Skip to content

2019: The Year of the Resurgence of the Financial Advisor, With Technology’s Help

February 4, 2019

 

advisor mobile technology

As we start the new year, feelings of both anticipation and anxiety are palpable for many Americans. Uncertainty reflected both in this country and across the globe are challenging financial markets, and the economy is looking unsettled for the first time in years.

With this as the backdrop, the financial services industry will have its fair share of challenges in 2019, but there are exciting opportunities also. In these turbulent market times, technology advancements used to amplify advisors’ human touch will matter more than during bull markets and will define client relationships to years to come. Here are three areas that will be top of mind for advisors and advisor firms in the new year:

1. Shift from Data to Insights and Action

The amount of data amassed on a yearly basis is staggering. According to a PwC research report, by 2020, we could see 44 zettabytes of data created annually. Financial services firms are investing heavily in data systems and predictive analytics, with multiple applications including security, fraud and client experience and personalization.

In theory, putting data to work with the right tools should help deliver the advice clients need at precisely the right moment. But it’s been easier said than done. For one, many advisors ignore so-called “next best actions” because the suggestions aren’t very good or performing the actions requires too many arduous steps. Firms have also tried to deliver these nudges directly to consumers through emails and app notifications, but the follow-through rate on automated suggestions is a few single-digit percentage points at best, compared to over 50 percent follow-through from a human advisor nudge, according to the Chief Product Officer of a popular robo advisor (which brings us to the next prediction). Perhaps 2019 is the year that data-driven advisor nudges will become viable.

2. Robo Advisors Will Cease to Exist on Their Own

Despite over $2 billion of venture capital flowing into robo advice startups, the hype about human advisors getting replaced by algorithms has simply not played out. There has not been an exodus of either boomer or millennial clients leaving their human advisors for apps. A 2017 study by LendEDU revealed that only about one-fourth of millennials polled had used a robo advisor. Almost 70 percent responded that a human advisor would give them a better return on their money, while two-thirds believed a robo advisor would be more likely to lose their money than a human advisor.

Many robo startups have closed or exitedhired human advisors, and/or gone the B2B route selling their software to advisors. Large established players like Vanguard, Schwab, and Morgan Stanley have built their own automated investment algorithms to bolster their core business.

Robos will continue to be challenged in 2019. First, they are untested in a down market. Most were developed post-2008 and it remains to be seen how they will perform in a significantly volatile market like the one we are starting to experience. Will they be able to adjust fast enough or provide enough guidance, flexibility, and personalization to meet antsy investors’ specific needs?

Second, investing is a highly personal and complex task in which emotion plays a big part. Human beings don’t bet their family’s financial future on the accuracy of a faceless algorithm. As they experience ups and downs and as the market fluctuates, investors are voting with their assets that they prefer to have a trusted person help them manage through it.

I predict that in 2019, robos will solidify as software utilized by advisors, rather than replace advisors. It’s a great example of how people can leverage AI and machine learning to free up their time, upskill, and focus on higher order work. We’ll soon see a model that combines robo efficiency with the human touch as today’s robo advisors morph into something more akin to a modern assistant.

3. Digital Basics, Like Texting Clients During a Major Market Event, Will Go a Long Way (no AI required)

With all this talk of data, AI and machine learning, it’s easy to get out over our skis. In fact, in 2019 and probably for at least a few years beyond, tremendous productivity gains and differentiation will come simply from digital basics like e-signature and text messaging. Unfortunately, advisors have been hamstrung due to growing regulations and slow-moving, risk-averse firms.

Take mobile, for instance. Today’s expectation is that everyone has a mobile device and everyone texts. Clients are used to getting answers quickly. They don’t want to play phone tag or trade voicemails, especially when it comes to their finances. Clients don’t understand why they can’t text their advisor.

Regulators have taken note. In December, the SEC issued a risk alert on advisors texting, Hearsay saw unprecedented demand for our compliant texting solution. New technology enables firms and advisors to mitigate risks and comply with record-keeping, advertising, suitability, supervision and security rules – and it all runs in the background so advisors can focus on connecting with clients on a human level during moments that matter.

Expect to see client-advisor relationships change for the better as advisors embrace the basics and continue digitizing manual processes this year.

With technology, financial professionals can increase the frequency and quality of client touchpoints, stripping out the manual inefficiencies and becoming more tailored in their outreach. Less time will be spent manually building individual portfolios and more time will be spent engaging with clients to address relevant market trends, life goals and opportunities.

The Final Word

The year ahead underscores a resurgence of the human advisor, thanks to the development of new technologies that enhance rather than replace the human touch. Volatile markets will test relationships as people inevitably stress over their financial future, and more than ever, the trust and empathy of an advisor enhanced with data and convenience will serve to establish lasting client trust, differentiation, and loyalty.

So, while the market could get wild in the coming months, the financial services industry has much to look forward to in the days to come.

Originally published on WealthManagement.com.

Clara Shih

CEO, Founder

A pioneer in the social media industry, Clara developed the first social business application in 2007. Her latest book, The Social Business Imperative, is a Wall Street Journal-featured bestseller. She is a member of the Starbucks board of directors.

Subscribe to our Blog. Get the latest insights and news delivered to your inbox.

Subscribe to Our Blog.

  • This field is for validation purposes and should be left unchanged.

Browse More Articles