Journal of Financial Planning: August 2016
Anthony Stich is director of global marketing at Advicent Solutions, a leading provider of SaaS technology solutions for the financial services industry, servicing the world’s largest financial institutions.
In my last column for the Journal, (“What Are Your Top 5 Essential Apps?” from the April issue) I explained the importance of technology, specifically applications, during our daily lives. However, the underlying theme centered around two important factors: the ubiquity of technology, and how technology empowers users—including your clients and prospects—more than ever before. Let’s take a deeper dive into these two factors, examining how they directly impact our profession, and, most importantly, what this means for your practice.
Technology Changes Lives for the Better
I believe the impact of technology is tremendous for everyone. Technology is at the point where we may underappreciate how much it has improved many aspects of our lives, from banking to ordering food to health care. In our profession specifically, technology is improving the client-adviser relationship.
Ten years ago, how did a financial planning professional go about providing a financial plan to their clients? They probably used NaviPlan®, Profiles™, or Microsoft Excel, while the really smart ones might have used a yellow pad of paper. They calculated and simulated whatever was needed, printed the report, and then delivered it to the client along with a presentation. No matter how much the adviser and client both vowed to be more proactive about future plan reviews and discussions, it always seemed to be an episodic event.
Fast forward to today where consumers get access to all the information they could ever want immediately by way of technology. Even more so, individuals are more empowered to impact their future by being actively involved in the decision-making process. This is most certainly happening in banking, retail shopping, and countless other industries. Herein lies the genesis of digital attrition.
What Is Digital Attrition?
Digital attrition is a term used by people way smarter than me. In short, it describes users who leave companies or services that do not offer an ideal digital experience. The best and most recent example of this is in banking. As account holders began to see the value of an empowering digital platform, they started to leave banks and credit unions that did not offer what they deemed to be a deserved experience. They wanted 24-hour access to their accounts; but more so, they wanted to be empowered to make decisions or perform transactions where they wanted and when they wanted.
I was in the banking industry for quite some time and witnessed attrition firsthand. Users were leaving rapidly to do business with institutions that provided the best digital experience available, even when the user (account holder) had a very low affinity toward the brand to which they were migrating. Think about that for a moment: people were leaving a relationship that they had a more positive experience with (brand affinity) for banks that they preferred less, but offered the ideal digital experience.
Smaller banks and credit unions were caught off guard. Brand affinity, personal experience, and other intangible measurements—their bread and butter—were not cutting it anymore. It was all about the digital experience. I think you see where I am going with this.
The Migration Will Happen
This same digital expectation is coming to the financial planning profession. You could argue that we are experiencing it now; however, the real tsunami of change is still coming. Today? Tomorrow? Probably not, but we will see it in our lifetimes. In fact, the management consulting company, Capgemini, recently published a research report regarding digital expectations across the globe. The report, “Wealth Management in the Digital Age,” supports my thoughts here, but the results were more staggering than most readers probably anticipated. In fact, the report found that 66 percent of high net worth individuals, globally, would leave their wealth manager due to a lack of integration between digital and traditional channels. If this scenario were to occur, wealth managers would lose an estimated 56 percent of their net income to digital attrition, according to the report.
At this point, you are probably thinking, “What? My dashing good looks will not do it for me anymore?” Exactamundo, as my father used to say. Thinking back to the bank example, your clients will begin migrating to a better digital experience, whether or not they prefer your intangible offerings, because the empowerment of technology is undeniable. In the financial planning space, clients will begin to seek out digital experiences that empower them to better control their financial future, while also granting them unlimited access to their plan. If the migration is similar to what the banking industry experienced, we will witness clients of all demographics begin moving to larger institutions that offer more power, easier access, and better technology in the financial planning process. Robo-advisers, consumer-directed planning options, and client portals will be very attractive to these individuals, whether or not it is actually what is best for them and their situation.
What Does This Mean for Your Practice?
Let’s start with the obvious: your practice needs to offer the digital experience that consumers expect, in addition to your amazing planning abilities. This experience will need to be competitive with what larger institutions offer, so if a comparison is ever considered, your practice can still win on the intangibles. What else does this mean? More business for you. Quite frankly, by building a technology stack that improves your efficiency and gives consumers what they seek, your business grows.
Now for the good news: offering a digital experience is attainable, easy, and will improve your practice in many ways. For instance, if you implement a client portal experience that offers personal financial management (PFM), you can identify held-away assets that could increase your AUM. In another example, if you use technology that offers business intelligence features such as real-time alerts, you can communicate with your clients on a timelier basis, eliminating the episodic planning of the past. This will improve your cross-sell opportunity and enhance your exposure to your client, putting you top of mind.
Finally, offering a digital experience will make your practice more appealing to a wider pool of prospects, resulting in a larger book of business, more referrals, and, ultimately, more revenue. Do not simply rely on your dashing good looks and yellow pad of paper. Offer technology that your clients expect and that will benefit your practice.
Learn More: Find Your Tech
Attendees of the FPA Annual Conference—BE Baltimore, Sept. 14–16, will have the opportunity to demo the latest technology from leading-edge fintech firms, including Advicent Solutions. Tech kiosks, located just outside the educational breakout session rooms at the Baltimore Convention Center, will showcase financial planning software, apps, CRM systems, and more.
Learn more at FPA-BE.org.