There is no “Back to the Future” for wealth management offerings at banks, credit unions and other financial services providers. What saved money in the 1980s or the 1990s, even the early 2000s, may be losing money today.
That’s because software and automation is finding its way into more processes and businesses must continue evolving to meet client needs.
Consider the advantages of tech-assisted financial planning. At SigFig, we’ve seen firsthand how offering clients the ability to set multiple financial goals for their accounts leads to better outcomes. According to our data, the mean account balance across the breadth of active accounts is more than $36,000. But when clients assign goals to those accounts, the balances grow by leaps and bounds.
Clients who set just one goal tend to have account balances that are more than 70% higher than our base case, and clients with two goals have accounts tallying more than 240% higher than our base case. In other words, the right digital personalization efforts can turn a five-figure account into a six-figure balance.
It’s a testament to the importance of personalization and providing clients with a feeling of ownership over their financial outcomes.
When financial institutions celebrate client expectations for personalization and embrace digital optimization, they subtly encourage clients to bring them new assets and entrust them with their financial outcomes. Clients expect personalization from service providers and will take their business elsewhere if they’re provided with a generic solution or service.
The right digital partner is key to scaling personalization, or any type of digital transformation. With the help of specialists, wealth managers can find greater profitability and engagement, even as they build more efficient processes and generate unique client insights.
The human face of digital advice
While the tools and technologies fueling advisors’ digital transformations continues to evolve, the need for a human hand at the wheel has not. Money is an emotional topic. Economic security isn’t a cold concept, disconnected from our feelings. It’s not mathematical. It’s real and it’s human.
Decisions about finances are important and we seek out advice from experts because we need human connection when we’re making life’s biggest decisions. We want to feel inspired and excited about the financial possibilities that lie ahead. We want an empathetic ear and advice that’s unique to our visions and goals.
Financial advisors already know how to connect with clients. Technology is still learning how.
But technology is exceptionally good at optimizing certain non-client-facing functions, like implementing the proper asset allocation to achieve financial goals. By automating repetitive tasks, advisors have even more time to connect with clients, build out new segments of their business, or take a well-deserved break away from their desk.
The new tech conundrum
Every week, advisors spend more than four hours on administrative tasks and more than five hours on meeting investment management needs. Advisors who are able to turn to technology to provide these services can find higher value use cases for their time.
Today’s technological transformations, however, present a myriad of obstacles to meeting this seemingly simple goal.
Legacy tech stacks are expensive to update. Many of these systems already contain sensitive client identifiers and data, which needs to be preserved and protected to remain in compliance.
To further complicate firms’ good intentions, advisors without a plan and a partner may see their margins shrink. Technology that’s deployed without thorough (and expensive) testing runs the risk of running afoul of regulatory requirements. Rather than risk getting it wrong, some firms decide to iterate — but do so at a pace that leaves them lagging competitors and deploying tools that are outdated by the time they’re approved.
Partnering provides a path forward
Financial institutions don’t need to be in the business of developing new financial planning, machine learning or artificial intelligence tools. The value of human advisors is in their ability to apply their expertise and build meaningful relationships with clients. By combining reliable technology with the value provided from advisors, clients can get the comprehensive and truly personalized experience they want and need to meet their financial goals.
Personalization begets agency, and clients with agency over their accounts will jump at the opportunity to grow their investments, strengthening financial services firms’ ability to grow their business.
Steve Mattus is Chief Investment Officer and GM of Digital Wealth at SigFig.
