Wirehouses using digital advice technology to boost cross-selling

With budgeting apps, account aggregation and integration with banking business, new apps give large firms the chance to increase wallet share

Jul 2, 2018 @ 2:23 pm

By Ryan W. Neal

Wirehouses may be playing catchup to the technology offered by custodians and independent fintech vendors, but the next-generation technology platforms they've recently revealed suggest a growth opportunity the others lack: a new chance to cross-sell between other business verticals.

Under the banner of "holistic financial planning," the wirehouses are tightly integrating their new digital wealth management products with their banking products.

Merrill Lynch last week revealed updates to its mobile app that allow brokerage clients to view their Bank of America accounts. The firm also is offering rewards to Merrill Lynch clients who have certain balances to enroll in a rewards program that offers lower checking account fees, a savings-rate booster, and credit card bonus points.

Wells Fargo Advisors, which kicked things off in the waning months of 2017 with the launch of its robo-adviser, is going a step further and using a single app to provide a digital experience to both banking and brokerage customers. This allows Wells Fargo Advisors to leverage its parent's banking capabilities, such as money movement, wire transfer and bill payment, on the mobile platform, said Paresh Mutha, senior vice president of client platform and digital product development.

"We plan on continuing to align with the broader enterprise capabilities to ensure we provide a seamless and simple experience between bank and brokerage," he wrote in an email.

(More: Wirehouses best positioned to benefit from artificial intelligence)

But firms aren't excited to use the term "cross-selling."

"The real value a financial adviser brings to a client is a strong, professional relationship," Kim Yurkovich, vice president of external relations at Wells Fargo Advisors, wrote in an email. "By understanding the client's full financial picture, paired with their fears, goals and hopes, an adviser can make recommendations and provide advice specifically tailored to each client's unique situation and needs."

But cross-selling isn't a dirty word, said Denise Valentine, a senior analyst at Aite Group. It's common business practice — whether it's Amazon offering free delivery with a Prime membership or fast food vendors asking if "would like fries with that."

"That's where the future is: putting everything together for people," Ms. Valentine said.

By bringing low-cost digital advice to existing banking clients, firms like Wells Fargo and Bank of America can form early relationships between their wealth management businesses and the mass-affluent, mass-market customers.

By giving them tools for goal tracking, budgeting and spending, banks can help people begin accumulating wealth as soon as they have income, she said.

"Saving, budgeting, investing, retirement, all of these things go together," Ms. Valentine said. "Banks, especially the largest who play in both markets, understand what that means for their business."

Morgan Stanley clearly sees technology as a pathway to growth.

In late May when rolling out its new technology suite, both the client-facing and the version for advisers, Andy Saperstein, co-head of Morgan Stanley wealth management, said the firm's new financial planning and account aggregation capabilities can help its advisers reach an estimated $2 trillion in assets clients currently hold away from the firm.

UBS Wealth Management introduced its own digital advice product in April that aims to deepen relationships with emerging affluent clients, the firm said then.

Kapin Vora, partner and head of North America Wealth Management at Capco, added that in addition to maximizing wallet share, banks are using their digital wealth management strategies as natural pathways to growth. The cost of acquiring additional assets from existing customers is much lower than finding new customers, especially in the high-net-worth market, he said.

For brands that serve the mass-market, reaching them with digital advice is a no-brainer and avoids the acquisition costs of the direct-to-consumer robo-advisers.

There also are other advantages to wrapping services together with technology outside of increasing wallet share. According to Kabir Sethi, Merrill Lynch Wealth Management's head of digital wealth management, the features on its new app, like sending money with Zelle and digital budgeting tools, decrease the number of third-party companies to which customers must share personal information. A wrapped service also helps the companies and clients go more paperless.

The business case is clear, but the question is whether the technology presents an opportunity for the firms to land in hot water for pushing unnecessary products on clients.

(More: Advisers with billions in AUM leaving Wall Street)

Mr. Vora doesn't think the technology will add pressure on human advisers at the firms to cross-sell more, but it could rub advisers the wrong way if the banking business tries to sell HNW clients a product without involving the adviser.

"As long as the adviser has control and gets paid on total assets, the adviser is going to be very, very happy. But if you try to create an additional thread, that's where the adviser would have a problem," Mr. Vora said.

Any firm can have bad actors. It's up to the companies to instill a culture of integrity to recommend only the products that are beneficial to customers.

"A culture that is high-integrity is not going to behave in a way that is disreputable," Ms. Valentine said. "It's what environment you are in that makes a difference in how people behave."


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