, advisor and employee lifecycles at scale.
Here are five areas where they can focus:
New policies and technologies enable advisors to take advantage of social media platforms to build their brands and expand their global presences. However, firms need to take social marketing to the next level by accelerating changes in performance metrics and compensation as clients use social media to find the right advisor for their needs.
Social intelligence and analytics
Today’s challenge is to use social listening tools to capture client insights. Tomorrow’s challenge is implementing sophisticated tools and analytics that gather and analyze data in real-time from several sources for prospecting and client servicing.
Firms are focused on enabling and encouraging advisor adoption of client-facing social media platforms to make the advisor more technology-enabled and digitally engaged with clients in day-to-day activities. However, social collaboration technologies can enhance client collaboration even further, in areas such as proprietary online communities, groups for next generation education or interest groups.
Firms need to develop and deliver mobile apps that improve advisor productivity and enhance client service experiences. Then, they need to move beyond mobilizing existing experiences to foster new innovations, reach new audiences, and create new user experiences and business opportunities.
Wealth managers are increasingly moving to develop new infrastructure tools, joint ventures and partnerships to drive innovation. They need to continue to up the ante by opening APIs for client analytics platforms and fostering third party developer communities to create innovative portfolio analysis and visualization apps. Firms need to use technology to break down walls to bring disparate groups together—similar to how crowd-sourcing has transformed technology development.
The wealth management market has considerable growth potential as changes reshape its business. Security remains top of mind with clients and must drive business and technical architecture decisions. The real questions are: who is best positioned to take advantage of these changes and how will they succeed? Will it be established firms who have become more agile or new entrants with focus and advanced disruptive technology? The result will define the future of wealth management.
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