By Mike Sha, Forbes Councils Member
Oct. 27, 2023
Wealthtech has woken up. Over the past three years, new investors flooded the market through robo-advisory platforms, and the number of users is projected to reach 234.30 million by 2027. Assets under management in robo-advisory services reached more than $1 trillion in 2020 and are expected to reach $3.13 trillion by 2026.
While digital transformation in wealth management has been on the rise, the industry has reached a tipping point. Working in the wealthtech space for some time, I’ve seen how technology advancements are becoming less about replacing humans, and more about delivering high-quality, advisor-led financial advice to more investors at scale. Technological advances not only can ensure access to financial advice, but they also have the potential to upend the delivery model.
Weathtech’s Transformation From Traditional To Tech—To Hybrid
Not so long ago, wealth management was a white-glove service centered around face-to-face interactions, available only to high net worth individuals. When robo-advisory was introduced, it made an indelible change by democratizing investment advice. These early tools, designed to help investors reach long-term savings and financial goals, offered access to information and basic automated investment management. Over time, more features were added, serving to further personalize investment management and automate continuous advice.
We are now in a phase of digital transformation that is centered on bringing investors and advisors together through digital collaboration tools. And through this evolution, technology is elevating the role of humans, not replacing them.
There was once much debate about the future of financial advisory services, and whether the advisor-led or the investor-led model would prevail. But what I’ve seen in this next phase of disruption is a much more nuanced combination of the two, fueled by the need to serve the growing mass affluent investor segment.
The Mass Affluent’s Impact On Wealthtech
I’ve found that many of these investors are in their mid-30s, on the early end of their savings journeys and have had some experience with digital investing platforms.
Imagine a married couple, once satisfied with the portfolio allocation, is now expecting their first child. They are seeking holistic advice on how to manage their new competing priorities, such as retirement savings, college savings, paying down their credit card debt and saving for a home. Perhaps they are also first-generation immigrants and want advice that takes into account the financial support they provide to their family overseas.
Say they have $50,000 invested and are willing to do basic functions on their own. They may not be quite ready for the fees, or even the service level, of a traditional full-service relationship. Like many investors, they are seeking a hybrid solution. The future of wealthtech is increasingly about making such options available.
Reimagining The Advisory Service Model
To make this happen, the current disruption in wealthtech is, and will continue to be, about human advisors building a greater number of meaningful relationships. Technology has the potential to significantly decrease administrative tasks and increase the amount of time advisors can spend with clients and find new ones. For this to happen, we must reimagine nearly every aspect of the advisory service model, starting with the way clients are matched with advisors.
For example, I am seeing teams structuring themselves differently to better service and meet clients’ expectations virtually. Some financial services firms are moving away from a branch-distributed structure to virtual advice centers that allow clients to access guidance in the way that best meets their needs. Consumers without a wealth manager can now be connected with virtual teams of licensed advisors and get matched with a person who is best positioned to help them.
Branches no longer have to rely on a single advisor and their ability to be in the office. Technology is bridging the gap between in-person and screen-based collaboration.
Best Practices For A Hybrid Digital Advisory Model
If your institution is considering moving toward a hybrid model—or already has one in place—here are some best practices and pitfalls to avoid.
- Clients should dictate how you interact with them. People have varying degrees of tech-savvy, so when you start to mix in-person services with virtual options, let each client be your guide. Don’t make assumptions—a 75-year-old may be extremely tech-savvy, and some digitally native Millennials may still feel more comfortable handling money concerns in person.
- Match investment products to a client’s wealth complexity needs. Whatever type of interaction an advisor has with a client, be sure both the human and the technology is well trained to match investment products to a client’s wealth complexity needs. Sometimes a mass affluent investor with fairly straightforward financial assets is presented with a complex investment strategy that may not be the best fit for meeting the client’s objectives. Conversely, ensure that your clients with greater risk appetite and market knowledge are given all the options that make sense with their goals, not just the obvious ones.
- Invisible innovation for clients regardless of their communication preferences. Just because an investor may prefer an in-person meeting doesn’t mean they aren’t experiencing the benefits of technology. Ensuring onboarding, workflows and data inputs are digitized means faster account opening, less back-and-forth managing errors and smarter interactions with their advisor. Having a solid foundation and automating back-end processes are just as important as the front-end experience.
- Remember that circumstances change. People’s financial pictures and needs change over time. Financial institutions need to be available to customers at these evolving moments of need. It’s critical to systematically identify the moments when a higher level of advice may be needed. For example, building in behavioral triggers to check in with clients when something changes creates an opportunity to deepen the relationship and change the investment strategy if needed.
Wealth management is changing. While advances in technology have played an integral role in access to financial advice and advancement in financial literacy, it’s human advisors we should be watching. They are the ones who are rewriting the rules to deliver better advice to more people, making white glove moments for all.
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