Advisors have had to completely change how they engage with clients over the past two years because of the pandemic. Two-way video chats are the norm rather than an unusual option. Where does the disruption leave the challenge of sustaining trust in uncertain times?

Mike Alexander, president of wealth, Broadridge, talks about how the role of wealth advisors is changing. His firm has a particular angle: it delivers technology-driven solutions that drive business transformation for banks, broker-dealers, asset and wealth managers and public companies. Clearly, technology plays a big role in wealth management today. The pandemic has massively accelerated the take-up of certain tools and communications channels, but there is far more to change than this.

The editors are pleased to share these insights with readers. The usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com

Over the past 24 months, the wealth management industry experienced radical shifts in the way firms and advisors communicate with clients and nurture relationships. Today, wealth managers are experiencing rapid changes in their financial situations and goals, and an even faster transformation of the products, channels and services they use.

The pace of change will continue to accelerate in 2022. To retain clients and grow business in the year ahead, firms and individual advisors will have to evolve their business models by addressing three key priorities:

1. Redefining, digitising and modernising the advisor-client relationship;  
2. Raising the bar on client service and investment advice with a focus on personalisation; and 
3. Embracing new investment products such as cryptocurrency and alternatives.

Redefining the advisor role
Today’s wealth management industry is much different from what existed at the start of 2020. COVID-19 lockdowns altered consumer behaviour, accelerating the adoption of virtual communication and e-commerce. The combination of more time at home, commission-free trades and stimulus funds fuelled an unprecedented influx of retail investors into the financial markets. These new, often young investors, use firms such as Robinhood and other online tools for DIY investing. They get their financial advice from Reddit and YouTube and are pouring assets into trendy cryptocurrencies and collecting NFTs – options which most financial advisors only offer on a limited basis. 

How can financial advisors adjust to these changes to attract new clients and deepen existing relationships? The answer is surprisingly simple: Become a trusted advisor and provide highly personalised, data-driven advice. 

Advisors in 2022 must start positioning themselves as expert advisors and coaches who provide investors with advice not just on specific products or portfolios, but on how to achieve overall financial wellness.

This means evaluating the entire portfolio – including both assets managed by the advisor and self-directed investments in traditional and non-traditional assets – and making sure it is aligned with the investor’s needs, aspirations and values. Today, less than one-third of consumers have a financial advisor and an astounding 45 per cent do not have any retirement savings. 

This creates scale challenges and necessitates AI-driven technology to reduce friction with clients, personalise services and improve investment outcomes. Embracing technology and interacting with clients in their preferred manner, including new conversational technology and video, will enable advisors to connect with new investors and scale their business.   

Studies have also shown that clients prefer to work with financial advisors who have backgrounds similar to their own. Bringing in talented professionals that reflect the country’s demographics will allow advisors to serve underserved communities better, helping all members achieve their financial goals and increase investor literacy. 

Redefining the advisor role also means broadening the advisor-investor relationship with the entire household or family. By addressing the needs of everyone in the family and including potential heirs in planning sessions, the advisor will extend and strengthen the existing client relationship while building new ones. He or she will also be in a much better position to retain the business of younger investors who are often disinclined to stay with their parents’ advisor. By assuming the role of educator or mentor across all aspects of financial wellness, such as budgeting, estate planning and philanthropy, the advisor can form a partnership that spans generations. 

In many ways, this new advisor role will resemble a life coach: an expert who understands a client’s unique, personal situation and offers real insights about how to achieve financial goals. 

Raising the bar on service
In March 2020, like many other industries, advisors and wealth management firms went digital to stay in business. Over the course of nearly two years, the industry cobbled together an ad hoc service model using Zoom calls, emails, virtual presentations and other digital tools. Because this was all so new and abrupt, most clients had patience with the inevitable snags and disruptions. That grace period is ending. In 2022, clients will expect the same level of seamless digital service they receive in their everyday digital applications. 

Fortunately, advisors have access to a combination of data analytics, communication apps and content services that allow them to deliver hyper-personalised service to clients. Service providers like TIFIN and Fligoo enable advisors to identify and anticipate client preferences, needs, interests and intents. Equipped with this data, advisors can foster deeper relationships with clients by sending recent and relevant content that is personalised to the individual client, whether the client is starting a business, paying for college, inheriting assets or retiring. 

Firms and advisors can partner with third-party vendors to supply that personalised content or build client engagement through rewards and other “gamification” techniques. Other widely available services allow advisors to communicate with clients at the right time via the right channel, whether that is email, Facebook or LinkedIn, on a computer or mobile phone. 

Relevant content sent through those channels should help educate clients about all aspects of their portfolios and lifestyle, while increasing financial literacy. As investors have a greater say in how they invest, when they invest and what they invest in, advisors should have a big role to play in those investment decisions. Advisors must position themselves to be a trusted primary source of financial planning helping clients make informed decisions. 

As advisors build out these technology platforms to create personalised strategies, they should never sacrifice their biggest competitive advantage: the human touch. The one thing advisors can provide that digital competitors can’t replicate is a phone call or in-person conversation about the things which clients care about the most. 

Embracing crypto (and other new asset classes)
Astronomical returns on bitcoin, NFTs and other new asset classes have spiked interest among investors of all types and ages. Financial literacy and education are important ways for advisors to engage with clients and meet their interests in crypto and other alternative assets, even if an advisor might not be able offer these investments through their own investment platforms. 

Today, wealth management firms are working furiously to integrate these asset classes into traditional investment platforms to make them more accessible to a wider audience. In the meantime, financial advisors must be prepared to answer client questions and to reach out proactively with educational materials on these complex and rapidly evolving assets. In 2022, firms and individual advisors will have to answer a critical question: What level of expertise is required to actively advise on cryptos, NFTs and other new asset classes while fulfilling their fiduciary responsibility to clients and complying with all other regulations? 

Bonus industry trend: restoring trust  
The rise of commission-free trading and low-cost ETFs are not the only reason young investors are bypassing expert professionals and investing on their own. Many young investors simply don’t trust financial service firms the way past generations did. 

Millennials were still in the early stages of their careers when the Global Financial Crisis devastated the economy – with banks playing a leading role. Nearly a decade later, a World Economic Survey of people from around the world found that almost half of 18 to 45-year-olds did not trust banks to be fair and honest. (https://www.weforum.org/agenda/2017/08/global-shapers-survey-2017-5-things-we-learned/)

Gen Z wasn’t even in the workforce in 2008, but as digital natives who prioritize personal values in their spending and investment decisions, these young people have no natural affinity for “Wall Street” or their parents’ financial partners.  

Building back trust and respect for traditional financial service providers among these cohorts will be a central challenge for the wealth management business in 2022 and beyond – not only in terms of attracting clients and assets, but in attracting the next generation of financial advisors.