The future of advisor platforms

In this final post examining the Capgemini study “Improving Financial Advisor Productivity through Automation”, we’ll take a look at the conclusion of the study, and what they advise the next generation of advisor platforms need to look like.

A next generation advisor platform, in order to keep up with the fast-paced changes sweeping the financial sector, the key functionalities a next generation advisor platform will have are:

Real-Time Updates ensures the making of informed decisions both by advisors and clients. They help in portfolio adjustments with real-time data feeds.

Streamlined Business Processes help advisors / firms operate efficiently to keep the costs low, and provide better transparency and a seamless client experience.

Multi-Product, Multi-Asset Class Capability is critical for processing various classes of investments across client segments.

Flexible and Agile Platforms allow firms / advisors to add business services as required. Technology components can also be upgraded with improved functionality more easily with a Services Oriented Architecture (SOA).

Compliance and Risk Management for the wealth management firm and the client to meet regulatory requirements and manage credit, market, and operational exposures to events that can negatively impact portfolios and profitabilit.

Scalability to support increases in levels of business volume into other market segments and geographies without a corresponding increase in the firm’s cost base.

The next generation platform aims to provide easier, faster and centralized access to all relevant tools and information. Next generation platforms support the advisory process through strong integrated workflows and leading edge applications. Key components of the new platform across the advisory value chain are as follows:

Prospecting & Relationship Management: Integrated a lead and contact management system to allow efficient prospecting / relationship management. –Efficient alert mechanism for advisors to track leads

–Access to all historic and current client data which helps in better understanding client needs / goals

–Reports on advisor productivity with up-to-date analysis of leads and their usage

–Supports client segmentation and customer analytics to identify opportunities

Investment Planning: The financial planning system is centralized and comprehensive with records for all client information.

–Enables a complete view of client history, financial goals, and assets

–Comprehensive risk management / scenario analysis tool which runs various scenarios for exhaustive client risk assessment

–KYC tool is integrated to capture all relevant client data for compliance purposes

–Compliance checks are initiated even before a financial plan is prepared

–Alerts / triggers based on life and liquidity events of clients

Client On-Boarding: Unified account opening tool which selects and pre-fills the existing client information (information entered in one tool reflects across tools / systems). Financial planning and portfolio management tools are integrated together.

–Provides streamlined account opening and paperless processing

–Facilitates step-wise approach to financial planning, automatically prepopulating the planning tool with data that exists in the client profile database

–Financial planning output is directed into the portfolio management tools

Servicing & Monitoring:

–A holistic 360° view of the client’s financial assets

–Helps in integrating a team-based service delivery model along with the traditional relationship based advisory

–Alerts and notifications that provide real-time messages driven by deviation from desired returns

–Customized views of client holdings, account information, service requests, and financial analytics

–Automated routine financial monitoring per defined benchmarks

Centralized Client Reporting & Alert Interface: The new platforms will be able to generate a wide range of custom reports without the advisor having to go to different applications (from the simple account balance / net worth to a complicated attribution analysis).

–Consolidated reports with data across all accounts and group of accounts (total assets with the firm, total equity holdings across all accounts)

–Reports with a consistent and professional look and feel

–Alert / Early warning system to proactively identify and address issues

The key to a good advisor workstation is the integration of data and a well orchestrated set of technology components. In addition to providing new and advanced features, the new platform should have a well-defined information architecture which promotes a greater adoption and usage.

How Blockchain and distributed ledger technologies are impacting banking

Coming from an underground cult-like technology for dispersing bitcoins, blockchain has now moved from out of the shadow of currency exchange to mainstream banking.

Blockchain has become the new cure-all to your third-party information retrieval hangover! The shared ledger technology that allows any participant in a business network to see the system of record, records and stores every transaction that occurs in the network, creating an irrevocable and auditable transaction history.

Blockchain is set to have a transformative impact on a number of industries, including financial services. The technology may still be in its infancy, but already we are seeing initiatives underway that hope to put forward blockchain as an industry-leading solution that will offer important benefits in the context of the transfer of assets within business networks.

As with any new and promising technology, it’s important to note the limitations of putting it on a pedestal too soon. While expert opinion varies about exactly how, when, and at what speed blockchain technologies will disrupt the financial services industry, it is generally agreed upon that it will bring about noticeable changes to the efficiency of the industry.

Current state of the industry:

Currently, participants in business networks each maintain their own traditional ledgers to record transactions between them within their ecosystem. This typically means a lot of file sharing and swapping data. What banks today are doing are essentially running databases and recording claims against them. With thousands of banks in the world, all maintaining similar but separate databases, that makes for a lot unnecessary expenses.

Potential for the future:

But blockchain has the potential to provide a common, ubiquitous ledger technology, reducing the friction caused when intermediaries use different technology infrastructures. Having a universal ledger system used by many institutions would help drive down cost and create more open access.

Put another way, the initial introduction of blockchain will bring efficiency in the short-term, and has the potential to completely rewrite the underlying infrastructure over time, more easily connecting counter parties in innovative network configurations rather than the more centralized models we’re seeing today.

Solutions for problems in the present:

Grandiose dreams aside, for now it is essential to apply blockchain where there is a genuine problem to solve. One of the most frequently used examples are transactions that are rooted in the physical world; where there is plenty of paper (which we can easily imagine being digitalised), and where a number of parties have to do a similar action but in sequence to enable a transaction to be processed. Client onboarding is a perfect example of this, and a process that would greatly benefit from blockchain applications.

Why existing advisor platforms just don’t cut it

In our last blog post, “Understanding the reasons for low advisor productivity”, we examined some of the key challenges for wealth management firms as identified by Capgemini’s study “Improving Financial Advisor Productivity through Automation”.

In this post we will return to the Capgemini study to discuss the study’s findings regarding the gaps and challenges in existing advisor platforms.

The following are the key gaps that have emerged around existing advisor platforms across various stages of the advisory process:

Prospecting and relationship management

Recruiting new clients and maintaining strong relationships with existing ones is the most important stage of the advisory process. This includes tracking all contact interactions with clients and prospects, including meetings, conversion notes, action items, and correspondence. Contact Management tools and Lead Generation/Management System tools are the most commonly used tools at this stage. But most such tools are either separate or with limited integration, causing co-ordination challenges and redundancies in present day advisor platforms.

Investment planning

Financial planning tools tend to have no automated link to either illustration tools or existing account information. Even more problematic, regulatory compliance activities like Know Your Customer (KYC) and Anti-Money Laundering (AML) are often not integrated with the advisor platform. Existing platforms also lack scenario analysis tools / risk management engines which are a must-have today.

Client on-boarding

Most of the time advisor have to manually key in all information for existing client and third party accounts. Not only is this time consuming, taking away from more productive activities like prospecting new clients, but it results in financial plan output being generated from different tools/systems which are disjointed with an inconsistent look and feel.

Servicing and monitoring

It’s normal for a firm to have multiple account opening interfaces with product specific account opening procedures, forms, disclosures, and eligibility criteria. The result: client information is often rewritten multiple times with client specific data having to be consolidated manually from each system. Most existing platforms have no automated process to efficiently compare clients’ financial status with the plan. Additionally, any sort of re-balancing of a portfolio requires further manual entry of multiple transactions into various systems and tools. Inefficient, to say the least.

Client reporting and alerts

The status quo sees clients receiving multiple statements instead of a single, consolidated and comprehensive one. There are limited options for reporting across accounts, and client reports tend to be inconsistent firm-wide, with each one having a different aesthetic and failing to present a united front. There is also a lack of early warning systems and alert mechanisms, making it challenging to identify and solve issues early on.

The common theme running through this list is a lack of unification and automation. The use of multiple systems, none of which communicate with one another, is inefficient and takes time away from more productive activities, like recruiting new clients or focusing on existing client relationships.

The next generation of platforms for financial advisors need to offer a comprehensive reporting solution, incorporate effective risk management tools, and reduce redundancies to help financial advisors keep pace.

 

Understanding the reasons for low advisor productivity:

Since the 2008 financial crisis, the wealth management industry has faced major changes. Customer behaviour has changed, and there is increased regulatory oversight and compliance pressures. On top of that, digitization has taken the financial industry by storm, altering where customers turn for advice and how they access it.

To be successful in the current business climate, wealth management firms require solutions that support personalized client relationships, strong regulatory compliance, and improved advisor productivity. High advisor productivity should be a key focus area for wealth management firms hoping to compete in the shifting conditions of today and the uncertainty of tomorrow.

In their study “Improving Financial Advisor Productivity through Automation”, Capgemini identifies key challenges for wealth management firms in a post-financial crisis world, and low advisor productivity is one of the most important. According to the study, low advisor productivity results from non-integrated processes and technology tools silos, and is pervasive in the global wealth management industry.

The sales cycle has become longer due to a more engaged and knowledgeable investor, resulting in more time consuming advice and service. A typical financial advisor spends around 67 percent of their time on client facing activities such as contacting and servicing existing clients, new client acquisition, and portfolio management services.

But what’s more alarming is the amount of time spent on administrative work and non-client facing tasks. A substantial portion of their total productive time (29 percent) is spent on operational / administrative activities. Advisors spend 24 percent of this on administrative related activities like back-office operations, investment research and client reporting, and around 5 percent on compliance related activities. Research shows that advisors are spending 25 percent more time on compliance related issues today than they did two years ago.

According to the study, the non-client facing, manual functions where advisors spend most of their productive time are due to:

  • Account opening processes that are product-centric (and not client-centric)
  • Lack of workflow integration with a high level of manual and redundant activities
  • Multiple entry points for client data and change
  • Lack of workflow integration with a high level of manual and redundant activities
  • Multiple entry points

The study comprehensively breaks down how the majority of financial advisors allocated their time in the year following the financial crisis. Of the time spent on client-facing activities (67%), 40% of that time was spent contacting existing clients, 17% of that time was spent on prospecting clients/new client acquisition, and 10% was spent on portfolio management. Of the time spent on operational activities (29%), a full 24% was spent on administrative tasks, and 5% was spent on compliance. The remaining 4% of time was spent on training and development.

By aiming to reduce the amount of time advisors spend on administrative work, advisors can spend more time on outward-facing client relationships and personalized service. Speeding up the workflow and automating some administrative tasks means advisors can spend more of their time on client-facing activities, so pre-existing clients get the attention they deserve, and there’s further opportunity to bring new clients on board.

Customer experience: Bringing new value to old-fashioned service

Superior, personalized customer service is nothing new. It’s inherent to any consumer transaction, and even more so when it comes to working with people’s personal finances. But the definition of what superior and personalized service is is changing. In today’s digital world, consumers have more information, and thus more choices than ever before.

With advances in digital marketing, bots, and targeted ads, the online experience has become more personalized than ever, and all without any sort of human interaction. Nowadays, a customer looking to buy a new electronic device might start by asking for advice for friends, then move online to research and compare products, and might go into a physical store to get the “hands-on” experience. But when it comes time to actually make a purchase, a growing number of consumers are turning to the mobile channel.

The Internet Retailer 2016 Mobile 500 Guide reports that mobile sales were 29.7% of all North American e-commerce sales in 2015, up from 24.6% in 2014. And according to KPMG’s Mobile Banking 2015 report, mobile is already the largest banking channel by transaction volume among North American financial institutions. As a result, personal relationships may be suffering.

The downside of digital: spam

With the sheer amount of digital data and information available, consumers are able to be make more decisions independently. In order to keep up, many business giants have jumped into the digital fray. Digital communication is easy to mass-market, and companies are able to reach more customers than ever before. But there’s a flip side to mass communication: customers are already inundated with so much digital advice, they’ve become extra wary of what appears to be spam.

In a study in The Economist, “Mind the Digital Marketing Gap,” research showed that 70% of consumers are jaded by what they consider to be superficial efforts at personalization. And 63% say they’ve grown numb to efforts that mostly mostly just insert their names into generic messages.

Customers can tell when they are the target of mass, untargeted communications. When customers feel like just a number, going digital is actually working against that feeling of personalization. With regards to the financial industry, it can feel like their advisor doesn’t know them at all. A Digital Banking Report called “The Power of Personalization in Banking” cites a study by Personetics which says only 31% of customers feel their banks know them and their financial needs well. And a whopping 28% believe their institutions put their interests before those of their customers.

Digitization is a powerful tool for financial institutions, but only if used properly.

So how to go digital without alienating customers?

Going digital is both necessary and helpful for financial institutions. As technology continues to advance and customer mindsets change along with it, those in the financial sector will have to change with the times or be left behind.

Digitization has revolutionized the speed, scale, and style of communications. Not to mention it has the ability to streamline your workflow and increase productivity. But to avoid alienating customers, it’s best to combine new technology with old-fashioned customer service.

Sending messages targeted to address needs actually felt by the customer are generally very successful.

Customers want personalized services. They want to feel connected to their financial advisor. It’s about finding the fine line between feeling more connected and feeling spammed with impersonal communications. Done properly, digitization can help close the customer experience gap and stay at the forefront of customers minds.

What keeps you up at night, Mike?

I’m always thinking about our company  –  at dinner with friends, on the commute home and even outside in the middle of the wilderness. I wake up in the morning with new ideas and I am constantly reminded that we cannot pursue all of our ideas, so I have to write them down and then keep them on the back burner for later. As an entrepreneur, I’m constantly processing what needs to get done that day or that week.

I had never really tried to articulate exactly what was keeping me up at night, I just knew that there were lots of things I was constantly going over in my head, whether i was consciously aware of it or not.

I recently met with a well respected entrepreneur and investor in Montreal and he asked me what kept me up at night. It was a great question, and quite a different experience being asked in person versus reading articles written by other entrepreneurs about the subject.

Ironically I spent most of that night staring at the ceiling thinking about that question, thinking about my journey as an entrepreneur to-date and how our team has evolved.

His question helped to center a lot of my thoughts on important things in the company that were being executed or conceptualized on a daily or weekly basis. Before, they were just things that needed to get done, so they got done.

We can’t always be treading water as entrepreneurs – we need to take some time in our day to reflect and to increase our awareness of the present while considering how we’re going to accomplish a long term vision.

What’s interesting is how the things that seem important or challenging at the beginning become the subsequent building blocks that are incorporated as part of your day-to-day routine. What used to be considered stressful is now something habitual. It doesn’t get any easier, you just get better.

And I think part of the problem is getting into the state of mind where you are “thinking fast and thinking slow”. We have the tendency to think fast too much of the time due to the sheer volume of tasks that we need to get done. But operating like that leaves no “down time”.

We need to make it an intentional process to stop and consider how our team’s collective energy is being used throughout the week and whether every member’s effort is being aligned towards a common goal. We need a birds-eye view of long-term goals, with a zoomed in view of the day to day tasks that will get us there. We need to be mindful of what is keeping us up at night.

 

-Mike Blicker, founder of WealthTab

 

Bridging the customer experience gap

The financial industry is feeling the effects of digital disruption. New personal technology like smartphones, tablets, and wearable tech combined with the advent of fintechs, robo-advisors, and the digitization of many traditionally paper processes has changed customer expectations. Many in the financial industry are struggling to keep up, and are increasingly finding themselves falling into the “Customer Experience Gap” (CEG).

Customer experience is increasingly the metric that is setting businesses apart. A Gartner study revealed that by 2016, 89% of companies will compete mainly on the customer experience they provide. It’s now 2017, and according to Salesforce, only 30% of marketers say that customer satisfaction is one of their key metrics.

But customer experience is precisely what financial professionals should be focusing on. They may lack the deep pockets of big banks or funded fintech startups, but they do tend to know their clients better than larger competitors. This knowledge, when combined with an openness to digitization, can create the capacity to climb out of the gap.

In “The Digital Tipping Point”, CEB (now owned by Gartner) discusses the implications of reaching such a point. Leading retail banking executives predict that by 2019 banks will need to make roughly half of all sales using digital capability that does not exist today. While consumers are already likely primed for this adjustment, it is the financial institutions that are lagging behind.

Consumers are already continuously connected to a vast array of resources they use to manage their lives. In the article, CEB points out that just three years ago, over ⅓ of consumers preferred to bank via personal channels. By 2016 that number had dropped to less than 20% with nearly a quarter wanting to do their banking exclusively via digital channels. The rest (58%) also preferred digitized services but still saw value in have access to a human employee when they needed it.

It used to be that consumers would consolidate business for ease of banking at a single location. But today’s networked consumer can have a similar one-stop-shop experience by stitching together best-in-breed solutions for every need by managing multiple providers on a single device. The result? Digital consumers are 60% less likely to consolidate all of their products at a single institution than non-digital consumers.

People used to shop for financial products when they had a life event, but now consumers learn about product needs while engaged in “constant goal seeking”, while exploring the digital network they have built for themselves. So someone might come across an ad for the perfect mortgage while browsing Zillow. Or maybe while shopping for a new car online a great finance deal pops up, accompanied by an ad for an easy to use digital loan process. Customers are now making major financial and life decisions without their financial institution even knowing they had a need.To bridge the Customer Experience Gap, it’s necessary to ensure customers know those same great digital experiences are available from their financial institution.

According to CEB analysts, the vast majority of consumers now take digital convenience and access for granted. They do, however, continue to value financial institutions that understand their needs, respond with relevant information, and help them stay on track with their financial goals. By building out a digital infrastructure and transforming routine customer interactions into extraordinary customer experiences, it’s easy to start bridging the gap.

Relationship building: it starts with client onboarding

Any financial advisor can attest to the fact that slow and complex customer onboarding is a problem. For many advisors, the onboarding process means lots of paperwork, lots of worry about compliance, and is unnecessarily long and difficult.

Because of this, most advisors tend to view client onboarding as a hassle rather than an opportunity. In the wake of a focus on growth, client onboarding becomes an afterthought rather than a relationship-building opportunity. It can be tempting to turn to the next potential client rather than focus on creating a lasting impression with new clients.

First impressions count

The client onboarding process is the starting point for the entire business relationship.

While it may not seem worthwhile, it’s important to remember that first impressions are lasting, and they begin with the client onboarding process. Failing to take advantage of that first face-to-face interaction is a missed opportunity that can hurt the client relationship before it’s even had a chance to get started.

Client onboarding is also an essential opportunity for advisors to uncover client needs, right from the get-go. Understanding the unique challenges and demands of a new client lays the foundation for a continuing successful relationship down the line.

Take advantage of technology

Onboarding software can be used to automatically guide the account opening process and bring it online, while enabling your advisory workforce to go mobile. Taking advantage of available technology to streamline the process and go paperless means more opportunity and time to focus on the personalized side of client interaction.

The application of this technology makes it possible to meet clients anywhere and open accounts faster and more accurately than ever before. And with paperwork out of the way, there’s time for real conversations with clients. These conversations are key to uncovering the key cross sell and upsell opportunities that are so critical to address in the first 90 days of the relationship.

A personalized touch

A little bit of effort goes a long way in distinguishing yourself from competitors. To ensure every client feels valued, consider providing a personalized welcome package to demonstrate appreciation and understanding of the new clients’ business and establish a commitment to service.

Follow up an exceptional account opening experience with a series of personal touch points during the first year of the client lifecycle. Recent studies suggest that most clients prefer a scheduled meeting with their primary wealth management advisor at least quarterly. These check-ins are an opportunity to deepen relationships and help clients select products and services that address their changing needs. Leveraging wants and needs identified during onboarding can help guide these conversations.

Client onboarding forms the base for all future client interactions. Taking advantage of technology that can help simplify and expedite the onboarding process means even more time to focus on the personalized aspect of client interactions, ensuring you put your best foot forward from the very first interaction and build a relationship that will thrive for years to come.

Beyond the robo-advisor hype: the battle for the customer and how financial institutions are responding

Robo-advisors like Betterment and Wealthfront made waves within the financial community over the past few years with their automated portfolio rebalancing, modern user interfaces and lower management fees.

Then something interesting happened:

Big banks and large wealth management firms responded by offering their own robo-advisor technology to their clients or announced intentions to develop them.

In true start-up fashion, Betterment expanded its’ product base, offering its’ services to financial professionals. Vanguard and Charles Schwab responded by offering robo-advisory services to their network of investment professionals and were able to quickly capture more assets under management than Betterment and Wealthfront.


In Canada, we’re starting to see the same trends in robo-advisor adoption.

Companies like Wealthsimple and Nest Wealth built low-fee robo-advisor solutions and attracted interest from millennials. Interestingly, Wealthsimple followed in Betterment’s foot steps by first positioning as a direct-to-consumer robo-advisor and expanded its service offerings in recent months to financial professionals.

So Why the Big Interest in Offering Robo-Advisory Services?

Robo-Advisors are filling an Investment Advice Gap.

They offer web and mobile based platform to give clients easy access to a diversified investment portfolio. These services are being marketed as a cheaper and more accessible alternative to traditional financial advisors, based on the low investment minimums and lower fees (typically between 0.15% to 0.40% on total assets under management).

For millennial audiences, this type of technology makes sense because their investment goals are not-as-of-yet specific so it’s possible to offer them a One-size-fits-all solutions by varying the asset allocation percentage as a function of their risk profile.

The business model sounds attractive on the surface until you do some analysis:

According to Michael Wong from Morningstar, Robo-advisors need between $16 Billion and $40 Billion in Assets Under Management to break even based on the lower fees they are charging clients and the average account sizes of their clients (1). Betterment with an average of $28,000 USD (2). Assuming an average fee of 0.25% per annum, that’s $70 earned per client. And now there’s industry research that it can take between $300 to $1000 to acquire a new client (4).

Some firms like SigFig and Hedgeable are claiming that they spend $0 in marketing but this itself is misleading as firms are spending money on value added services at no cost to clients so these development costs are attributable to customer acquisition costs.

The challenges of scaling to profitability are also compounded by being able to retain these clients long enough for the life time value of the customer to be higher than the acquisition cost. So if it’s taking me $500 to acquire that customer, I need to keep them for 5–7 years in order to recoup my cost.

As the competition for assets within the automated direct-to-consumer robo-advisory space intensifies, the clear winners will be the larger institutions because they are better positioned to distribute their products to their current customers and to provide human advice when needed.


Retail banking and fintech

Over the past few years, fintech companies have transformed the way that people engage with Financial Services. Leveraging existing banking networks or relying on external third-party systems, fintech providers have been able to deliver the same services that banks do, including commercial loans, holistic financial advice and investment advice. They are doing one thing particularly well when compared to their traditional counterparts: they are building better client experiences.

The retail banking experience:

Customers have higher expectations than ever before from their financial services providers.

Clients want custom tailored solutions to fit their needs. The most obvious example of this is within payments and we only need to look to the e-commerce space to see that this market is dominated by alternative payment mechanisms like Paypal, Braintree or Stripe. Customer-facing retail stores like Starbucks have similarly followed suit, offering their clients seamless Point of Sale solutions.

Millennials are the biggest early adopters of mobile banking and mobile money management applications. Many early stage fintech companies have recognized this and are building mobile-first applications: Acorns (investments), Osper (prepaid debit) and Robinhood (trading) and Venmo (social payments) to name a few.

So how does this affect the retail banking landscape?

These technologies are putting pressure on banks to automate their business processes and reduce their headcount. In the retail banking environment, Citi Bank projected that it anticipates as much as a 30% reduction in headcount from 2015 to 2025 (1). While this implies a significant number of job losses over the coming years, the main takeaway will be that retail banking will shift towards mobile distribution as the primary means of interaction between the customer and the bank.

In fact, close to 38% of millennials have not visited their retail bank branch within the past year (2). More startling still, 71% of retail banking customers consider their relationship with their bank to be transactional rather than relationship-driven (2). In other words, millennial clients are starting to place greater emphasis on the services being delivered and how they are delivered rather than who is delivering them.

The implications for this are extremely important going forward for Financial Services as these technologies may lead to lost revenue (lower fees, fewer in-house transactions), loss of brand relevance (app dominated) and loss of customer relationships (fewer interactions with clients).

Nearly all banking executives agree that the industry is moving towards a digital banking ecosystem, but the major problem to digital adoption is scaling in accordance with their legacy systems and regulatory constraints (3). Legacy IT banking systems are preventing banks from adapting quickly to new demands from clients and from regulators. Banks must start building new scalable systems to respond to rapidly changing consumer expectations.

The key to customer retention in the long term for banks will be maintaining relationships with their clients.