Advisory firm owners today are deluged by the rapidly increasing number of technology choices and their broad array of functionalities. To help my advisor clients focus, I suggest that they think about technology from the perspective of how it's used by their firm.
There are two basic ways that today's tech benefits independent firms: increasing employee productivity and increasing client service and communication. In this piece, I'll discuss technology that benefits clients; next week, I'll address using tech to increase productivity.
There's no question that technology can greatly enhance advisory clients' experience, or that advisors need to keep up with the latest client technology to compete. Yet, I've found it's a mistake for advisors to focus solely on these innovations.
Instead, when making tech decisions, firm owners need to take a step back and reevaluate what key services they and their firms are currently providing to clients.
For most firms, the answer boils down to three key services: providing financial advice, changing client behavior and connecting with clients. If you think about it, everything else — from estate planning to financial planning, and portfolio management to risk management — falls into one of those categories.
Consequently, the key question firm owners should ask, but few do, is: How does my present technology, and any new technology I'm considering, increase my firm's ability to deliver those three services?
To answer this question, you'll have to spend some time thinking in detail about how your firm delivers each of these functions. You might ask the following questions:
- How do you provide financial advice?
- What data do you collect?
- How do you use that data to create a financial plan and/or an investment portfolio?
- And how do you communicate these conclusions to your clients?
Break It Down
Let's look at each of these issues.
In the area of portfolio management, digital investment platforms (also known as robo advisors) automate the portfolio creation and management process — usually for a lot less cost than human investment managers.
But are those digital portfolios really better, or even as good, as human asset managers? It's true that they often recommend the lowest cost investments. But are those funds always in the best interest of the clients?
What about risk? Are "digital advisors" really as good at assessing portfolio and market risks as well as human advisors? And do all robos always act in the best interests of the clients at all times? How do you know?
