Every day, there are hundreds of news items extolling the virtues of new fintech. There is a dizzying array of tools flooding the advisor market. I am envious of those who can choose wisely among them.
And yet this software doesn’t quite capture the feel and efficiency of the advisor-client experience. Is that a problem with the software? Or with the users?
I don’t want to discourage innovation—bring it on! But I wonder if we have truly learned how to use the amazing apps and software we already have, or if we keep jumping on emerging fintech as if it were the new iPhone version X.X before we’ve figured out half the functionality of the old models.
The center of any technology should be the advisor-client relationship. That’s the utopian vision, anyway, one that should prompt simple and easy solutions. Software providers should be enabling your digital relationships, and thus improving your volume of activity, as well as the consistency of your results. When you can string your software together into a customer experience, you see the potential contribution from tech adoption—and wasteful gaps when the tech is not deployed.
When you’re starting to deploy your technology, start with a daily plan and see how it affects your overall results. Your CRM software should have all your client’s information loaded and your activities log should show that every day you have “calls to action.” The average book for every advisor is 125 families. Your CRM should include three to four nuclear family members but also aging parents and adult children for a total potential “household” of 30 to 40 accounts with several custodians. Without good software, that’s a lot of Post-it notes.
It’s time to think of your expectations for the customer experience. How many of those households receive a solid annual review? A midyear review? How many times do you follow up on the actions you’ve taken? If the industry standard is two meetings a year, can you be sure all 125 families got theirs? That’s 250 appointments with just two meetings for three generations and 30 to 50 accounts. What if more meetings were needed? If the accounts are for retired people, would that not mean more complexity?
I remember visiting with one of the country’s top wirehouse advisors a few years after managed accounts became mainstream. One of the pillars of this advisor’s offering was a quarterly performance and holdings report and a quarterly review with the clients. People loved the transparency and accountability—and consistency.
Walking into the advisor’s office, I noticed a flurry of activity in the office next to his. “They’re stacking our quarterly reports,” he explained. “We had to get another office to hold them.”
The advisor’s practice became buried in meetings with clients. He made changes to balance the load—like setting annual reviews by the client’s birthday instead of trying to squeeze everyone into the calendar at the quarter’s end. He also merged some account reviews by inviting multiple family members. Both steps opened additional opportunities, but the initial motive was just to save time.
The discipline required for the regular client meetings was an eye-opener to him. “We had no idea of how little we were talking to clients—and how narrow the conversations were,” he observed.
This is Practice Management 101: Our client communication is lacking, and that means there’s opportunity if we improve it. The average wealth management client is about 67 and has accounts with four to five firms, but no one firm usually has more than half those assets. Until that reality is altered, advice providers are battling each other in a zero-sum game with really significant implications. “Share of wallet” is the new battleground.
As aging clients consolidate their assets, there will be winners and losers among financial services professionals. Morgan Stanley has said for five years that it’s actively seeking the nearly $3 trillion it doesn’t have from the clients already on its books. In pursuit of that goal, the firm booked $438 billion in net new assets in 2021.
This is a big game with a lot on the table. If you think you’ll achieve organic growth that miraculously springs from this aging investor population, forget it.
Keep in mind the reality. Most advisors don’t regularly reach out to clients with tailored information. They just don’t have the time. This applies to RIAs, wirehouse advisors, regional brokerage advisors, independents and direct providers. Ironically, it’s the AI-powered robos that have upped the game for proactive outreach, not the humans. Robots are pretty organized and work 24/7.
Tech tools can indeed help you, however—help you manage opportunity and remember all kinds of important business issues: the clients you haven’t seen for a while and the meetings you meant to set and birthdays and retirement dates and RMDs and bond maturities and graduations and all the stuff clients told you in meetings that they hoped you’d remember.
Tech helps you manage opportunity by managing volume. Most advisors have all the clients they need—especially when you consider each client’s extended family, friends and business associates—but they are not organized well enough to get there.
Remember Warren Buffett’s line: “Investing is simple but not easy.” The same goes for advisors in the business of details—the excruciating details they must remember, like accurate beneficiaries and powers of attorney and cost bases and the names of the children (and pets!) Everybody knows this, you might say. But the industrywide data tell the story—they don’t do it. Otherwise why would the average client have four to five different firms? Are they really meeting a couple times a year with each?
His colleagues were soon consolidating assets, and their work set the stage for the evolution of the business into Merrill Lynch Private Wealth, a new step in client service.
As it was starting up, data again revealed reality. A very simple exercise we did with the top advisors globally showed that there was potential to serve even the best clients even more.
The advisors reviewed their top 20 households against a list of the seven most common financial products (such as managed accounts, for instance) and eight of the most common financial strategies (asset allocation, estate planning, etc.). The gaps found among just the top 20 households were alarming (or exciting, if you like opportunity). Each of those gaps opened a door of access for a competitor—and that became the basis of the wealth management game plan of driving consolidation and referrals (by closing that door to competitors).
Simple, right? It should be. All the best strategies are simple, and understandable to clients. But they require organization and attention to detail, and you cannot achieve that level of efficiency with Excel spreadsheets and Post-it notes. And that is where a lot of the advisory world remains, trapping frustrated clients with them.
Consider that in 1997, the time when Merrill Lynch took that step, there were just a few client households to reach, and the client population was not nearly so close to retirement. The oldest baby boomer was only 51.
Now there are some 10,000 people turning 65 every day. The Great Retirement and Great Resignation together suggest the number leaving the workforce exceeds 12,000.
The good news is that if your marketing and relationship skills haven’t atrophied after 156 months of bull markets, you’ve got a historic chance to win new clients and assets from less ambitious advisors—potentially doubling your business, or more. The flip side of course, is that you are surrounded by competitors who might do the same to you.
Let me know how it’s going—call me on my Razr flip phone or email my BlackBerry.