Financial Advisor-Focused WealthTech Takes Center Stage Once More

Pandemic’s Economic Disruption Escalates Consumer Anxieties, Drives Increased Engagement with Financial Advisors

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Derek Bruton has held leadership roles across major custodial firms and independent broker-dealers, including Charles Schwab, TD Ameritrade and LPL Financial, but he didn’t start out in wealth management. The Stanford graduate from the class of 1989 played professional basketball in Japan his first few years after school, after playing on his college basketball team for four years on an athletic scholarship.

“I recall two things about my first game, in Hokkaido, which is the northern-most Japanese island” he said. “The gym was ice cold, and when I was warming up there was steam coming off of everyone’s body.”

Bruton, who now serves as CEO of Kingswood US, a hybrid RIA and broker-dealer with over $2.1 billion in assets, sees parallels between his basketball stint in a foreign country learning the ropes in real time on how to best integrate with his teammates and the complexities of aligning the right wealthtech for financial advisors.

“Whether it’s in professional sports, or in your professional career, cutting through all of the background noise, knowing the role you play and how to leverage the strengths of others is crucial to being able to produce the best possible results.”

Bruton’s message on staying focused on tech strategy objectives that support financial advisors in the face of ongoing proliferation of fintech tools contains many lessons for the fintech space – Especially when it comes to the age-old debate between ‘do it yourself’ (DIY) advocates and B2B proponents.

DUELING FORCES

Over the past decade, fintech has been shaped to a fair extent by two dueling forces:  On the one hand, are those who believe the future is in the hands of DIY investors, empowered by advancements in robo-advice (think Betterment), online self-directed trading (think Robinhood), as well as consumer-facing financial planning tools like Personal Capital or Quicken. 

In the opposing camp, are B2B fintech experts who remain confident that the bulk of growth opportunities in fintech will continue to be driven with B2B solutions that place financial advisors at the heart of the financial planning and wealth management process.

When early robo-advisors appeared in the early 2010s to considerable fanfare, DIY enthusiasts crowed that these platforms would soon displace traditional financial advisors, who would suffer the same fate as travel agents at the hands of online travel bookers like Expedia.

But if anything, the pendulum appears to be swinging back towards advisor-driven wealth management, as market volatility and economic disruption from the pandemic have pushed consumers to financial advisors for handholding and personalized support.

With the surge of engagement reported among wealth management firms with anxious clients has come renewed attention on the technology platforms that place financial advisors at the heart of the experience.

“The B2C side of fintech is saturated, with too much money chasing too few opportunities,” says Joel Bruckenstein, Founder of the T3 fintech wealth management conference, and a strategic consultant to wealthtech firms. “More savvy investors have turned their attention to wealthtech focused on financial firms and their professionals.”

T3 plans to hold a live event from Sept. 27 to Oct. 1 in Denton, Texas, provided COVID-19 vaccinations happen on schedule. Bruckenstein says technology exhibitors are eager to get back in front of advisors, and several firms will make their first showings at the event.

AVOIDING APPLES TO ORANGES COMPARISONS

Pete Clemson, the new Senior Vice President in charge of Digital Solutions at Advisor Group, agrees about the resurgence of financial advisor-centered wealthtech while suggesting there’s significant room for improvement in this segment of the marketplace.

“The most effective digital experience requires offering customers an essential range of features,” Clemson said. “That starts with simple actions such as having a robust digital account open and digital signing process, and progresses on to having the ability to leverage powerful visualization tools that will help people have a clearer picture of their financial future.”

Clemson is quick to add, “It’s apples and oranges comparing financial advisors with most of the other jobs that direct-to-consumer digital tools have replaced.  Buying airline tickets or auto insurance might not be cheap, but there’s not a great deal of complexity involved.”

“In contrast, having in place the right financial plan that encompasses making your mortgage payments, saving for your kids’ college education and retiring – These are complex decisions that need to be approached thoughtfully and correctly, in partnership with a financial advisor.”

COMPLEXITY DRIVES OPPORTUNITY

One factor driving the surge of new interest in wealthtech is the surge of new opportunities in serving high net worth and ultra-high net worth investors, consistent with both ongoing demographic changes as well as the creation of new wealth from participants in especially high growth sectors such as technology.

Andrew Aziz, Executive Vice President of Business Development at d1g1t Inc., a digital wealth management platform that offers turnkey, institutional quality risk analytics for RIA firms focused on clients with greater levels of wealth and income, said, “There is no doubt that DIY tools will remain important to investors with a small portfolio and limited investment options. Having cheaper, more automated tools is a good thing for that type of investor.”

But Aziz also emphasizes that when investors reach a higher level of wealth, income and life complexity, they inevitably require professional guidance from financial advisors – And those financial advisors will need to be equipped with more sophisticated tech-enabled tools to adequately serve this demanding segment of the wealth market.

“What about people who are slightly older, have more money to work with and perhaps a family? They likely have complex issues to consider, whether it’s paying for college, saving for retirement and tax planning.  A good professional, enabled with the right technology and analytics, is invaluable for higher net worth investors.”

MAKING THE PIECES FIT

But while the opportunities are there for wealthtech, one of the biggest challenges is helping wealth management firms figure out how to best work with a mix of proprietary technologies, older third-party tech, and more current third-party APIs.

Firms cannot eliminate all their outdated technology, whether third party or legacy proprietary. Therefore, workflow automation emphasizing seamless integration of both existing and new solutions is essential.

“Lack of technology integration costs advisors time and often manifests as poor service experiences for investors,” said Marc Butler, President of Skience, a provider of wealth management workflow automation solutions.

“This includes how data is shared across applications as well as how applications integrate on a front-end. Wealth management firms also have traditionally under-invested in client portals, but it is an area where they have an opportunity to differentiate themselves and deliver on their value proposition.”

TRANSFORMATIVE GAME CHANGERS?

There’s also the potential for new B2B tech solutions that could be game-changers in driving exponentially greater productivity and growth for wealth management firms and other financial services businesses.

One particularly exciting development?  AI-driven virtual assistants that enable wealth management firms to decrease call volume from advisors to call-center staff, without impacting middle and back-office services, such as financial advisor onboarding, cash management and routine compliance support.

Venture-backed and Silicon Valley-based CogniCor, led by Dr. Sindhu Joseph, co-founder and CEO, has emerged as a leading provider in this emerging space.  Discussing the timeliness of her company’s “digital companion” for financial firms and their professionals, Joseph said, “Incremental technological change does not work for growth-oriented firms, and in fact taking a patchwork approach can cause more problems than it solves.”

Under its mission of driving fundamentally transformative opportunities for its client firms, CogniCor’s platform improves on past AI assistant solutions because it is built upon “knowledge graphs” that tie together specific concepts and features of its client firms’ operations, as well as the relationships between those characteristics and how professionals will use them in daily operation.


According to Sindhu, her firm’s solution serves as “a digital clone of the best service agent on the team,” increasing the efficiency of a firm’s administrative function and transforming its most labor-intensive, manual tasks without disruption of critical operations and client service. 

Sindhu notes that CogniCor’s customers have reduced calls to call centers by 25 percent while achieving more than 80 percent first call resolution with its Digital Companion solution.

“The complexity of the screen-based suite of technology used by wealth management, insurance providers, and other financial service providers have forced these professionals to spend around 40 percent of their time executing routine, manual tasks, such as finding and filling a form or checking status of routine requests.”

“Navigating the complex technology and support infrastructure takes away the most valuable resource of a financial advisor – The time and energy needed for serving their clients.”

THE MORE THINGS CHANGE…

In a fintech future driven by B2B solutions, one thing won’t change:  The spiraling costs required to access the most cutting-edge technologies.

Being able to absorb continually rising costs for the best possible tech tools will continue to mark the difference between success and failure for wealth management firms seeking to grow via acquisitions and financial advisor recruiting.

Derek Bruton of Kingswood US, which is part of a global, London-based wealth management organization, said, “Larger firms with more resources, more capital and more talent continue to win the recruiting and acquisition game by a wide margin.”

While Bruton concedes that small- and mid-size firms can leverage fintech solutions to increase their office efficiencies and elevate the client experience, he underscores that “from the perspective of a prospective financial advisor recruit or owner of an RIA firm that is looking to be acquired, a well-run firm with a checkbook is much more appealing as a partner than just a well-run firm.”

For wealthtech firms and the investors who back them, the message is clear:  The demand – and budgets – exist for providers offering truly superior solutions that move the needle in terms of growth and efficiency for wealth management firms and their professionals.