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When hyper change isn’t fast enough in wealth management

At Joel Bruckenstein’s T3 Advisor Conference this past February I communicated to advisors about a scenario we have been calling ‘hyper change.’

The basic premise is that a series of megatrends are spinning together to completely transform the wealth management industry over the next three, five, ten years.

We see it even in our daily lives - think about how our kids are quickly becoming young adults and they’re using tech so differently than we ever did. In just a handful of years, we’ve gone from desktop to laptop and then to mobile phones, and now to voice assistants and smart devices. My five-year-old gets all of his music, jokes and weather news from Alexa.

So as part of my presentation on the hyper change phenomenon, I include a slide with an alphabet of change, each letter signifying an element of these trends. So, ‘B’ for “big data,” ‘P’ for “personalization-at-scale,” and so on. As a joke, for ‘Z’ I have “Zombie Apocalypse.”

That’s the only thing that hasn’t happened yet in 2020. Apparently, the world had its own joke for us, and hyper change it seems wasn’t fast enough. That transformation is no longer occurring over the coming decade. We’re in it right now.

Face-to-face meetings, for instance, were already falling out of favor, shrinking from a 30% preference rate among clients to just 16% in a two-year span, with the near majority preferring mobile apps for account updates, according to EY’s global wealth management report. Fast-forward to today, it isn’t a matter of convenience anymore; virtual meetings are how we’re getting anything done at all.

Fast-forwarding is how I’m thinking about everything we’re experiencing at this moment in time. Behavioral change and market transformations that were beginning to surface before are now part of a rolling wave. So much is happening now all at once. It’s crucial to acknowledge that while some of your clients will return to old habits when we’re able to meet freely again, many will not.

A digital presence is essential

Consider the shift in retail. We’ve watched the gradual disappearance of mom-and-pop stores in the wake of big box stores and then e-commerce for years. In these last few months though, thousands of small businesses have shuttered and even several high-profile brick-and-mortar retailers have declared bankruptcy. But Amazon? Revenues of $88 billion in the second quarter, more than $20 billion more than they did last year at the same time. There’s no magic formula. Amazon is built for digital-first distribution, selling volume – pretty much anything now – at scale quickly, with just a few clicks. 

In New York City, when going out became a challenge, I had no issue getting all my shopping done online. Before, I’d go to my neighborhood convenience store maybe three times per week. Since March, I’ve only been back once. I’m not sure I’ll go back to shopping that way, because my online experience has been so easy. In fact, every category of retail was down following the start of lockdowns except online, according to the National Retail Federation; online and non-store retail was up 21.2% over the same time last year.

It should be clear to everyone now that a good digital presence is essential to maintain and grow a business. If a local business has a digital-first set up to sell and distribute orders, they’ll fare much better too. That’s why a number of states as part of their relief efforts are now trying to help small businesses get digital, and why some e-commerce fintech startups, sensing an opportunity, are offering up small business platforms with no fees. Again, when an easier, more convenient way comes along, a business has to adjust.

Wealth management outcomes

Wealth management is no different. In the past few months, new outcomes have undercut some widely-held beliefs about how investors would react in a volatile market, particularly those that trade and get advice primarily through digital means.

We witnessed the stock market stumble spectacularly. In March the Dow Jones Industrial Average suffered one of its worst point plunges in history. That was followed by two more steep declines. Yet despite such record-setting volatility, investors aren’t running for the exits as many feared they would, they’re actually buying more. We’ve erased those March market losses and as I write this, the Dow Jones is at its highest in six months.

Meanwhile, the biggest wealth managers and banks that invested in an online presence and capabilities in the past few years are now reporting gains in digital channels, even as traditional channels experience declines

In its first-quarter earnings report, UBS noted client logins for its Americas wealth management business rose 26% in March compared to December. The firm told Financial Planning it had “probably accelerated by five years user adoption of its digital tools.” In the same vein, TD Ameritrade’s robo-advice offering, Essential Portfolios, grew 150% year-over-year in the same period. Schwab also reported a strong performance for its automated advice offering, Intelligent Portfolios.

And despite predictions to the contrary, the upstart robo-advisors and the most popular trading apps are all seeing even more engagement, not less, in all this market volatility. Depending on your perspective, that’s either a good or bad thing. 

Betterment and Wealthfront reported double-digit client growth at this time. They both claim over $10 billion in assets and are expanding into banking. And despite a series of issues, such as systems failures during March’s steep market declines, Robinhood landed another $600 million in funding and now claims it is handling more monthly trades than Schwab and E-Trade combined.

Meeting the digital engagement demand

Once more, the client is choosing a more convenient way of doing business. There’s all this demand and it’s plugging into digital because it’s often the simplest option and the most accessible. And no wealth manager is going to be shielded from this trend. In July, Aite Group released a global survey of 31 wealth managers to learn how the pandemic has impacted the industry. Among its findings was that over half of the firms it spoke to were reporting client demand for major increases in digital engagement.

This is where we can help you. AdvisorEngine® is a fully digital, scalable solution that provides your practice with the online presence your clients are seeking now. Having mapped out these industry-changing trends long before, I can say AdvisorEngine® is built for this moment.

We don’t see digital trends leading to an end of wealth managers, as some predicted early on. The opposite in fact. If this is how a client wants to work now, that’s fine; it may even be better. For all the convenience the client gains, the advisor gains too. You’re saving time because sessions are scheduled remotely, your workflows are both digital-first and automated, and you can move beyond a referrals-only model to a business that can gain and serve clients from anywhere.

Through an advisory firm using AdvisorEngine’s platform, I recently opened an investment account online. All the heavy lifting an advisor does in the traditional, in-person process - opening and funding an account at a custodian, disclosure documents, creating a portfolio - can be completed either by the advisor or client now in just a few minutes. By comparison, the paper-heavy, in-person process takes hours to complete just one step; and even then, there’s no guarantee that all the information will be applied correctly. The digital experience made me think: Just as my shopping habits have changed, why wouldn’t a client prefer a simpler and faster wealth management process? And why would an advisor want to keep doing old-fashioned, time-consuming tasks? With the help of digital automation, I received personalized, instant service and the knowledge that the lines of communication with my advisor are open at any time. That effortless experience also developed a great feeling toward the advisor.

That’s the incredible opportunity for investment advisors who embrace a digital presence. It feeds data and automation that allow for segmentation and personalization at a deep level and growth at scale. Using our Junxure® CRM, you can see all the attributes of the client and can create personalized experiences for them. Embedded in the AdvisorEngine platform that automates onboarding, funding of accounts, creating a portfolio, and delivering information to your client, is the ability to grow and scale personalized solutions.

We’re now in a sea of change in wealth management that eclipses even the shifts we witnessed in the 1990s. But as we speed toward a digital-first future, technology should enable relationships, not dehumanize the practice. The foundation of wealth management is personal relationships, and our vision is to help elevate your connection to your prospects and clients.

-- Rich

AdvisorEngine delivers an open technology platform
for every wealth management moment


This blog is sponsored by AdvisorEngine Inc. The information, data and opinions in this commentary are as of the publication date, unless otherwise noted, and subject to change. This material is provided for informational purposes only and should not be considered a recommendation to use AdvisorEngine or deemed to be a specific offer to sell or provide, or a specific invitation to apply for, any financial product, instrument or service that may be mentioned. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Opinions and forecasts discussed are those of the author, do not necessarily reflect the views of AdvisorEngine and are subject to change without notice. AdvisorEngine makes no representations as to the accuracy, completeness and validity of any statements made and will not be liable for any errors, omissions or representations. As a technology company, AdvisorEngine provides access to award-winning tools and will be compensated for providing such access. AdvisorEngine does not provide broker-dealer, custodian, investment advice or related investment services.

Rich Cancro

Rich Cancro

Rich is the driving force behind AdvisorEngine - setting the strategic vision for the company. Rich has more than 25 years of experience creating innovative wealth management solutions, reinventing technology platforms and driving growth.


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