Adoption is the new innovation

In my last column, I ruminated about the number of fintech products flooding the adviser market and wondered how anyone could evaluate — let alone select — from among the vast array. I shared the poignant slide from Michael Kitces showing logos galore but not many financial successes. The industry needs help organizing and improving the feel and efficiency of the adviser/client experience, but is it a software problem — or a usage problem?

I am not in any way trying to discourage innovation — bring it on! My question is whether we are truly utilizing the wonders we have — or jumping for the iPhone XXXX before we’ve figured out half the functionality of the old model. Maybe more to the point, are any individuals at your firm still clutching their flip phones? The answer is easy to find, and the payoff is huge.

Start by looking more closely at the adviser/client relationship. That’s the center of my customer experience universe, the utopian land of simple and easy solutions. Relationship enablers improve your volume of activity, but also your consistency. Stringing them together in a customer experience timeline shows the potential contribution from adoption and wasteful gaps when the tech is not deployed.

Start with your daily plan and how it affects your overall results. A good CRM with all the client information loaded and updated activities logged should fill the day with “calls to action” for any good-sized adviser book. The average book (per adviser) of 125 families with an average of three to four nuclear family members could include aging parents and adult children for a total potential “household” of 30 to 40 accounts with several custodians.

Now align with the expectations for a great customer experience. How many of those households receive a solid annual review? A midyear review? Follow-ups to actions decided? If the industry standard is two meetings a year, can you be sure all 125 got theirs? That’s 250 appointments with just two meetings across three generations and 30 to 50 accounts. What if more meetings were needed?

I remember visiting with one of the country’s top wirehouse advisers a few years after managed accounts became mainstream. One of the pillars of the offering was a quarterly performance and holdings report and a quarterly review with the adviser. People loved the transparency and accountability — and consistency.

Walking into the adviser’s office, I noticed a flurry of activity in the office next to his. “They’re stacking our quarterly reports”, he explained, “We had to get another office to hold them.”

The adviser’s practice became buried in meetings with clients. He made changes to balance the load, like setting annual reviews by the client’s birthday instead of trying to squeeze everyone into the calendar quarter-end. He also merged some account reviews by inviting multiple family members. Both steps opened additional opportunities though the initial motive was just to save time.

In addition, the discipline of the regular client meetings was an eye-opener. “We had no idea of how little we were talking to clients — and how narrow the conversations were,” the adviser observed. Hmmm.

OK, so that’s Practice Management 101 — client communication — but consider the reality of the industry today and the opportunity presented by the overall lack of client communication. The average wealth management client is about 65 and has accounts with four to five firms, and usually no firm has more than half the assets. Until that reality is altered, advice providers are battling each other in a zero-sum game with really significant implications for AUA.

Aging clients consolidate — there will be winners and losers. Morgan Stanley just said it’s going after the $2 trillion it doesn’t have with clients already on its books. This is a big game with a lot on the table — unless you believe organic growth will miraculously spring from this aging investor population. (Forget it.)

Keep in mind the industry reality — most advisers across wires, regionals, independents, direct providers and RIAs do not contact their clients regularly with proactive ideas personalized to the clients’ individual needs. They just don’t. They don’t have time. And they will lose. Ironically, it’s the AI-powered robos that have upped the game for proactive outreach, not the humans.

Rewind to 1997, in a raging bull market, and a study done by a smart Merrill Lynch adviser in Indiana. His sales assistant asked why the practice had so many accounts that didn’t generate revenue. Naïve, right? The data were disturbing — 88% of the book’s revenue came from just 12% of the clients. Got to be an exception, right? Isn’t the world at least 80/20? No such luck. A broader study proved otherwise and the smart exec paying attention, Rob Knapp, went on to brand the project SuperNova — creating smaller books, higher touch rates and better client satisfaction.

His disciples consolidated assets, drove referrals like crazy and set the stage for the next leg up in client service, Merrill Lynch Private Wealth. And that was 20 years ago, when the client population was much smaller and not nearly so close to retirement. The oldest baby boomer was only 51. What’s that tired stat — 10,000 turn 65 every day now?

This is supposed to be a column about technology — and it is. Tech tools help you manage opportunity and remember all kinds of important business issues — the clients you haven’t seen for a while and the meetings you meant to set and birthdays and retirement dates and RMDs and bond maturities and graduations and all the stuff clients told you in meetings that they hoped you’d remember.

Tech helps you manage opportunity by managing volume. Most advisers have all the clients they need — especially when you consider each client’s extended family, friends and business associates — but they are not organized well enough to get there.

Simple stuff, but remember Warren Buffett’s line, “Investing is simple but not easy.” I’d add that for advisers it is also a business of details — excruciating details like accurate beneficiaries and powers of attorney and cost bases and the names of the children (and pets!). Everybody knows this, you might say. But the industrywide data tell the story — they might know it, but they don’t do it. Otherwise why would the average client have four to five different firms? Are they really meeting a couple times a year with each?

It’s not all about contact — the product and service suite reveals opportunities across the spectrum of services. As Merrill Private Wealth was starting up, data again revealed reality. A very simple exercise we did with the top advisers globally showed that even the best clients had more potential.

The advisers reviewed their top 20 households against a list of the seven most common financial products (managed accounts, etc.) and eight most common financial strategies (asset allocation, estate planning, etc.). The gaps across just the top 20 were alarming (or exciting, if you like opportunity). Each of the gaps is a door of access for a competitor — and that became the basis of the wealth management game plan of driving consolidation and referrals by “closing the doors” to competitors.​

Simple, right? It should be. All the best strategies are simple, and understandable to clients. But they require organization and attention to detail, and you cannot achieve that level of efficiency with Excel spreadsheets and Post-it notes. And that is where a lot of the advisory world remains, trapping frustrated clients with them.

The good news is that if your marketing and relationship skills haven’t atrophied after 112 months of bull markets, you’ve got a historic chance to win new clients and assets from less ambitious advisers — potentially doubling your business, or more. The flip side of course, is that you are surrounded by competitors who might do the same — to you.

Let me know how it’s going — call me on my Razr.

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

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.