Automation in wealth management is only expected to increase. So how can advisors take advantage of new digital tools to increase their abilities and capacities, while maintaining the value they provide to their clients?
The effort starts with understanding the tools and training to learn how to make your practice smarter, says Ray Sclafani, head of practice management coaching firm ClientWise, and author of a new book for advisors, "You've Been Framed."
Sclafani's book aims to help advisors see their practice in context of the changes happening in the industry, and guide them in reorienting themselves for the next generation of clients.
Technology is a big part of that, Sclafani says. But he hastens to add,"just bolting on a client portal or Salesforce will not make an advisor more efficient."
How do advisors become more efficient with technology?
There are two types of technology, I think, in terms of efficiency. One is internal – the use of technology on an internal basis – and then the use of technology on an external basis that is client-oriented.
Let's talk about the internal basis first. The ability to use technology to build better financial plans, the ability to use technology to produce better client reviews and the ability to use technology to manage CRM are three examples of very efficient ways to use technology internally for client benefit.
In terms of efficiency and operations, StatusPath.com or teamphoria.com are examples where teams can become more efficient in using technology to build better interdependence, build more sustainable businesses because they're aligning their key objectives at every employee level to the company and corporate objectives that are client-focused.
On the external side is having technology that enables the client to stay connected, to gather information, and receive the information they're looking for. For example the digital interface where clients can actually log in vis-a-vis their mobile device to look up information about their accounts.
We have a client for example right now who is installing a relationship with a robo-type advisor for a new level of service for a client that frankly they won't talk to for a couple of years, but at least it's at a flip of a switch when the client wants to start paying for advice, they can do that.
Is that truly the strongest external technology that is being actually put into use? We hear so much about taking advantage of social media.
At ClientWise, we're big on social media so we can stay connected to our clientele and those who maybe aren’t clients today but are prospective clients and may want to engage in the future. But we also use social media to help shape the industry and share our views on things.
I think for advisors, social media is really tough. There are so many compliance issues – even with great tools like Hearsay Social.
I had a client a major firm – he wanted to post a team photo on his Facebook through Hearsay Social and got rejected by his firm because a team photo isn’t in compliance.
So, while I appreciate social media as a piece of technology, I wouldn't consider that a primary use of technology to gain efficiency in any way – maybe from a marketing perspective, perhaps.
How do you maximize efficiency? Email was supposed to make us better communicators and free up time, yet now messaging technology has multiplied, and it's easy to get overwhelmed.
Remember when the advent of the computer was to create a four-day workweek? We were going to create so much efficiency because there was a computer and we would all be in a paperless society because of the computer and the death of the paper industry because of the computer, and people printed more emails out.
So, I think it's about training. I think if advisors are going to create efficiency, what we observe is they are really good at training and getting a high adoption rate of the technology, both internally and externally.
The client that knows how to use the portal, the client that knows how to log in, how to gain access to content and they can go find what they need, when they want it, creates great efficiency for the advisor. Just bolting on a client portal or bolting on Salesforce as a CRM will not make an advisor more efficient, but getting an entire team to adopt practices that create efficiency internally for a team is exactly what happens.
Let me give you a specific example. There was a client of ours at a major firm. He is a 62-year-old professional. His preparation for client reviews would take him two hours. He would take the spreadsheet; he would download all this data and work the spreadsheet so it would be attractive looking to the client. Two hours for one review.
His firm had installed an awesome client review technology where at the press of a button it would spit out a beautiful plan and give the advisor to make adjustments before hitting the print button or selecting the save to PDF option. This advisor was wearing the team out because the spreadsheet needed to be updated in a particular way.
Once he adopted the press-of-the-button client review center, all of a sudden capacity grew and team members were happy. But without the training and the adoption there was no efficiency and technology was making it worse, not better.
What is the one step that advisors haven’t done yet that you will see them needing to do beyond training in order for that efficiency to actually be achieved?
The one thing advisors haven’t done as much yet but will in the future – I think there is a next generation advisor emerging that are digital natives and will adopt technology faster.
I observe that the teams that adopt that next generation advisor build much better efficiencies and move at a much faster pace than those that don’t. Let's also recognize that this next generation advisor isn’t working 8 a.m. to 6 p.m. like they used to. This next generation works around the clock, but they want that flexibility in their schedule. So the advisors that adopt this talent and give them the flexibility, they adopt the technology.
Does this improve productivity?
What about being able to be flexible about when you start and when you're working?
As long as one thing is really clear: the outcomes and expectations of each professional and their contribution to the team for the benefit of the client. If there is not a clear articulation of that, then there is not a sense of confidence that the client is being well-cared for. But when that is really clear and people are able to work at their level of flexibility, both for the client and interdependently – so everybody meets the goals and expectations set forth – it's really great actually.
If much of advice becomes automated, what becomes of the value in your practice beyond being an actual human? How do you define your value so that people won't come back and say, "Honestly, I can just completely automate this process."
Yes, and [they say], "I don’t need you." I talk about that in the book, "You've Been Framed," that the advisor today needs to start anticipating how they are going to reframe their practices for the future.
They need to focus on their future company and they need to decide what value, not only the clients that they currently have, but the clients that they seek to acquire, what value that client will be willing to pay for. Because at the end of the day, if you can go to Betterment or build some ETF portfolio at Schwab for 30 basis points and the advisor is going to charge a point and a half, the delta of 120 basis points is what we're competing for in terms of value.
In my observation I do believe this is a noble profession and I do believe that the advisor today – who has built a relationship with his or her client – adds tremendous value and adds a legacy impact in that family and in the community.
When an advisor is able to articulate that value in a way that the client receives that value, that 120 basis points, they're willing to pay for it.
Advisors need to start asking clients what they believe they have achieved in working with those clients for all the years they've worked for them. If the client can't answer that question, then there is a problem. And, if the advisor of today who is seeking to grow a business and knows the kind of client they want to acquire in the future, they need to anticipate and be prepared to deliver on what the client of tomorrow is looking for. There is a human element to this business.
A machine is valuable to crunch the data and produce a pretty report and a plan, but in the end there are powerful decisions that every investor, every citizen, needs to make relative to their family, to their wealth, to their legacy and it's up to advisor to help be a partner in that conversation.
In the old days it was about selling stuff – products and services. There is a big shift taking place. There is a big demographic shift on what consumers want to buy and it's about partnering, not selling. There is this sense of equality and a relationship that when the advisor positions him or herself alongside the client to co-create that plan and make those decisions jointly, that's very different and a machine can't do that.