Disruptive look at the confluence of digital and human advice

Earlier this year, industry leader Steve Gresham and I engaged with InvestmentNews to host roundtable conversations with the architects, builders and champions of tech-enabled platforms that are powering the future of financial advice.

The transformative work being conducted at each of their “skunkworks” is both exhilarating and accelerating. We recognized a need to expand the conversation around our industry’s future, as these leaders were working in common cause but largely unaware of what their cohorts and competitors were up to.

InvestmentNews has hosted two Future of Financial Advice Roundtables, and a larger event is scheduled for Nov. 20, with more roundtable discussions and keynotes from senior executives who are leading the way. Thirty leaders have participated, and here are some points they agree on:

• The future of financial advice is undergoing a significant transformation in which managing the full household portfolio in a comprehensive and optimized way is the new standard, and that change brings significant complexities and challenges.

• Both human and digital advice are necessary; not one or the other.

• Adviser adoption is the biggest and most immediate challenge.

• Given the multiple, unconnected capabilities necessary to manage at the household level, the current user experience for investors and advisers is insufficient; it’s simply too complicated.

• Monitoring, tracking and quantifying beneficial financial outcomes for investors at the household level will be the new performance benchmark by which all firms will be judged.

Roundtable participants hail from Morgan Stanley, Envestnet, Fidelity, LifeYield, Carson Group, BlackRock, Jackson National, Dynasty, Allianz, Black Diamond, AdvisorGroup, Fiserv, Apprise Labs, Raymond James, eMoney, Hightower, Nuveen, Whealthcare, MMI and Morningstar. They are collaborating and competing as they connect capabilities to enable advisers and clients to manage all investment and insurance assets on comprehensive, coordinated and optimized platforms, with the goal of enhancing the experience and results for all.

Why does this matter? Only technology can connect the dots to improve investor, adviser and firm outcomes, including practice management efficiency and effectiveness. It’s a win-win-win.

In this blog series I will explore the ramifications of these trends, challenge the status quo, and poke, prod and provoke our industry to act in creating a more connected and beneficial future for investors, advisers and firms.

Steering toward the future with one hand on the rearview mirror must end. We must leave behind: selling products and models, features and “benefits”; overreliance on benchmarks and relative performance; and a lack of coordination of individual account types where risk and tax considerations are paramount. Instead, our focus must be on building platforms to improve client household portfolio outcomes.

This transformation is a result of advances in technology. I’ll elucidate what it will take to succeed as we create client-centric, optimized multi-account portfolios, powered by both human and digital advice where we achieve quantifiable and improved risk-appropriate, after-tax returns. We’ll explore:

• Data: The lifeblood of advice. Leaders are building fully integrated and comprehensive ecosystems with seamless data flows that quantify and improve outcomes. These next-gen ecosystems include: CRM; client/adviser portals; simple financial planning; data aggregation; risk management; proposal systems; account opening and onboarding; tax-smart asset location; household-level rebalancing; optimal income sourcing; trading platforms; and household-level reporting.

[Recommended video: How fintech is evolving the onboarding process for clients and advisers]​

• The players. Wealth and asset managers, insurance companies, defined contribution and fintech players are devoting significant resources to executing their digital/human advice strategy to enable advisers and clients to improve outcomes.

• Next-gen financial planning. Current planning tools are not used by most advisers or if they are, it’s on a limited basis. I predict dramatic change for financial planning.

• Models are a problem. Individual account models are the rage but need modification in a household framework.

• Uber experience, please. Current user experience needs to improve to make tracking and achieving goals as easy as getting an Uber.

• Artificial intelligence, now. Advisers and clients already benefit as AI is incorporated. The aim is for the user experience to be as AI-driven as possible, so all data are assembled as the starting point for a conversation between investors and advisers.

• Improving investor outcomes. We will explore five ways to improve investor outcomes.

• Scoring 1.0. Scoring methodologies have been developed on aspects of the household framework to encourage engagement and measure improved outcomes. We’ll explore the impact of current-day scoring methodologies.

• Scoring 2.0. Leaders are now combining key factors to track and provide a “next best action” road map to improve outcomes. Comprehensive scoring systems — including AI — will replace many current tools in the ecosystem. This is a game-changer.

Stay tuned. Lots of good stuff is coming your way.

Jack Sharry is co-chair of MMI’s digitally enhanced advice committee and executive vice president of LifeYield.