National Bank using AI to reach out to clients

Robo-advisors may represent the bare bones of the financial services business, focusing on simplicity and automation, but full-service financial advisors could take a page from their competitors’ no-frills communications skills, Dave Nugent, chief investment officer with Toronto-based Wealthsimple Financial Inc., told attendees at the 2017 Canadian Funds Summit on Friday.

“We talk to clients in the voice in which they want to be talked to,” said Nugent. “There’s no jargon, no acronyms and our communication is in a style that’s as simple as possible.”

Since Wealthsimple’s launch in 2014, the robo-advisor firm has attracted $1 billion in assets under administration and 30,000 clients. However, 95% of WealthSimple’s client base, which leans toward millennials who have a facility in technology but also includes other age groups, don’t understand many of the principles the average advisor is espousing, Nugent said.

Many advisors feel they need to “talk above the client” to impress clients, gain their confidence and win business, but this strategy often alienates them, Nugent said.

“We’ve realized that’s not what clients want,” he said. “They want a true, genuine tone and information that is articulated in a simple way.”

WealthSimple’s clients also respond best to communications in text format, Nugent pointed out.

“Our No. 1 mode of communication is text,” he said. “They may or may not look at emails, but for whatever reason they’re most likely to respond immediately to a text.”

It’s not only millennials who want electronic communication on their phone, he said.

“Baby boomers don’t always have time to come in and meet in person either,” Nugent explained, “they’re just as happy to get a message and go about their day.”

Wealthsimple has opened up its services to attract a new client base of advisors who want to delegate the investment management aspect of their practice to the robo-advisor while focusing on other complementary business components such as developing a financial plan for clients, estate planning and tax strategies. Wealthsimple can also take care of some of the paperwork, compliance and other back-office functions.

“A robo-advisor can do some things more efficiently and at a lower cost,” he said. “Technology is allowing people to do things easily on their phone — such as order a cab, book a hotel room or order food. Why not financial services?”

With regulatory initiatives such as the second phase of the client relationship model and more transparency on costs and returns, there’s pressure in the industry to lower fees — and this means advisors must work harder to receive the same compensation, Nugent said.

Specifically, advisors may find it more efficient to delegate investment management in order to give them more time to recruit new clients and offer advice outside of investing.

“The days of being a stock picker or mutual fund jockey are gone,” he said. “Platforms such as ours are commoditized businesses, and advisors must learn how to position themselves. It’s important to define your value proposition, and articulate that to clients in a humane way.”

Nugent recommends that advisors should know what their advice is worth; charge fairly for their services; and have confidence in what they charge. If the client still can’t see the value advisors offer, this is not the client for them, he said.

“The robo-advisor is a volume business and we aim for scale,” he said. “We’re not in it for one on-one relationships. That’s where an advisor can add value.”

Photo copyright: georgejmclittle/123RF