The demographics are telling: More Americans are turning 65 in 2024 than ever before. The precipitous decline in defined benefit programs, recent economic uncertainty and stubborn inflation represent a perfect storm that has given more oxygen to the number one fear of clients in or near retirement: outliving their money. Financial advisors have many tools in their arsenal to help clients create and execute an effective retirement income plan, including financial planning expertise, investment product knowledge and hard-won experience navigating complex market environments. An additional resource: innovative technologies that work in conjunction with portfolio management to optimize retirement income strategies and elevate the client experience.
For decades, wealth management firms and their advisors have embraced technology as a means to build efficiencies, automate processes and advance successful outcomes. With so much on the line for so many investors in or approaching retirement, are financial advisors increasing their use of technology to help maximize their clients’ retirement income potential? And, importantly, to what extent should they be doing so?
Given clients’ diversity of circumstances, goals and risk tolerances, there’s no single answer to the technology use question – but in most situations, it’s not a matter of if advisors will deploy technology, but to what degree. To obtain informed insights on what lies at the intersection of portfolio management and technology, as well as best practices advisors can put to work serving investors, we spoke to three experts whose firms invest strategically in tech stacks supporting advisors with diverse client bases:
- Jeff Brown, President, Stratos Private Wealth, a division through which Stratos Wealth Partners, Ltd., a registered investment advisor, markets its wealth management services
- Victor Hicks, Wealth Advisor and Managing Director, Perigon Wealth Management, an advisor-led, independent wealth management firm with offices across the country
- Jeff Vivacqua, President, Growth and Development, Cambridge Investment Research, Inc., an internally controlled and operated financial solutions firm focused on serving independent financial professionals and their clients
Jeff Brown – When managing retirement income, the best approach for advisors and portfolio managers involves blending tech with portfolio management. Using dynamic financial planning tools is key.
These tools support guardrails, which are like financial bumpers that adjust spending based on how the portfolio is doing. This makes sure retirees don’t run out of money, even when markets are unpredictable. Advisors should really get to know these technologies inside out to make the most of them, tailoring retirement plans that adapt as clients’ needs and markets change. Keeping the retirement plan up to date with regular check-ins, thanks to these tech tools, is also essential. By embracing this mix of technology and personalized management, advisors can better serve their clients as the “Financial Guide” that stays with them on the whole journey.
Victor Hicks – Technology provides more than just scale and efficiency in wealth management practices. When used properly, it creates a seamless, enhanced experience that drives client engagement, satisfaction and loyalty. As an advisor who works with clients in retirement, I have also experienced how technology can provide reassurance to those who may fear running out of savings, and potentially identify ways for their retirement portfolios to generate income. Financial planning software can provide modeling and scenario analysis to accurately forecast and stress-test retirement distribution plans. Automating trades can streamline portfolio management, ensure consistency, optimize tax mitigation and ensure compliance alignment.
Advisors utilizing technology should also be mindful of maintaining cybersecurity protocols and continuous education to both ensure client data is never compromised as advisors adopt more programs and platforms, and to foster a competitive edge.
Jeff Vivacqua – Technology can help an advisor efficiently manage portfolios and model income. But what about understanding client expectations and determining their specific needs? That’s something only a financial advisor can accomplish. As important as technology is, even the most innovative tools cannot replace the subjective human element, the education, collaboration, coaching, advice, and the path(s) this client can take in working toward their goals. That’s the “art” of it all.
Our industry is very proficient when it comes to creating technology that builds models, generates product selections and simulates results. But if you over-focus on that, you may neglect the human element of discussing investment and spending strategies – the items most impacting client retirement income planning.
Technology augments the advisor/client relationship. It cannot replace it. Tech is limited by the differing levels of tech proficiency among both advisors and clients, who generally fall into three camps: early adopters, marketplace users (who fall in line with usage trends) and laggards. How each cohort deploys tech will differ. That in itself limits the impact technology can have on the retirement income process, not to mention the fact that tech output is only as good as what is input to begin with.
