Millennials, technology and the future of advisory

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On one hand, Lex Sokolin’s prescription for how financial advisers will successfully serve clients in a tech-dominated future is delightfully old-fashioned. As explained to attendees at a session at IMPACT, Mr. Sokolin believes that advisers’ human skills will become more important than ever as advisers essentially become behavioral finance therapists. 

On the other hand, the road Mr. Sokolin envisions delivering advisers to the future — one where technology upends everything including operations, investing and marketing — is a route many might see as dystopian.

“Digitization is happening everyplace and everything in wealth management is being automated,” he said. “This is both frightening and an opportunity.”

While looking younger than his 33 years, Mr. Sokolin’s real-world credentials lend credence to his prognostications. After receiving J.D. and MBA degrees from Columbia University and working in investment management at Barclays, Lehman Brothers and Deutsche Bank, he founded and ran NestEgg Wealth, a private-label robo-adviser for financial advisers. The firm was acquired by in 2014 by Vanare, now AdvisorEngine, where he became chief operating officer. He still serves as a board member of AdvisorEngine, but now directs fintech strategy at Autonomous, a research firm for the financial sector that helps clients understand and invest in innovation. 

He says advisers’ current anxieties aren’t unwarranted.

“Everything in wealth management is being automated,” he said. “Each piece of the business will see massive pricing compression, with everything moving to zero. It will be impossible to be a fiduciary without automation.”

Mr. Sokolin sees advisers implementing this automation in one of three ways. One is a channel strategy in which the firm sets up a side, digital business that can be marketed differently and run by someone younger.

“The second approach uses the app ecosystem, where an adviser lightly integrates best-in-class apps. You can upgrade them as better ones appear that integrate better with your existing systems.”

“Third,” he said, “is a platform solution that provides deep integration of all processes for improved workflow, with all accounts opened and maintained digitally.”  

The opportunities, as Mr. Sokolin sees them, come from being automated and using digital tools to serve millennial investors, who constitute a $30 trillion market that’s currently underserved — and difficult to reach. 

“The truth is, we are now an attention-based economy, and people are not paying attention to you. They’re engaged with media nine hours a day and consuming 11 hours of content. How? By multitasking, which is especially pronounced among millennials. Older people are on Facebook, and younger people are on sites with chatting and video. Your competition isn’t another adviser, it’s a cat or a dog on YouTube.”

Capturing the attention of prospects begs the real issue that advisers must face, Mr. Sokolin says, which is the need to change what they’re selling. 

“People don’t want to buy a mutual fund or do a financial plan. They want to feel content, to go on adventures and become who they are. The role of the advisory industry is to help them self-actualize and fulfill their financial self,” he said.

To sell that service in an attention economy, Mr. Sokolin says requires understanding current marketing techniques and having something to say — and producing lots of content that says it — to demonstrate that you know how to help people fulfill their financial selves. 

Traditional promotional activities such as publishing newsletters, speaking at conferences and holding seminars still work. But creating content and disseminating it through social media where advisers can build a following and audience is critical. A prolific fintech commentator himself on social media, Mr. Sokolin told advisers that he uses services that create automated posts and repost material so that his audience keeps growing.

“More important than ever for advisers,” he said, “will be knowing who you are and what you are saying,”