The Whiteboard: Big Tech is coming for your clients, so how can an advisor ensure they stay ahead of the curve?
Here is a reality that you will need to face: Big Tech is coming for your clients.
It came for advertising and retail shopping, it came for manufacturing and it is now coming for your job as well. The good news is time is still on your side, but you need to be prepared because when it comes, it will be fast.
The other good news? If you do it right, Big Tech will never be able to do what you do for your clients. I don’t mean to be doom and gloom but as Investment Advisors and Financial Planners we need to be aware that our industry, like any other, is open for competition and disruption, and I would argue that in a lot of cases this is overdue.
In many ways our businesses have been happy to live behind the moats of a concentrated industry with little competition. This has held back innovation and efficiency and left us vulnerable. But herein lies the opportunity for those of you ready to taking advantage of it.
A few months ago, I attended a conference in Omaha where one of the speakers had obtained a slide from Vanguard which showed where they feel their advisors can create value for their clients. Here is the summary of that slide:
Strategies Increase in Income
Portfolio Construction 0-115 bps
Wealth Management 0-145 bps
Behavioural Coaching 150+ bps
Total Advisor Alpha 3%
According to Vanguard, one of the lowest fee product solution providers on the planet, an advisor can add up to 3% in value to a client. That means, if you are charging even 2%, you can still add an additional alpha of 1% above your fee to the client as compared to a do-it-yourself option or robo advisor.
This is where advisors need to become the difference-maker and it goes beyond just having a phone call once a year and paying lip service to doing comprehensive planning.
What Vanguard is telling you is that they are going to drive the cost of portfolio construction to the floor because they have economies of scale. Amazon, Google and Apple will likely take a similar approach when they enter the personal finance world in a more serious way. Need proof? Just look at Apple’s current strategy for video streaming and how they plan to compete with Netflix. This is their advantage over you… but you have distinct advantages as well. Vanguard is telling us that the biggest component where we can add value for our client is in behavioural coaching or, in short, having a good relationship with our clients.
This doesn’t just mean that your clients like you; this means that you are there for your clients for all of the life events. You are there to prepare them for what may come and to achieve their goals. You are there to hold their hands when life events happen and they need someone to walk with them. You are also there after the event to take the next steps forward, or to take those steps with their family members. If you position yourself correctly, Amazon will never be able to replace you in this space for your clients. But you are going to need help.
Technology is a big advantage for your future competitors, but it can also be yours. In order to provide the solutions you will need to in the future, you need to have the right tools available to you. Having a CRM (client relationship management) system in place that can integrate your servicing offerings, coordinate your tasks and mine client data to identify opportunities and concerns for your clients, is going to be absolutely essential.
For example, we have developed software for Endeavour Wealth Management which helps to automate our entire client experience by coordinating our internal stakeholders and ensuring they know what to do and when to do it. Our system also tracks client data and even pulls in information from external sources like social media so that we can anticipate life events for our clients and know when we need to be in touch with them for planning purposes.
In my opinion, this is really just the tip of the iceberg when it comes to the added business efficiencies that technology will be able to provide.
Technology is important but just as important is having processes and systems. We have entered a world where there is going to be continued price pressure and unless you want to enter the race to zero, you need to be able to show your clients value above an algorithm.
Living in Winnipeg, I recently heard a saying which I think speaks volumes about the spirit of this city: “there is no such thing as bad weather, only badly dressed people.” I have adapted this saying for the future of our industry and can say that “there is no such thing as too high a fee, only the absence of value to meet it.”
Amazon is coming, but the good news is that Canada is too small a market right now. This will change one day and now is the time to make sure you are ready for it.
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with Industrial Alliance Securities Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Grant White who is a Portfolio Manager/Investment Advisor for Industrial Alliance Securities Inc. Opinions expressed in this article are those of the Portfolio Manager/Investment Advisor only and do not necessarily reflect those of Industrial Alliance Securities Inc. Industrial Alliance Securities Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.
