This publication will be casting its eye on how wealth management organisations think technology is changing the role of advisors.

Over the next few days, this publication will run interviews with a number of firms about how they think technology will affect how wealth managers operate. And going into the months ahead, this news service will continue to track this vital area. Readers who want to share experiences about how technology has, or has not, changed their working lives should email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

It’s the 21st Century so we need to talk about robots. And mobile devices, two-way video, Big Data, data mining, cloud computing and telecommuting. Are you keeping up with all this? Because you need to do so in today’s wealth management industry.

All these technological marvels are, at least according to some people, going to make humans redundant. But already the private banking and wider financial services sector is figuring out that these new devices and ways of communicating can augment and enhance humans’ capacities, just as an artificial knee or super-powerful hearing and visual aid might do. (The words “augment” and “enhance” come up a lot). Debate is therefore focusing on how technology can boost advisors’ productivity.

As productivity is one of the key performance indicators, it will be used to judge technology at wealth management houses. Private banks are, in this writer’s experience, coy about whether relationship managers have a client ratio (such as 25 clients per RM) but even if there isn’t an exact number, the idea is to make advisors more effective. In practice, it can mean that RMs serve more clients each, and bring in more new clients to a firm. 

The need for RMs and other staff to deliver more of the goods is easy to locate. Margins are under pressure due to increased regulations; low, or even negative, interest rates, demand for more sophisticated services and rising labour costs. According to Boston Consulting Group in 2017, pre-tax margins at global wealth managers fell to 22.4 basis points in 2017 from 33 bps in 2007, with inflated compliance costs much to blame. 

With part of the value chain in finance being commoditized, even the more “human” side of private banking has to prove its value more vigorously, and technology can help. Firms are using technology’s ability to mine data so that RMs can be better informed about prospective clients and make a sharper pitch. A better-prepared RM is more likely, so it is hoped, to win and keep a client.  

And technology can enhance the role of advisors by delivering easier-to-read, and more intuitive presentations of clients’ finances. A RM who dreads going through reams of paperwork with a client can instead deliver a far more engaging presentation via his mobile tablet, or over a two-way video link where the client can see slides that suit his/her requests quickly. 

Last year the publisher of this news service issued its 2018 Technology and Operations Report, published in conjunction with SS&C Advent. One take-home point was that 58 per cent of wealth managers surveyed saw client experience improvements as a top-three innovation priority, and 58 per cent gave it as their highest rating. And a big part of a good client experience is how well RMs communicate with them. Poor technology is not an excuse for poor communication.

Although wealth managers have clearly been seriously ramping up their efforts to digitalise and innovate, our experts believe that the industry still has a great deal of catching up to do compared with the FAANGs (Facebook, Amazon, Apple, Netflix and Google). Seeing how other sectors of the economy get more out of human talent when technology plays a part can yield valuable lessons. 
 

But mention of such Big Techs raises the question of whether private banks and other wealth management professionals really are competing for the same kind of clients. At a series of industry events in the UK and US recently, your correspondent was told over and over again that when the big events arise for a client (marriage, divorce, buying/selling a home, change of career, bereavement, estate planning, selling a business, etc) they want to speak to a person face-to-face. One senses that after some of the initial hype about robo-advice, debate is maturing, with more talk about the need for hybrid options rather than junking human interaction completely.

It is not easy to know whether technologically-augmented advice will, on balance, benefit the larger wealth management shops, further consolidating the sector, or perhaps be the saviour of smaller operations. There is arguably a democratic aspect to some modern technologies, such as internet-driven search and data. Small firms can get access to data that decades ago were only in the grasp of their larger peers. (There is a parallel with journalism: old, national newspapers used to have large libraries, while a freelance journalist would struggle to keep more than a few piles of papers in a home office. Now the internet has evened up the playing field.)

Getting educated
If technology is going to make RMs and other wealth professionals more effective, it will only work if they learn how to use technology. And that means that training and education programmes will have to be adjusted. This is already happening.

Organisations involved in professional development understand what is happening. In June this year the CFA Institute issued Investment Professional of the Future, a report looking at how disruptive technology is changing the skills firms need. One striking result from the CFA report, based on survey responses from more than 3,800 of its members and candidates, was that almost half (48 per cent) expect their role to be “significantly different or non-existent” within five to 10 years. Among financial advisors, the rate is even higher - 58 per cent. 

Standing still is not an option. And even for those wealth managers who are still sceptical about how much technology can change their roles, they cannot afford to ignore some of the fine details. With the ageing Baby Boom generation and new, younger HNW clients coming through used to different ways of communicating, RMs must adjust.