Q&A on How Financial Firms Should Adapt Technology Post-Pandemic | Financial Advisors

With no end yet in sight with the global pandemic, sectors across the economy are bracing for the long-haul, including financial advisors. One of the chief day-to-day challenges for financial advisors is the lack of adequate technological support.

A recent survey by Broadridge Financial Solutions found that financial advisors faced a series of challenges in adapting to the pandemic-induced virtual environment. Chief among them was not having adequate technology. As the world begins to accept the pandemic may be a harbinger of a new norm, advisors are looking to their firms for technological support in preparing to navigate the coming years.

We spoke with Michael Alexander, president of wealth management at Broadridge Financial Solutions, which has closely studied these shifts. Here are excerpts from that interview.

How has the pandemic changed the financial advice and wealth management landscape?

The pandemic has accelerated the shift to digital for wealth managers and financial advisors. Clients expect advisors to have the appropriate technology tools to assist them. But 74% of advisors reported in our survey say that they wish their firm had better access to these tools. The pandemic and corresponding stay-at-home mandates have reinforced that the future is digital and advisors need to make sure they have the proper technology tools to service clients virtually for the long-haul.

The pandemic has also changed the frequency in which advisors and clients connect, as we are now accessible 24/7. Sixty-three percent of financial advisors report that they communicate with clients on at least a weekly basis, and 51% of millennial financial advisors communicate with their clients daily.

With this frequent communication comes more personalized advice. Advisors routinely share ideas for new investment vehicles with clients, as well as a personalized analysis of existing investment vehicles. As we continue to live in a volatile time, investors want real-time, frequent updates on their investments, and advisors need the digital tools to act fast.

What challenges has the pandemic brought for advisors?

Financial advisors are seeing their clients ask for more information across not only retirement planning and the current status of investments, but also information regarding taxes and debt management advice. These results are a clear indicator that financial advice is shifting toward holistic financial planning, and the advisor is no longer just an investment manager.

According to another Broadridge survey, advisors younger than (age) 40 are four times more likely than older advisors to believe that the main value they provide to clients is holistic financial planning. Advisors recognize that this shift is occurring, but it’s happening at a rapid pace, and wealth management firms need to support their advisors in this transition.

How should firms and advisors be adapting to the “new normal” the pandemic has brought?

For firms to stay competitive, they need to turn disruption into an opportunity and reimagine their operating models, further leveraging technology and combining it with personal interactions. According to a Broadridge pulse survey of 500 C-suite executives and their direct reports, wealth management firms plan to focus on a variety of technology tools within the next six months, including modernizing IT platforms and software engineering, to develop new digital propositions and improve the ability to quickly gather and analyze data.

As wealth management firms use these tools to navigate the impact of the pandemic, they’re finding opportunity in the chaos. According to that same survey, 38% of wealth management firms reported that remote working and collaboration is one of the biggest opportunities that will arise from the pandemic.

Firms also need to show their value as a goals-based and holistic financial planner, but advisors still find that they are lacking insight into their clients’ financial pictures. In order to be successful in the new normal, advisors must integrate a client’s banking, illiquid asset, held away assets and liability information to properly deliver goals-based advice.

Digital transformation is a big and intimidating task. Firms should be working with a technology partner, internal or external, that is willing to invest alongside the firm throughout their technology transformation.

What risks do advisors and firms face if they don’t accelerate their digital transformation?

If firms do not prioritize, accelerate and make investments that support digital communication and holistic financial planning, they could be at risk of losing advisors and failing to connect with the next generation of investors.

According to Broadridge data, 77% of financial advisors have lost business as a result of not having the appropriate technology tools to interact with clients. More than half of financial advisors say they often think of leaving their current firms in search of better technology, and this number is even higher for millennial advisors.

What are your predictions for the wealth management industry over the next few years?

The investment advice industry is headed for a massive transfer of generational wealth over the next few decades. Firms must make the right strategic technology investments that will scale to support the next generation of clients seeking goals-based advice, self-service and holistic financial planning solutions.

As millennials and Generation Z look to invest their money with a financial advisor, they’ll expect real-time, personalized advice as well as frequent communication with their advisor. These are generations that are accustomed to a constant flow of information and connectivity with technology, so wealth management firms will need to equip their advisors with the most up-to-date technology to service the next-generation investor.

These next-generation investors, many of whom started investing in the age of digital advice and zero-fee self-directed trading, will want to remain hands-on and have a more active role in their financial wellness, even when working with a financial advisor. The most successful financial advisors will embrace this and quarterback the various services that these next-generation investors want to retain, adjusting their business models to enable this shift, rather than focusing primarily on wallet-share and assets under management.

Data aggregation will continue to be more pervasive, meaning investors have more ready access to their data than ever before, in one place, without needing to log onto all the various portals. This sort of data portability will mean it’s easier for specialized strategy registered independent advisors (RIAs) to provide specialized services.

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