A distinct shift in focus from the utilization of discrete products, accounts, and technology tools to holistic, household-level integrated solutions has emerged across the advisory industry.

According to research published recently by the Money Management Institute (MMI), there is a new trajectory for the future of financial advice marked by human guidance enhanced by digital capabilities.

The report, titled “Modern Wealth: The Roadmap to Improved Investor and Advisor Outcomes,” finds that optimized, household-level wealth management has moved from the realm of “The Next Big Thing” in advice to the new standard. This shift brings new complexities and opportunities for financial services firms in coordinating client data, digital tools, and processes to enable financial advisors to provide comprehensive guidance for the benefit of investors.

The research also highlights the importance of connecting multiple technologies and data sources as an integral part of this change, as advisors and enterprises move from a siloed technology and product approach to more coordinated technology and investment platforms to quantify the benefit of household-level management and help investors achieve their financial goals.

Key findings from the research include:

• Today’s investors tend to own five to six accounts with a range of registrations and product types, most commonly managed by two or three advisors. In their quest to diversify products and advice sources, investors are unable to plan appropriately, optimize their full household portfolio, and achieve their intended results.
• Industry-leading firms are creating comprehensive wealth platforms that leverage and coordinate in-depth financial planning and goal-setting, multi-source data feeds, and various technology and software capabilities.
• Optimal asset location and the organization of multiple account registrations using a risk-smart, tax-smart strategy can add as much as 183 basis points per year in incremental after-tax returns and income.
• There are a number of key software tools necessary to coordinate household-level management, including: CRM and client portals; financial planning; account data aggregation; risk management/asset allocation; portfolio construction/investment proposal; account onboarding and funding; tax-smart asset location; household-level management and rebalancing; optimal income sourcing; trading platforms; household-level reporting; and insurance/protection.
• Consumer demand has shifted from a simple “beat the market” mentality to a personalized, goals-based, holistic solution. As a result, industry leaders are moving away from a focus on beating arbitrary benchmarks for each product and account, and toward achieving client goals across household holdings.
• 80% of consumers are more likely to do business with a firm that offers a personalized experience; 90% indicate they find personalization appealing.
• 65% of high-net worth individuals are prepared to leave their wealth management firm due to the lack of an integrated, omni-channel experience.
• The human advisor remains a critical piece of the puzzle. While digital investment advice platforms such as robo-advisors rose to prominence by promising an improved digital experience, adoption has remained decidedly low. An overwhelming majority of investors still prefer some degree of human interaction to make investment decisions and life choices in the face of increasing complexity.

Elaborating on these points, Charles Smith, executive director of EY, said, “The firms that will win the war for advisory dollars – both qualified and non-qualified – will be the ones that clearly articulate the value of advice through a goals-based approach, a simplified plan to tie goals to a personalized set of portfolios, and effective management of the impact of taxes and fees on the client during the onboarding process.”

The article first appeared in B2B Global Professionals.

Image: Unsplash

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