The digital shift is here — and it’s uncomfortable

This article is part of a series of special reports appearing in the Sept. 14, 2020, edition of InvestmentNews.

Advisers have tackled dramatic shifts since the onset of the pandemic, from guiding client portfolios through a Black Swan market event to quelling client fears over Zoom calls. Like much of America’s workforce, the wealth management industry should be applauded for its adaptability and tenacity.

The massive technology transformation is a told-you-so moment for all the evangelists who have long preached the ease of adoption and the cost savings of adviser tech. For a vast swathe of the country’s workforce, some version of this tech-enabled, remote-work life will likely become a lasting reality.

Firms are already beginning to send employees back to the office; 32% of 159 financial advisers surveyed in July expected employees to return after October, according to data from InvestmentNews Research. However, 10% expected to permanently expand remote working arrangements.

While tech has eased its way into our daily work routines, it also comes with unforeseen challenges — especially for late adopters.

The reliance on technology has already led to a certain level of disruption and has a certain level of anxiety for clients, according to Dan Egan, managing director of behavioral finance at the independent robo-adviser Betterment. “Let’s face it, it’s uncomfortable for a lot of people,” Egan said, adding that some clients seek out financial advice for the human relationship.

For advisers, relying on face-to-face meetings with clients to bring in new clients will have to become a thing of the past. And, just as some firms have flourished, other advisory firms will likely suffer.

Ominously, advisers have traditionally been less than enthusiastic about adopting new technology. Only about 24% of RIAs said that the majority of their clients used digital portfolio reporting statements before the outbreak of the pandemic, according to a survey by Aite Group. Ranking a distant second, only 12% of the 400 RIAs surveyed said the majority of their clients are checking investments or financial planning goals online.

“There’s certainly a potential pitfall for advisers that have emphasized the face-to-face,” Egan said. Advisers who have relied on a certain rapport with clients as a “trust mechanism” may find their clients are deciding it’s better to go the investing route alone.

An example is typing. It’s a simple skill that could have an outsized impact in a post-COVID-19 world when advisers are interacting with clients via chat or instant messaging channels. Advisers who are more comfortable with touch typing will be more comfortable communicating with clients in real time.

Company cultures will also play a vast new role in advisory practices. Those that have traditionally valued human interaction may experience a real grinding of the gears, Egan said. “The skills financial advisers will need to communicate with clients is going to be very different," he said.

There will be new technology winners, too, of course. Financial TikTok has flourished in recent months by helping inform the investing public about financial topics. Albeit, the app has been the object of significant scorn from advisers when self-proclaimed financial gurus spout dangerous investing advice to the masses.

New channels will concentrate success because that’s what technology does, Egan said. If you’re able to adapt and become proficient, the shift to digital has leveled the playing field. That can be scary and uncomfortable for the more traditional adviser — but that change is already here.

If the pandemic has any lasting lessons, it’s that financial advisers are more flexible than previously thought — and they’re certainly up for a challenge.

More articles from the special issue:

Is working from home the new normal? — Jeff Benjamin

How advisers can use tech to attract assets — Nicole Casperson

Keeping an eye on chats — Bruce Kelly

Enforcement, arbitration proceedings move online — Mark Schoeff Jr.

Pandemic's financial, emotional toll prompts early retirements — Emile Hallez

Home office deduction limited to self-employed — Mary Beth Franklin

10 unexpected ways COVID-19 is changing wealth management — Brittney Grimes