Catch and ride the next wave in financial advice

Over the past few decades, technological innovations have had a significant impact in the role that financial advisers play in the lives of their clients. The work that was once labor-intensive, time-consuming and client-limiting is now streamlined, giving advisers the ability to effectively manage the money of more clients.

Yet for one reason or another, innovation is still outpacing adaptation. Millennials — now 24% of the population in the U.S. — grew up with technology and demand it in all aspects of life. That includes their financial advisers. A recent survey from CEB Tower Group Wealth Management shows that the over-50 crowd has also embraced technology, using it to both communicate and collaborate. Technology, then, becomes critical for advisers.

Just like these tech-hungry investors, the next wave of advisers, should not be defined by age. They should be defined by their ability to adapt to meet the evolving wants and needs of their clients. A next-wave adviser could be a veteran adviser ready to take a new step forward, or a rookie adviser who’s looking to start a practice that changes the game.

Technology is one area in which advisers must evolve along with their investors, and below are three steps to help jump-start the transition.

1. Crack the co-planning code
The sheer amount of information available to investors, thanks to technology, has changed the way advisers approach the financial planning process. Since investors know more than they ever have, why not involve them in the process by co-planning? Collaborative planning fosters a more engaged investor, leading to a smarter investor and eventually yielding a stronger relationship with the adviser. To do this effectively, advisers need to be bilingual, speaking in terms of both specific dollar amounts and specific client goals. Principles of goals-based investing become critical in a co-planning model, where communication is of paramount importance.
Technology can make advisers’ lives easier when it comes to co-planning. Software companies have created client portals that allow for real-time interaction between adviser and client, repositories that allow both parties to work on documents together and bring mobile technology into the fold. Advisers already use these client portals — more than 85%, according to an SEI poll on financial planning that surveyed more than 1,000 advisers in August 2014 — but clients haven’t taken to the portals as quickly. Almost 55% of the advisers surveyed said that less than a quarter of their clients use a portal, which generally means that they don’t see the value. Co-planning can help establish that value.

2. Pitch the paper
Once the plan is created — or co-created — advisers still need to present the plan. In years’ past, the standard format was a paper plan either mailed or presented to an investor. Technology is making the reporting process easier with the growing popularity of tablets, which enable interactive plan presentations to happen anywhere. Even with technology’s rise, though, 39% of advisers still only produce paper-based plans, and 12% don’t deliver a plan at all, according to SEI’s poll on financial planning. The landscape is shifting from paper to the screen, and advisers would be wise to get on board if they aren’t already.

Soon enough, exclusively interactive, on-screen plans will dominate the investment world and paper plans will go the way of cassette tapes.

3. Change your data mindset
While access to vast amounts of information makes for better co-planners, there are potential drawbacks. That information can muddle the picture and cause investor to lose focus. Whereas traditional advisers were the only source of information for investors, the next generation of advisers takes all of that information — some of it quite complex — and presents it in a way that clients can understand.

Think of it in terms of a camera: the lens has many objects fighting for attention in the frame and without focus, it will yield a blurry, unappealing picture. Financial advisers provide that focus for their clients — the guidance that sharpens the financial picture.

(More: See Why advisers need to keep their human touch in a digital age)

There are a few ways for advisers to make the mountains of data more approachable to investors. The user interface, for starters, has come a long way. Gamification, or incorporating elements of gaming into financial software, is becoming more common in programs such as MoneyGuidePro.
More companies are focusing on offering effective ways to present information that clients can visually organize in diagrams. Firms are realizing that using technology to make information more approachable and accessible across different platforms is an important step toward a more knowledgeable investor.

In the big picture, technology is still in its infancy — especially as it’s used in the financial planning space. Advisers have a massive opportunity to make technology work for them, eventually passing on the benefit to their clients.
Younger investors demand technology, and aging investors are coming around on it as well. That’s evolution. Advisers need to follow suit and distinguish themselves as pioneers in using technology to effectively manage their clients’ wealth. Advisers who don’t get ahead of the curve risk getting swallowed up by it altogether.

John Anderson is a managing director and head of practice management solutions at the SEI Advisor Network.