A couple of years ago,
InvestmentNews warned of the
"great wealth transfer" that loomed on the horizon and detailed the risk it posed to advisers. The article unearthed some unsettling stats about what happens to the adviser-client relationship when accounts are passed down to the next generation. According to the study, an overwhelming 66% of children fire their parents' financial adviser after they inherit their parents' wealth.
There is a parallel crisis brewing within advisory firms, as the current crop of advisers inch toward retirement themselves. A commonly cited Cerulli study reveals that by 2022, the U.S. wealth management industry is likely to face a shortfall of at least 200,000 advisers.
The collision of these two trends highlights the importance of developing the next generation of advisers and investors for the future of the industry.
The solution to this issue starts with how firms adopt new technologies to effectively serve the new generation of investors entering the market while growing the books of business of advisers young and old.
Technology has historically been seen as a cost center by many firms. But that's changing.
InvestmentNews' Annual Adviser Technology Study found that the industry's most successful and fastest-growing firms viewed technology as essential to their business strategy and their ability to extend their competitive advantages. Firms are realizing that the harmonious use of technology across generations is the catalyst to simultaneously attract the next generation of advisors and clients and future-proof the organization.
So what does the harmonious use of technology across a firm look like?
For starters, your technology must be flexible, to allow advisers to learn and employ new technology at their own pace. Investors also benefit, especially when wealth must be managed across multiple generations with differing tech preferences within a household.
For example, portfolio management and trading should be able to serve spectrum of operating models, from advisor-driven portfolios, to more automated, centrally managed ones, to hybrids in between that advisers can modify models within guardrails defined by the firm.
Flexible technology can also increase retention through enhanced client engagement. Short, spontaneous meetings via video conference or co-browsing with clients and prospects can supplement in-person consultations, email and text messages to ensure the end investor can access the adviser in a way that suits his or her particular preference. Offering an interactive self-service investor portal reduces repetitive conversations about investments and performance, and gives way to richer interactions with clients around goals and overall financial health.
The next generation of advisers expects firms to provide sophisticated, adviser-facing tools to enable them to provide new ways of serving clients and finding new ones. For example,
social media like YouTube, Twitter and LinkedIn are becoming more common for brand development and prospecting. Having a CRM system that integrates social media activities into advisers' daily routine is a sure way to keep them engaged and motivated.
Addressing adoption challenges
How do you teach new advisers old tricks? Encouraging adoption of new technology
can be a challenge, especially when dealing with advisers who are hesitant to disrupt their processes. But it is the key to unlocking technology's full value.
To motivate your advisers, offer a carrot, not a stick. Educate and encourage them to experiment and get more comfortable with new technology incrementally. Show them the difference between average and high-performing, technology-savvy advisers and how they can efficiently grow their business.
To this point, I offer a word of caution. The line between "Learn from these younger advisers and how much more efficient they are" and "Here are some illustrative examples of how you can leverage our technology to effectively serve your clients" can be razor-thin.
Despite the tectonic changes facing the wealth management industry, investors mainly want to feel secure and optimistic about their financial futures, regardless of their generation. For an adviser community undergoing its own generational transformation, this means being able to communicate with clients around investments in a way that accommodates their schedule and technological savvy.
Charlie Haims is vice president of marketing at wealth management technology company MyVest.
