There’s little doubt that the financial advisor/client landscape will be fundamentally altered by fintech innovation. But machines can do only so much, especially in meeting the complex needs of high net-worth (HNW) clients. That reality will create new opportunities for advisors who can harness the power of technology while also providing the kind of customized, personal advice that distinguishes the most successful advisory practices.
“At the end of the day, advisors can see through the trees,” says Chris Ambridge, president and chief investment officer of Toronto-based Provisus Wealth Management Ltd. “It’s my experience that people’s lives are complicated. And unless you know all the nuances, you’re not going to get it right. And that’s not going to be done through a series of ones and zeros at this stage.”
Still, HNW clients increasingly expect you to understand – and make good use of – new technology. At the same time, clients will continue to expect the advantages of traditional support, leading to a marriage of service style increasingly referred to as “hybrid” advice. Indeed, a 2017 study by Accenture LLP found that 68% of emerging wealthy and HNW investors prefer hybrid advice models.
There clearly is appeal to be found in accessing the best of both worlds: the accuracy and convenience of technology, fine-tuned using judgment and experience. “[Such advice means] bringing together humans and technology in new ways, so that there’s more flexibility for the investor and more fluidity between different life events and clients’ complex needs,” says Kendra Thompson, managing director and head of global wealth management with Accenture in Toronto.
How exactly technology is deployed may vary, although it most likely would be used for repetitive tasks such as “onboarding” new investing accounts and making wire transfers. Harnessing widely available communication tools, such as videoconferencing, also is an easy way to bring technology into your business.
Choice will be important, says David Hurd, leader in Ernst & Young LLP’s wealth and asset-management advisory practice in Toronto. “If it’s a full-service, traditional type of relationship,” says Hurd, “[the hybrid model means] that you’re providing your high net-worth and ultra-high net-worth clients with the choice to interact with you on certain things digitally because that’s what they desire.”
Working with HNW clients also may mean you will begin to work with more sophisticated tools. For example, you may work with more robust financial planning software that allows for a deeper understanding of investment risk scenarios. Other options may offer the integration of tax and investment advice, as well as more specialized reporting required by professionals such as lawyers and accountants.
Technology also has its challenges, notably in increased security risk. For example, HNW individuals, in particular, tend to use intermediaries or delegates to assist them. These delegates may request permission from you to execute certain sensitive transactions, such as moving monies between institutions or jurisdictions, by using online tools. That can present the risk of errors or fraud. As a result, questions will arise regarding when and how such delegates should be given access to clients’ accounts.
“One thing that’s particular about the high net-worth and ultra-high net-worth market when you start to introduce some of these capabilities,” says Hurd, “is how do you provide a delegate [with] access to some of these capabilities and only to the ones that the actual owner would want [the delegate] to have access to?”
Being successful in the HNW segment means you must offer a range of services that, while including technology, are grounded in experience and sound judgment. For example, how you handle a situation in which a client or a client’s family member has dementia or how you handle a conversation about the financial independence of a client’s children.
“You’re seeing advisors who are buying into the future of hybrid [advice] and really redefining their value proposition,” says Thompson.
Ambridge, whose firm offers an online investing platform, agrees, noting that HNW advisors will always face seemingly endless change. “Complexity is very standard for higher net-worth individuals,” he says, “and it just gets messy.”