Rebuilding Trust, Respect For Financial Services

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Advisors have had to completely change how they engage with clients over the past two years because of the pandemic. Two-way video chats are the norm rather than an unusual option. Where does the disruption leave the challenge of sustaining trust in uncertain times?


Mike Alexander, president of wealth, Broadridge, talks about how
the role of wealth advisors is changing. His firm has a
particular angle: it delivers technology-driven solutions that
drive business transformation for banks, broker-dealers, asset
and wealth managers and public companies. Clearly, technology
plays a big role in wealth management today. The pandemic has
massively accelerated the take-up of certain tools and
communications channels, but there is far more to change than
this.


The editors are pleased to share these insights with readers.
The usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com


Over the past 24 months, the wealth management industry
experienced radical shifts in the way firms and advisors
communicate with clients and nurture relationships. Today, wealth
managers are experiencing rapid changes in their financial
situations and goals, and an even faster transformation of the
products, channels and services they use.


The pace of change will continue to accelerate in 2022. To retain
clients and grow business in the year ahead, firms and individual
advisors will have to evolve their business models by addressing
three key priorities:


1. Redefining, digitising and modernising the advisor-client
relationship;  

2. Raising the bar on client service and investment advice
with a focus on personalisation; and 

3. Embracing new investment products such as cryptocurrency
and alternatives.


Redefining the advisor role

Today’s wealth management industry is much different
from what existed at the start of 2020. COVID-19 lockdowns
altered consumer behaviour, accelerating the adoption of virtual
communication and e-commerce. The combination of more time at
home, commission-free trades and stimulus funds fuelled an
unprecedented influx of retail investors into the financial
markets. These new, often young investors, use firms such as
Robinhood and other online tools for DIY investing. They get
their financial advice from Reddit and YouTube and are pouring
assets into trendy cryptocurrencies and collecting NFTs –
options which most financial advisors only offer on a
limited basis. 


How can financial advisors adjust to these changes to attract new
clients and deepen existing relationships? The answer is
surprisingly simple: Become a trusted advisor and provide highly
personalised, data-driven advice. 


Advisors in 2022 must start positioning themselves as expert
advisors and coaches who provide investors with advice not just
on specific products or portfolios, but on how to achieve overall
financial wellness.


This means evaluating the entire portfolio – including both
assets managed by the advisor and self-directed investments in
traditional and non-traditional assets – and making sure it is
aligned with the investor’s needs, aspirations and values. Today,
less than one-third of consumers have a financial advisor and an
astounding 45 per cent do not have any retirement savings. 


This creates scale challenges and necessitates AI-driven
technology to reduce friction with clients, personalise services
and improve investment outcomes. Embracing technology and
interacting with clients in their preferred manner, including new
conversational technology and video, will enable advisors to
connect with new investors and scale their business.   


Studies have also shown that clients prefer to work with
financial advisors who have backgrounds similar to their own.
Bringing in talented professionals that reflect the country’s
demographics will allow advisors to serve underserved communities
better, helping all members achieve their financial goals and
increase investor literacy. 


Redefining the advisor role also means broadening the
advisor-investor relationship with the entire household or
family. By addressing the needs of everyone in the family and
including potential heirs in planning sessions, the advisor will
extend and strengthen the existing client relationship while
building new ones. He or she will also be in a much better
position to retain the business of younger investors who are
often disinclined to stay with their parents’ advisor. By
assuming the role of educator or mentor across all aspects of
financial wellness, such as budgeting, estate planning and
philanthropy, the advisor can form a partnership that spans
generations. 


In many ways, this new advisor role will resemble a life coach:
an expert who understands a client’s unique, personal situation
and offers real insights about how to achieve financial
goals. 


Raising the bar on service

In March 2020, like many other industries, advisors and wealth
management firms went digital to stay in business. Over the
course of nearly two years, the industry cobbled together an ad
hoc service model using Zoom calls, emails, virtual presentations
and other digital tools. Because this was all so new and abrupt,
most clients had patience with the inevitable snags and
disruptions. That grace period is ending. In 2022, clients will
expect the same level of seamless digital service they receive in
their everyday digital applications. 


Fortunately, advisors have access to a combination of data
analytics, communication apps and content services that allow
them to deliver hyper-personalised service to clients. Service
providers like TIFIN and Fligoo enable advisors to identify and
anticipate client preferences, needs, interests and intents.
Equipped with this data, advisors can foster deeper relationships
with clients by sending recent and relevant content that is
personalised to the individual client, whether the client is
starting a business, paying for college, inheriting assets or
retiring. 


Firms and advisors can partner with third-party vendors to supply
that personalised content or build client engagement through
rewards and other “gamification” techniques. Other widely
available services allow advisors to communicate with clients at
the right time via the right channel, whether that is email,
Facebook or LinkedIn, on a computer or mobile phone. 


Relevant content sent through those channels should help educate
clients about all aspects of their portfolios and lifestyle,
while increasing financial literacy. As investors have a greater
say in how they invest, when they invest and what they invest in,
advisors should have a big role to play in those investment
decisions. Advisors must position themselves to be a trusted
primary source of financial planning helping clients make
informed decisions. 


As advisors build out these technology platforms to create
personalised strategies, they should never sacrifice their
biggest competitive advantage: the human touch. The one thing
advisors can provide that digital competitors can’t replicate is
a phone call or in-person conversation about the things which
clients care about the most. 


Embracing crypto (and other new asset
classes)


Astronomical returns on bitcoin, NFTs and other new asset classes
have spiked interest among investors of all types and ages.
Financial literacy and education are important ways for advisors
to engage with clients and meet their interests in crypto
and other alternative assets, even if an advisor might not be
able offer these investments through their own investment
platforms. 


Today, wealth management firms are working furiously to integrate
these asset classes into traditional investment platforms to make
them more accessible to a wider audience. In the meantime,
financial advisors must be prepared to answer client questions
and to reach out proactively with educational materials on these
complex and rapidly evolving assets. In 2022, firms and
individual advisors will have to answer a critical question: What
level of expertise is required to actively advise on cryptos,
NFTs and other new asset classes while fulfilling their fiduciary
responsibility to clients and complying with all other
regulations? 


Bonus industry trend: restoring trust  

The rise of commission-free trading and low-cost ETFs are not the
only reason young investors are bypassing expert professionals
and investing on their own. Many young investors simply don’t
trust financial service firms the way past generations did. 


Millennials were still in the early stages of their careers when
the Global Financial Crisis devastated the economy – with banks
playing a leading role. Nearly a decade later, a World Economic
Survey of people from around the world found that almost half of
18 to 45-year-olds did not trust banks to be fair and honest.
(https://www.weforum.org/agenda/2017/08/global-shapers-survey-2017-5-things-we-learned/)


Gen Z wasn’t even in the workforce in 2008, but as digital
natives who prioritize personal values in their spending and
investment decisions, these young people have no natural affinity
for “Wall Street” or their parents’ financial partners.  


Building back trust and respect for traditional financial service
providers among these cohorts will be a central challenge for the
wealth management business in 2022 and beyond – not only in terms
of attracting clients and assets, but in attracting the next
generation of financial advisors.

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