Digital empathy – expressed through the right tools - will set advisors apart, creating longer client retention, higher growth, and improved quality and operational efficiency, the author of this argument writes.  

What should independent financial advisors consider when investing in new technology? The answers to that question are not as simple as one might think, and the often costly mistakes that wealth managers can make in their tech purchases are testimony to that. So how to proceed? John Wise, chief executive and co-founder at InvestCloud, the financial technology firm, considers the questions. The editors here are pleased to share these views and invite readers to respond. Email the editor at tom.burroughes@wealthbriefing.com

Most wealth management firms today understand the importance of deploying a digital platform to engage their clients. At a moment when we are seeing the largest transfer of wealth in history (from aging boomers to younger, more tech savvy and less financially educated generations) wealth management firms recognise the need to be digitally engaged, in order to survive. Wealth management firms are under immediate pressure to automate processes as much as possible due to the well-documented fee compression that is occurring throughout the industry. At this inflection point, everyone has one question on their mind: how are firms going to attract new clients and retain existing ones in a cost-effective manner? 
 
Any investment in new technology needs to address this question. The right digital strategy can provide a firm with a competitive advantage. It is critical for wealth management firms to understand how fintechs and larger financial institutions are changing the competitive landscape within this space and the level of sophistication for digital engagement and digital empathy that some platforms bring. This is what wealth managers need to be concerned about if they don’t already have an appropriate digital strategy.
 
Only those firms which can automate processes and learn how to digitally engage with their clients will survive. After a decade or more of uncoordinated technology investments, today’s successful firms are beginning to recognise the importance of a completely integrated front-to-back platform that keeps track of all aspects of client data throughout their organisation. It is not simply a matter of applying technology - it is about integrating knowledge.
 
Integrating knowledge begins with collecting data directly from the client. Here, digital automation tools that collect data and give advisors a holistic picture of their clients, whether through digital onboarding or know your customer (KYC) processes, are vital. Once data is collected, it should then be leveraged to allow mass automation of client prospecting, servicing and retention. From the moment a potential customer visits your website, the data you collect is paramount.
 
While automation is critical to increasing a firm’s profitability, it is only one side of the equation. Continually improving the quality of the digital experience they provide is crucial. To connect with customers that they cannot see face to face, financial institutions are creating digital relationships where each client becomes engaged on their own terms. Conventional deployment has been one-size-fits-all for too long. Today, it’s about beautifully designed interfaces that are intuitive to work with and empathetic to the user’s needs.

This will enable organisations to differentiate themselves and really connect with their clients through individualised personas.
 
Information is power, but only if the data is all in one place and in a structured format. Adopting a data warehouse is the most important aspect of any digital strategy, ensuring that information is correct and accessible. Many traditional firms fail to appreciate how information can be leveraged to better serve their customers. Leveraging an organisation’s data, wealth management firms can monitor how this information changes. For example, which demographic pays closest attention to market changes? How does a client’s investment objective or risk tolerance change over time? Today, advanced digital platforms can deploy pattern recognition tools and prescriptive analytics, whether to find upselling opportunities, or to alert advisers of early red flags. These tools are designed to allow firms to support more clients per advisor.
 
Finally, there is adoption. How are digital platforms helping wealth management firms increase adoption and retain existing clients? Combining behavioural science with digital personas, financial institutions are able to digitally engage with their clients in spite of vast differences in wealth, age, outlooks and all the numerous facets that make them unique. Digital engagement requires human empathy where each user feels that their financial concerns are understood. The same digital experiences created through personas need to carry from online client portals to the offline digital reports they receive -- all branded to help advisors differentiate themselves.
 
These elements are what constitute a great overall digital strategy, allowing advisors to compete effectively with the larger financial institutions. This is the holy grail of hybrid wealth management – automated, digital experiences combined with the advantage of human insight. Digital empathy – expressed through the right tools - will set you apart, creating longer client retention, higher growth, improved quality and operational efficiency.