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Disrupted by the global impact of COVID-19, a pause in “business as usual” is providing advisory firms with an opportunity to review their business development strategy and use of digital capabilities to personalize their service.
The pandemic will force business leaders to review and revise their business continuity and succession-planning efforts. A firm must now be prepared for worst-case scenarios in which key staff are unavailable due to a quarantine, illness or worse. Insufficient clarity or transparency around investment decisions will degrade service and lead to client dissatisfaction and attrition.
Rather than scramble to force the integration of one-off solutions into your architecture, your immediate task is two-fold, involving the challenges of business risk and a growing reliance on digital channels to provide personalized client communications (investment and educational).
Your priorities are to sustain investor confidence and protect your business through continued engagement with advisors and customers. As we all work remotely, the importance of personalized timely information and service leveraging secure digital tools becomes mainstream.
Fortunately, the view that next generation wealth management firms will likely withstand the coronavirus-driven downdraft was recently underscored by J.D. Power’s 2020 U.S. Full-Service Investor Satisfaction study.
Powers’ study – completed just before the pandemic began – indicated that digital solutions increased the trust clients had in their advisor relationship, resulting in lower turnover due to investment underperformance. Additionally, advisors who used frequent digital communications such as emails, texting and online video were 50% more likely to see more assets from clients when compared to advisors who initiated no digital contact. Those asset-gaining advisors also delivered more timely, holistic and personalized services.
Clients have grown steadily more loyal to their advisors too, the study noted. Survey participants cited their primary advisor trust drivers to be, “taking responsibility for mistakes and resolving them effectively; providing useful guidance; fulfilling service expectations; and putting the interest of clients first.”
Responding favorably to their digital experiences with online retailers like Amazon, investors have also grown increasingly aware of their power in the marketplace. Twenty-five percent of participants in a Broadridge survey said they were ready to leave a wealth manager if they delivered a customer experience that they felt was subpar.
Increased reliance on digital channels for client interaction
In the coronavirus setting, in which physical face-to-face meetings must be avoided or minimized, some wealth management firms will find it difficult to onboard new clients or increase wallet share among existing clients. However, social distancing and travel restrictions have also created an opportunity to emphasize your firm’s digital channels to both investors and advisors.
We already know what growth-focused advisors want: more digital marketing support, planning and measurement tools. According to Driving Client Acquisition, growth-focused advisors who constitute the top 20% of their profession employ digital tools more aggressively to increase the gap in client acquisition and AUM between themselves and everyone else.
On the other hand, slower adopters who are behind in employing digital communication to secure trust and engage with clients will face resistance. As the depressed nature of economic activity will be with us for a while, expect the strengthening digital connection that links a firm to its advisors and clients to grow in importance.
While traditional wealth managers will face difficulties in the short term due to the high-touch nature of their business, they also have an opportunity to develop new digital communications channels. To educate your clients, be mindful that digital solutions will vary by customer segment. A retiree comfortable with in-person interactions, for example, will need to be shown how to acclimate to a digital solution to remain connected and safe in our challenging business environment.
In contrast, firms able to demonstrate stronger technical capabilities will attract new clients despite the crisis by stepping up their pace of adoption:
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Upgrade skills of your financial advisors. Advisors need to have a holistic life-cycle view of each client, have a detailed knowledge of portfolio holdings and the ability to run rebalancing simulations during the pandemic in real time by way of online portfolio management tools.
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Emphasize digital advisor-to-client communication channels. Traditional, high-touch paper-based communication is less desirable. Given the need for a continuous flow of information, both wealth managers and advisors should consider texting clients daily or offering online meetings to provide portfolio updates, market guidance and emotional support.
Additionally, launch dedicated campaigns with positive messaging through digital channels that include tutorials and demos on how to access more information from your firm. To boost advisor acceptance, showcase best practices and digital success stories to emphasize to slower advisor adopters how to build client relationships in this new way.
Keep it coming: The importance of ongoing communications
Another Broadridge study showed that all generations prefer more ongoing communications with their financial advisors including monthly, weekly and – for some – daily messages. Automated text and social media campaigns in addition to phone calls and on-line meetings can do much to offset the isolation caused by social distancing.
This tragic global crisis offers wealth managers a timely way to pause, adopt a holistic perspective and collaborate with a proven service partner to overcome the growing pains associated with digital transformation.
If you can’t scale your modernization efforts and provide the tools your clients and advisors want, another firm will. During the coronavirus era, successful wealth managers will distinguish themselves by reframing their strategy toward keeping their relationships with advisors and clients both personal and at a safe social distance.
Michael Alexander is president, wealth management of Broadridge Financial Solutions.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.