Amid all the digital energy at the InVest conference, with talk of disruption and data, my thoughts turned to a similar dilemma facing 19th century farmers.

There are clear parallels: The tools and machinery that allowed farmers to work larger tracts of land, more cheaply, with increasing crop sizes and fewer laborers fueled economic upheaval ― and led to open revolutions by those negatively impacted by the changes.

The specter of planners, advisers and brokers taking to the streets in the face of the fintech revolution may seem far-fetched, but the effects are going to be very real over the next 10 years. The successful companies in the space have been focused on data collection and aggregation. The real promise of fintech appears ready to live up to expectations.

Indeed, many of the speakers at SourceMedia’s InVest conference focused on the growing ability of fintech to support advisers in their efforts to engage more clients, service them faster, manage more households and gather more AUM ― all at a lower cost.

Brian Walter, global industry lead of IBM’s Watson Financial Services Solutions, discussed an API-driven solution targeting and delivering client insights. IBM is leveraging its AI capabilities to deliver a more robust client experience that not only can segment clients using machine learning, but adds value to the adviser-client relationship by segregating and ranking clients by the importance of relationship-critical issues for the adviser to address. IBM's AI platform also seeks to turn client actions and behavioral patterns into actionable ideas for advisers to deliver customized solutions on a real-time basis. Future iterations hold the promise of machine-learning that will prompt advisers in anticipation of a client's financial needs based on observed, past patterns of behavior.

SAME SPEED, FULLER ENGAGEMENT
If a Watson or AI solution is fully realized, why would a firm need four advisers to service a client’s needs when one adviser would be empowered by AI to service three to four times as many clients ― with the same speed, fuller engagement and lower costs? In other words, if a farm machine run by one person replaced three laborers, why wouldn’t that analogy apply to the business of investment advice and asset gathering?

In another possible scenario, a firm able to leverage fintech properly and harness the promise of more efficient client interactions might lead it to secure, perhaps, 60% wallet share versus 15%.

Ilan Davidovici, global head of wealth management at Salesforce, told attendees that Morgan Stanley recognized that its brokers run their own businesses and are reluctant to share with the firm the process of managing a book of business. Under that scenario, when the sales team doesn’t want the firm to reach out to clients, how could Morgan Stanley help its brokers reach the 80% of assets held away at other firms? The solution was to develop a CRM-based program that brokers could use through Salesforce to bring clients on a “nurture journey” intended to help advisers engage clients more fully and aggregate more assets, supported by a centralized compliance function.

Under that scenario, once again, there could be one big winner and three losers. Is the value-chain between advisers and clients about to undergo a similar revolution to the one farmers experienced as mechanized equipment replaced and displaced manual labor?


OVERHAULING THE VALUE PROP
One can imagine that, over the next 10 years, advisers will need to recognize that their value proposition is in need of a major overhaul.

Looking back on my years on Wall Street, brokers and advisers have basically provided the same value proposition to their clients. The same can be said about the traditional business of selling life insurance over the kitchen table. Those days are going to disappear as fintech capabilities force firms to shed the mindset of “winning is a matter of being a little bit better than the next guy.”

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Instead, successful firms and advisers will fully define what their strategic value is to a client, take a hard(er) look at what clients actually want, drill into what client expectations are regarding their investment advice and how those views are evolving, and, finally, what clients are willing to pay for the strategic, defined-value offered.

The end game of the changing investment advice business became clearer at the InVest conference: Advisers and their firms must retool and refine the value-proposition. Clients must be put on a more level footing with their adviser and become more fully engaged in their financial life.

The industry should expect to see clients create a “wealth passport,” said Sebastian Dovey, managing partner of consulting firm Scorpio Partnership. That passport can be presented to competing advisers to see what customized solutions they offer, and allow consumers to shop for best-in-class investment advice solutions supported by the personal touch needed to forge a lasting relationship.

As the farmers went, so go advisers?

Guy Sullivan

Guy Sullivan

Guy Sullivan is a principal with Fund Forensics, a fintech implemenation firm based in Fairfield, Connecticut, serving asset managers and advisers. He also has been a managing director at Putnam Investments and CEO of OgdenBurr Partners.