Be the Advisor of the Future — Starting Today
Technology gives the best practitioners a chance to shine.
A decade ago, financial advisor Matt Cooper would have called you crazy if you'd prophesied that one day he'd be working on an Internet-enabled iPad while flying cross-country. So he has no trouble imagining that 10 years from now, advances in computers and communications may well have changed the advice business immeasurably.
"When today's technology-savvy youth mature and intersect with the culmination of social media, voice recognition, artificial intelligence, search and robo-advisors ... the combination may be very powerful," Cooper, who runs Beacon Pointe Wealth Advisors, writes in an e-mail. The firm manages nearly $700 million in Newport Beach, Calif.
The best advisors will thrive by using emergent tools to their advantage, he believes, while those who dole out carbon-copy financial plans will lose business. Robo-advisors may actually prove perfect for smaller clients who need help only with straightforward budgeting, college saving or retirement planning. But advisors who learn about clients' personal goals, identify their unique needs and deliver customized service have little to fear. New technology "will provide an opportunity for really good advisors to shine," writes Cooper.
Soul Searching
Forward-thinking advisors can begin positioning themselves for this brave new world today, according to Melissa Mrazek, director of advisor consulting for asset manager Curian Capital in Denver. She says mavericks will emphasize the personal touch by doing for clients what machines cannot — acting as sounding boards on difficult decisions and parsing the financial implications of life situations that aren't overtly about money. Advisors agree with Mrazek that in an age of ubiquitous high-tech investment-management and financial-planning software, the key to justifying one's fees is improving the quality of time spent with clients.
Of course, software firms like Envestnet want independent advisors to think of technological advances as big improvements in time management. And in some cases, tech can indeed help wealth managers be more efficient when tackling tough financial-planning issues. For example, says Lori Hardwick, Envestnet's executive vice president of advisory services, her firm sells "overlays" for its portfolio-management tools that address tax efficiency and socially responsible investing. Using these filters instead of doing the heavy lifting of stock-picking can save advisors hours, says Hardwick — time they can spend with clients instead.
Financial technology will free the advisor of the future to think about the subtleties of client situations, says Perry Moore, director of wealth planning at Payne Wealth Partners, which manages $380 million in Evansville, Ind. His firm already delegates chores like portfolio rebalancing and performance analysis to computers, so team members can focus on helping clients make financial decisions that may trigger anxiety or other negative feelings. "A lot of it is coaching a client through what on paper might seem black and white but in their brain is not," says Moore. A prime example would be the question of when to start collecting Social Security. "Help the client not only understand the logical case based on the calculations, but also get in their head and help them get past the emotional impulses."
A wealth manager who guides clients on what often becomes a philosophical journey conveys caring and trustworthiness, Moore says. To be sure, the journey will probably yield valuable information about the client on topics like budgeting, estate planning and charitable giving. But having a conversation about the very meaning of a client's life requires understanding human signals, from word usage and tone to body language and facial expressions. That's something machines haven't yet accomplished.