Advisers and clients agree: Life’s better in the wealth management ecosystem

Wikipedia says an ecosystem “is a community made up of living organisms and nonliving components.” A digital ecosystem is a “distributed, adaptive, open socio-technical system with properties of self-organization, scalability and sustainability.”

Welcome to the cutting edge of wealth management.

In my wealth management utopia, clients can self-actualize mundane needs such as money movement with a few simple clicks of the mouse, and their advisers are alerted when more complex issues arise — before the clients are even aware of them. This utopia is a partnership based on transparency, objectivity and trust. New prospects arrive regularly based on the ravings of your clientele. The occasional bad apple — the one who seeks only to beat the market (every quarter) — is politely shown the door.

Best of all, your client service team can’t imagine a better place to work and they pass their jobs down to younger family members who accept the roles as though part of a royal lineage.

If I’ve just described your advisory practice, move on to more deserving entries on this website with my congratulations and admiration. Dilly dilly!

For the rest of us, it’s back to the salt mine. Our objective is developing superior client solutions while creating an environment worthy of both our advisers’ and associates’ best efforts. We know we are making progress only when both parties to the effort — the clients and their advisers — together can focus on the highest-value issues.

I like the ecosystem definitions above, especially when they are combined. The interplay between “living” and “nonliving” is elegant science-speak for the dual and complementary roles of technological efficiency and human touch. Financial services technology in the wealth management utopia is not a replacement for advisers; it’s a tool set that creates capacity and better service. The second definition — the digital ecosystem — goes further: adaptive — open — self-organization — scalability — sustainability. The ecosystem is less a collection of parts than it is a dynamic combination of elements that evolve with changed conditions.

Competitive wealth management offerings should have the same flexibility. Can we really say the portfolio accounting system you have today cannot be improved — or that your clients are doing as much as they can on their own without burdening your service team with minutiae?

We can debate the key parts of a wealth management ecosystem, so I will start the dialogue with my nine essential elements of wealth management.

1. Wheathcare. Wealth without health or health without wealth? Each is half a loaf. Wealth management without integrating health care funding and longevity planning is just malpractice.

2. Tax-efficient investing — and planning. The only issue uniting all the world’s affluent clients is taxation. If we can’t talk about the impact of taxes — all kinds of taxes — then we can’t really say we have a comprehensive plan.

3. Regulation and its impact on client engagement and risk. A mouthful for sure, but the shorthand is that being a smart fiduciary is fast becoming table stakes for running a good business. Do we really need the federal government to design our business strategy?

4. Digital investment services. So far beyond the label of “robo,” these capabilities are a godsend for busy advisers working with multiple family generations.

5. Automation of client data and adoption of centralized data management. Two words: artificial intelligence. One system: CRM. Will this generation of advisers be the first to eliminate Excel and the Post-it note? Adoption of powerful tools lags way behind their creation.

6. Communications. Three principles here: how, when and why. Flexibility in the ecosystem customizes your outbound messaging by sharpening the content and its delivery.

7. Security. Wealth management’s Lord Voldemort (“we do not speak his name”) will have an impact on your practice, your reputation and your clients. What is our preparation? By focusing on what to do when the inevitable breach hits your practice, we increase the potential for survival.

8. The risks of an aging population. Take a lesson from the historic collapse of the Big Three automakers: Demographics matter. The baby boomers own the market for financial advice and pay most of the bills for years to come. Their median age is 63 and they likely trail​ two attached generations with them, along with a myriad of accounts and complexity and risk.

9. Adviser hiring, training and retention. Where to start? Surveys suggest top advisers average age 55-plus, and very few young people seem to be entering the industry. ‘Nuff said perhaps – but what to do? We can spend a lot of time here.

Onward. The true north for wealth management is simple, intuitive experiences for both advisers and clients focused on achieving better outcomes. Industry leadership has shifted to players creating wealth management ecosystems.

Yet despite the appeal of a unified approach, the status quo is a formidable obstacle to change — most advice firms are experiencing record results consistent with record markets. A deeper look reveals structural weakness in many advice offerings that stand in the way of providing a seamless, flexible and compelling client experience.

Let’s keep this dialogue going. Check out this summary of the forces now transforming wealth management: Private Client 2020.

Steve Gresham is former head of the Private Client Group at Fidelity Investments, an adjunct lecturer in public policy at Brown University and principal at The Gresham Co.