Many financial advisors work with all types of clients, from wealthy retirees to hard-working millennials who are just starting to invest their money. Those advisors who succeed in this business know that each of those clients must receive a good level of advice – even those with small accounts. That’s because these clients are going to be the big accounts of tomorrow.
In fact, there are two reasons why clients with small accounts are set to become a much more important part of many advisors’ books of business. First, we are about to see a game-changing intergenerational transfer of wealth of roughly $1 trillion in Canada. That’s going to turn some of those smaller clients – the millennials who have yet to inherit their parents’ wealth – into much bigger clients. Second, advisors’ pay structure is moving toward a fee-based model, which means advisors will have to work with more clients to earn the same amount of money than they did in the past.
Although the stereotype is that millennials are glued to their smartphones, the truth is that they also want a human touch. To attract and keep this new generation of clients, advisors are going to have to offer a “hybrid” approach – part computer, part human.
According to the study Decoding the Millennial Mindset, which was published last year, 73 per cent of millennials surveyed said that in-person communication was the best way to build trust with an advisor. This was well ahead of telephone calls (45 per cent) and e-mails (42 per cent). Meanwhile, only 17 per cent view texting and nine per cent consider social media to be effective means of building trust with advisors.
There’s also evidence that Canadian investors, on the whole, believe that bespoke financial advice is a standard, rather than premium, service. In fact, 87 per cent think that if they share their data with advisors, they should receive personalized financial products and services, according to a 2017 Accenture study. That’s the highest share of any market in the world as the global average is 73 per cent.
The same study revealed that 55 per cent of Canadian investors also seek quality and value brand integrity and excellent service. They’re prepared to reward advisors who put clients’ interests first. All of this suggests that generic products and advice, which is too often what clients with smaller accounts receive, will simply not cut it with Canada’s upwardly mobile millennials. Advisors who continue down this path do so at their peril.
Technology should be a key weapon in the advisor’s arsenal. Although millennials value human interaction, they also expect everything to be delivered digitally. Financial services firms are already making good use of robo-advisors to create smart, diversified investment plans. These firms also leverage robotic process automation (RPA) technology, which uses artificial intelligence (AI) to mimic the actions of humans in carrying out specific tasks.
RPA is easy to use and relatively inexpensive for advisors, some of whom are adopting this AI-based technology to increase efficiencies and lower costs of what would normally be manual tasks. For example, advisors might use AI to streamline the client onboarding process by filling out forms automatically.
But good financial advice depends on intellectual capital and an understanding of nuance, which RPA can overlook. There’s also some skepticism that AI can fully replicate human beings’ value judgment and sophisticated thought processes, hence the need for a hybrid approach.
Making clients who have smaller accounts – millennials and otherwise – feel valued will require unique and ongoing communication in the form of market performance updates, tax information and tips, financial education webinars, macroeconomic and geopolitical information and various financial tools. That level of communication might sound onerous to many advisors, but they should not be discouraged.
For example, advisors could blend automated campaigns with phone calls and in-person meetings. Technology should enhance, rather than inhibit, the client-advisor relationship because it provides advisors with mountains of new data they can leverage for their clients’ benefit, such as knowing that a long-term client’s birthday is approaching or that another client is saving for a child’s postsecondary education.
Still, technology will bring advisors extra responsibility along with opportunities. Not all clients who have small accounts are tech savvy and they will need to be educated about the tools that will play a role in their financial lives. This is nothing for advisors to fear. It’s worth remembering that the initial purpose of technology such as RPA and AI was to relieve companies of repetitive work, freeing up employees to focus on higher-value tasks, such as those involving client interaction.
Technology and personalized interaction both have significant roles to play in giving smaller accounts the attention they deserve, especially as they will be your large accounts of tomorrow. However, neither technology nor the human touch can do the job alone.
Donna Bristow is managing director, North American Wealth, at Broadridge Financial Solutions Inc. in Toronto.