Client Service March 12, 2018

Advisers Moving to a Client-Centric Model

Advisers are using new planning models and smarter technology, including automation, so that they can offer personalized service, SEI finds.

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Financial advisers are using new client-centric technologies and processes that can increase transparency, create more value and help clients become more actively involved in financial planning, according to a new report from SEI Advisor Network and co-authored by Spenser Segal, CEO of ActiFi, a financial services software development company.

What is driving this movement to a client-centric world and more personalized advice are the fiduciary movement, robo advisers and a changing consumer dynamic, SEI says. The report recommends that advisers use a customized planning approach that is facilitated through technology to best fit each client’s goals and cash flow needs. This means using a variety of planning models, including project-based, modular, holistic and segmented, SEI says.

“Many financial planning approaches exist today, and the days of delivering only holistic advice to clients are gone,” says John Anderson, managing director and head of practice management solutions at SEI Advisor Network. “This report shows how an advisory firm can mechanize financial planning procedures with repeatable processes and the latest technology, but still deliver customized advice to their clients. Each client brings a distinct set of goals, needs and expectations to the table, and advisers can show value over time through more personalized planning.”

SEI surveyed 542 advisers and found that only 41% view financial planning as their core value proposition. Twenty-four percent said the biggest challenge they face is explaining the value of planning to prospects and clients. Twenty-six percent said that finding the right technology to effectively collaborate with their clients is difficult.

“In this era of intense competition, fee compression and increased regulatory scrutiny, advisers must become more efficient and do more for their clients, with less,” Anderson says. “Technologies are pivotal, but advisers need to balance ‘high tech’ with ‘high touch’ to add capacity and value. While automating elements of the co-planning process is key, the human component remains central to the advice management experience.”

SEI recommends that advisory practices focus on three business elements equally: people (i.e. clients and staff), process and technology. In order to illustrate the value of implementing a people, process and technology model, SEI Advisor Network partnered with ActiFi to track the performance of 46 financial advisory firms from September 2015 to December 2017 to learn how systemizing routine tasks affected their businesses.

The survey found that advisers who automated repeatable processes were able to spend more time engaging with their clients. Before the program, 70% of the advisers said they did not have enough time for client-related activities. After the automation program, there was a 41% decrease in the number of firms that felt this way. They also saw a 66% increase in the number of clients receiving financial planning services.

The white paper, “The Next Wave of Advice Management,” can be downloaded from here.

Compliance March 9, 2018

Wells Fargo Advisors SEC Filing Hints at Federal Fiduciary Investigation

The firm says it does not have additional information to share at this juncture beyond what has been noted in a 2017 year-end SEC filing; in that newly emerged document, Wells Fargo Advisors says it has begun an internal investigation into “whether there have been inappropriate referrals or recommendations” made by its advisors, including with respect to rollovers for 401(k) plan participants.

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News emerged this week that Wells Fargo Advisors is now the subject of federal and state inquiries assessing whether its advisers acted inappropriately in the treatment of wealth and investment management clients, including 401(k) plan participants.

In an explanatory exhibit attached to the firm’s mandatory 2017 year-end Securities and Exchange Commission (SEC) performance filings, the following is spelled out under the heading “Review of Certain Activities Within Wealth and Investment Management”: “A review of certain activities within Wealth and Investment Management (WIM) [is] being conducted by the Board, in response to inquiries from federal government agencies, assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the Company’s investment and fiduciary services business.”

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According to the document, the review “is in its preliminary stages.” The firm declined to offer any additional information at this juncture about what the timeframe for an internal investigation may be—or from which federal agencies it has received inquiries. As of Friday afternoon, the Department of Labor (DOL) had declined to comment on whether it was investing Wells Fargo Advisors in this manner. Asked whether it was involved, the Office of the Comptroller of the Currency, which has previously won consent orders against other divisions of Wells Fargo, pointed out that Wells Fargo Advisors is technically part of the bank’s holding company, not actually a part of the bank. The Federal Reserve primarily regulates bank holding companies, but that entity did not immediately confirm or deny involvement.

In any case, it is already clear that at least one state, Massachusetts, is taking its own look into the matter. In a press release shared by Secretary of the Commonwealth William Galvin, it is confirmed that the state has opened an investigation into Wells Fargo Advisors. The investigation “is seeking information related to inappropriate referrals of brokerage customers to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations in connection with 401(k) rollovers.”

The Massachusetts press release points to the SEC regulatory filing as evidence that wrongdoing may have occurred within its jurisdiction. As part of the investigation, Galvin’s office will be seeking additional information to determine the scope of Wells Fargo’s internal investigation, as well as “reasonable assurances that any Massachusetts investors affected by unsuitable recommendations will be made whole.”

Galvin’s statement continues: “Given the recent retirement savings crisis in America, referrals and recommendations involving 401(k) accounts should be closely scrutinized, and in light of the Department of Labor’s fiduciary rule. Wells Fargo’s recent banking scandal, which involved opening bogus accounts for their customers, leads me to believe that where there is smoke, there’s fire.”

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