The Need to Embrace Digital Tools in Wealth Management

By Wes Garner

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We live in the age of disruption. Everything from transit to groceries to shopping has been upended by technology that seems to move at light speed and predict our every need. We’ve become accustomed to the likes of Netflix, Spotify, and Amazon anticipating our next move with a suite of personalized recommendations.

Those expectations have arrived at the financial sector’s door and fintech companies have been happy to fill the need, using artificial intelligence (AI), predictive analytics, and mobile applications. 2017 saw record fintech investmentsof $27.4 billion—an increase of 18%—and the industry has seen nearly $100 billion in investments since 2010.

Because of this, the race is on for investment management firms—and credit unions —to provide digital tools and enhanced services to their advisors, allowing them to harness fintech’s power, rather than struggle against it, and improve the client experience in the process.

A History of Disruption

Wealth advisors have faced disruption for decades, from discount brokers in the 1970s, no-load mutual funds in the 1980s, internet trading in the 1990s, and robo-advisors in the 2000s. In the 2010s, digital technologies have moved from an alternative method to a central investment principle. Innovators such as Betterment, Wealthfront, and Ally are just a few of the companies that provide simple, efficient digital services to investors.

The collective impact of these and other companies is the automation of portfolio management and financial advice. Thereis also the lowering of fees, because it costs less to maintain an algorithm than to employ a full-time human. These innovations have wide consumer appeal and have altered behavior in a way that has demanded a higher level of member service from traditional advisors.

That said, there are still signs of growth in the industry, with a 2018 Charles Schwab studyshowing that, from 2013 to 2017, assets under management had an impressive five-year compound annual growth rate of 9.8%.

The Age of the Algorithm

In many ways, the fintech revolution feels inevitable—investors encounter digital tools in nearly every other area of life that provide personalized, up-to-the-minute experiences when they order food, hail a cab, watch a movie, or check their credit union account balance. Why should they expect any less when they plan life’s big purchases or prepare for retirement?

The numbers bear this out—in 2015, nearly half of peoplewho switched advisors or firms moved to a digitally focused company. Seventy-two percent of Millennials would work with a digital advisor and the majority of themwould be happy to get their financial advice from companies like Google, Facebook, or Amazon.

Robo-advisors continue to be a major force in the industry—in 2019, their assets under managementin the U.S. reached nearly $1 billion, with an expected growth rate of 38.2%. Artificial intelligence (AI) has also made inroads, with tools such as Salesforce’s Einsteinand H&R Block’s collaboration with IBM’s Watsonbringing predictive analytics to both advisors and investors.

This trend makes it more important than ever for wealth advisors and managers to emphasize that high-touch can go hand in hand with high-tech. The marketplace for financial advice is enormous and a personal, trusted relationship can help members cut through the clutter.

Improved Member Service

Advisors and their institutions also stand to benefit from these innovations, because they can cut down on manual research, number crunching, and data analysis, leaving more time for actual client conversations. High net-worth members are always interested in optimized investment tools—and those include digital tools. But members of all levels will appreciate direct, efficient tools that they can interact with on their own time, from their laptop, phone, or personal digital assistant.

Citi is one of the companies leading this chargewith its use of unified communications and collaboration (UCC) technology, which allows high net-worth members to pick up their phones, open an app, and instantly have a video or audio chat with their advisors. Advisors can share files, review portfolios, and bring in other parties to the call.

Platforms like this can create member efficiencies and increase advisor productivity, as Envestnet’s Vision IQtool also demonstrates. It takes full advantage of the growing popularity of tools such as Amazon’s Alexa, which uses a conversational user interface to accomplish a series of simple tasks. Whether in the office, at home, or on the road, advisors can simply make queries like “Which members added cash this week?” or “Give me a list of today’s top members.” Results come in seconds, much faster than pulling the data by hand.

Let Fintech Be Your Friend

Make no mistake, the arrival of fintech will test our flexibility and capacity for change. But real-world, human advisors have an even more important role to play in this new ecosystem. We read emotion, parse nuance, and navigate complexity, skills that are beyond the scope of even the most sophisticated algorithm.

Embrace the tools that can help you do your job better. Harness their power to achieve our common goal: deeper member relationships.

Wes Garner is president of TDECU Wealth Advisors located at Texas Dow Employees Credit Union (TDECU).

Section: Standard
Word Count: 1214
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Copyright Year: 2019
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