Industry News

Technology could be used to prospect for clients and provide basic advice while advisors could step in and provide a greater holistic picture to clients

By Tessie Sanci |

The investment industry should consider ways to meet investors' growing demand for obtaining financial advice online while getting financial advisors to serve Canadians in ways that cannot be automated, according to industry insiders who spoke at the Investment Industry Association of Canada's Small and Independent Dealers' Symposium in Toronto on Thursday.

This is in light of a growing chasm worldwide between investors and wealth managers as to how financial advice will be delivered in the near future, said Gregory Smith, partner at Ernst & Young LLP (EY) in Toronto, pointing to data from an EY report published in August entitled The Experience Factor: The New Growth Engine In Wealth Management.

Specifically, the report found that more than half (60%) of wealth-management clients, globally, believe that digital tools will be the primary channel for obtaining advice in two to three years while 26% say that face-to-face interaction will remain the dominant method. This is in contrast to 34% of wealth managers who say that advice will be digitally-driven compared with 66% who feel that face-to-face meetings will be the prevalent method.

Clients are already making the switch to buying investments online, which is producing analytics that could, in the future, be used to deliver more personalized financial advice, said Alexandra Williams, chief compliance officer with Vancouver-based Qtrade Financial Group.

As an example, if a client buys shares in one company through a direct brokerage, the service could then recommend a similar company in which that client could invest, said Williams: "There are lots of opportunities for firms, especially in the online space, to build some models and try to push out information to clients."

But for that to happen, regulators will have to modify current rules. That appears to be happening, to an extent, as the Investment Industry Regulatory Organization of Canada (IIROC) recently published a new proposal that would allow order-execution only (OEO) services, known as discount brokers, to provide a very limited form of advice. This would be a change from the convention that OEO firms don't provide any advice whatsoever and are, therefore, exempt from requirements to ensure suitability of investment purchases.

See: IIROC proposes to allow OEO firms to provide limited model portfolios

"What IIROC is looking at today is, ‘What is advice?' And ‘What can an [OEO] firm actually do?'; ‘How much information can it push to a client and where do you go over the line and it actually becomes a recommendation?'." Williams explained.

The investment industry also needs to consider the value in using digital tools for prospecting for clients, suggested Randy Cass, CEO and founder of Nest Wealth Asset Management Inc., in Toronto.

Nest Wealth has been able to develop marketing campaigns targeted to specific individuals simply based on information they provide for a sample portfolio. Individuals are willing to fill in an online form that asks for their goals, the amount of money they have saved and how much they want to save, said Cass.

"[The process] was eminently scalable and for some reason, individuals kept dropping ridiculous amounts of personal information on our website with no effort by us and nothing [exchanged] in return except for a suggested portfolio mix at the end of it," he explained.

This means investment industry has to stop thinking of the account-opening process and even the goals-setting process as something that requires human interaction, and instead put advisors' skills to better use, Cass recommended.

"Think bigger about the things that technology will never be able to do," he said, suggesting that this can include advisors acting as "financial therapists" who can help clients determine the best ways to stay on track with goals and providing holistic financial planning that technology cannot produce.

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