Client Service May 16, 2016

With Great Technology Comes Great Responsibility

Financial services consumers expect providers to offer more than a few pieces of client support technology—they want full utilization of technology tools and ongoing reinvestment in the latest and greatest tech. 
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It’s not likely going to be news to financial services industry professionals that new data and communication technologies, unimagined even a decade ago, are reshaping the way people think about, pursue, and ultimately purchase financial advice.

What may be more surprising, according to new research from Cerulli Associates, is the extent to which technological advances are “pushing providers to keep up with investor expectations, and, ultimately, be the center of their clients’ financial lives.” 

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“Pushing” is an important word here, Cerulli researchers note, because providers have not necessarily found it to be easy or comfortable to head down this road. They have, of course, benefitted from technology advances in recent decades, widely allowing firms of all stripes to improve their reach and the efficiency and responsiveness of the services provided. However, it appears that for many firms, the advancement of more and more powerful data technology into the financial services space is causing equal parts pain and profit.

“Wealth management providers, in particular, feel pressure from new sources of relatively inexpensive digital advice, changing financial planning expectations, and the commoditization of investment management services,” explains Shaun Quirk, senior analyst at Cerulli. Against this backdrop, the individual investor is “demanding more,” forcing firms to offer a deeper client experience than they may be used to, oftentimes at a price point lower than they would have historically been comfortable with.

As Cerulli Associates explains, these forces are coming together to drive a real re-think of the cost-value equation for financial advice. 

One strategy firms are adopting to try to communicate their willingness to first install and then fully utilize new technology is embracing the language of “holistic financial wellness.”  Firms are eager to point out to clients that they are utilizing new sources of data to better hone investment advice, Cerulli finds, for example by taking not just personal savings levels but also a variety of other financial factors into account when managing an automated portfolio.

“Many advice providers tout a ‘holistic’ planning model to bolster their perceived value,” Quirk adds. “However, this overused term in wealth management is vague and heavily focused on investment management as opposed to true financial planning.” To really keep clients happy, firms must do much more with technology than bring efficiency to portfolio management, Quirk concludes

Information on obtaining this and other Cerulli Associates reporting is here. 

In Practice May 16, 2016

Boomer Clients Still Eyed Eagerly by Many Advisers

It’s a simple formula that keeps more than half of advisers primarily targeting Baby Boomers: They have the most money saved and are the most in need of immediately actionable advice.
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Survey data released by D.A. Davidson & Co.’s Individual Investor Group shows more than half of financial advisers are still primarily going after new clients who are Baby Boomers—although the majority is unlikely to hold out that much longer.  

According to D.A. Davidson, about six in 10 (59%) advisers are “most focused on attracting Baby Boomers (age 52 to 70) as future clients.” More than half (53%) of these respondents, in turn, believe that Baby Boomers are the “most attractive generation because of the advice needed based on their current life stage.”

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Advisers identified a variety of familiar services they would like to deliver to more Baby Boomer clients, from traditional investment portfolio support to holistic financial wellness consulting, including guidance on Social Security claiming strategies, budgeting, structuring income, etc. Many expect challenges to some of these offerings related to the Department of Labor’s (DOL) new fiduciary rule, but D.A. Davidson executives feel the industry has more than enough brainpower and resources to solve short-term business challenges.

Andrew Crowell, vice chairman of D.A. Davidson & Co.’s Individual Investor Group, tells PLANADVISER the findings also underscore a significant opportunity for advisers to engage younger clients. For many advisers this will represent first targeting Generation X clients who are well-established in their own careers and who are likely entering their peak earning years—but the firm also encourages advisers to think longer-term, about the earning power Millennials are already starting to build in the labor force.

“Millennials are very rapidly becoming the largest generation in the workforce, and many of them are very closely plugged into their Baby Boomer parents’ own finances,” Crowell explains. “Having gone through the financial crises essentially right at the start of their working careers, and with the likelihood of a large amount of wealth transferring from Baby Boomers to Millennials, it is certainly the time to start forming a presence among young people in the workforce.”

NEXT: Communication challenges 

The question is, of course, when does a Millennial shift from a prospective future client to someone you’re targeting to have as a client today? From D.A. Davidson’s perspective, Crowell says the formula that seems to work best amid real regulatory reform and difficult markets is “essentially to leave this decision about the timing of starting a formal relationship up to the client.”

“Practically, this means that we have to be using channels like social media and getting into the workplace to create some awareness of who we are and what we do,” Crowell adds. “We need to start making young people aware of the value of financial advice, especially when it is sought out early so that a good long-term plan can be put in place. If we do a good job on all of this we will naturally invite Generation X and Millennials in at the right time.”

While the appeal of winning new Baby Boomer clients is fairly obvious, it’s also a pretty simple formula that makes Generation X and Millennials a sensible target today.

“We have a tremendous opportunity to advise Gen Xers and Millennials for decades to come,” explains Michael Purpura, president of D.A. Davidson & Co.’s Individual Investor Group. Those advisory firms who move early to serve these generations have a chance to win literally decades of loyalty, and they will be driven to stay in tune with the latest technology, product developments, communication strategies—even business models. In the end it's healthy for the client and the adviser. 

The survey data shows roughly one-third (37%) of advisers are most looking to attract Gen Xers (ages 34 to 52), and “only 2% say they are primarily focused on attracting Millennials (ages 18 to 33).”

Roughly half (52%) of those looking to attract Gen Xers as future clients say that this generation is most attractive because of their future earnings potential; and one-third (35%) say that it is the advice needed based on life stage that makes them appealing. “Notably, 62% of advisers surveyed believe that younger generations are not working with advisers because they think they do not have enough investable assets,” Purpura concludes. 

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