Clients need their wealth advisors, especially in the summer

Summer used to mean down time in wealth management with many clients on vacation. However, nowadays even when clients travel, they remain one click away with their smart phones in hand.

Below are some typical wealth planning issues that occur during the summer months:

Travel inspired expenses. Many high-net-worth clients consider major purchases while on vacation. Imagine how many of your clients pick up the real estate section of the local paper curious about how much a beach house or villa might cost. Others are ambling down the pier, checking “for sale” signs on boats or strolling through local art fairs and galleries (where nearly half of the high-net-worth buy their art).

35% of high-net-worth individuals are active in the art and collectibles market and dealers made 46% of their sales at art fairs in 2017*

Divorce. According to a study conducted by researchers at the University of Washington, March and August are peak divorce-filing months. Many suggest the August timing results from the stress of family travel and failed last ditch efforts at reconciliation during summer vacation. And, most high-net-worth individuals say they don’t have a financial plan in place for divorce.

College incidentals. Although many high-net-worth parents of college-aged kids have put aside funds for tuition, room and board, they may not have foreseen the additional and often significant added expenses of college. For example, Greek life can be very expensive, and some kids are surprised to find they need a car on campus (to get to an internship, for example). So, when college students head to school at the end of August, there may be unplanned additional expenses.

Stay in touch with clients this summer

If your business is providing advice or guidance to high-net-worth individuals, stay top of mind this summer. Email clients thought leadership addressing topical issues, add timely resources to your website and post entertaining social media reminding clients you’re available to help wherever they may be, because you’re only one click away.

* Source: The Art Market 2018: An Art Basel and UBS Report

Getting Smart with SmartAsset

SmartAsset is another player in the holistic online “advice” and information market. Co-founder and CEO Michael Carvin states that the mission of the company “is to help people make the best personal financial decisions and to build the web’s best resource for personal decision-making.” SmartAsset originally launched as a “buy versus rent” analysis tool, allowing users to also see how much they could afford to spend if they did buy. It has since added information, tools and calculators for taxes, retirement, banking, credit cards and, unsurprisingly, since Focus Financial, the advisor roll up is one of its major investors, investing. For each category except for investing, it offers a somewhat curated list of providers, with comparisons and reviews. 

Target: Advisors

On the investment side, SmartAsset has somewhat loftier goals and is focused on providing advisors with leads (for a price, of course). For investors, it provides an advisor matching service. For advisors, the value proposition is attractive. The portion of the site targeted to advisors says that it reaches “a monthly audience of more than 45 million Americans, and provides more than 5,000 qualified prospects per month to financial advisors (like you) across the country.” Using publicly available data and algorithmic robo-writing, it has been building profiles of advisors to be used for matching, with the goal of eventually having all 300,000 U.S. registered advisors eventually up and available. “Listing” is free, qualified leads are not. Other firms, such as BrightScope, have tried this in the past, without success. SmartAsset, however, has far greater sustained traffic and the backing of Focus Financial, which is in turn backed by Stone Point Capital and KKR.   

Better Leads?

It also brings the promise of qualified leads that may be worth the price. The typical lead they provide is in his or her 50s, with an average of $750,000 in investable assets, most of whom don’t currently have an advisor. Advisors can choose their leads by:

○ Range of investable assets

○ Geography

○ Number of introductions per month

The qualification process appears to be reasonably vigorous, conducted through a multi-step process that includes a detailed online survey with phone follow-up for a final vetting. 

As the online advice and information environment continues to evolve, this model could provide a significant boost to the smaller independent advisor in the form of a cost-effective lead generation tool. Some have termed this Zillow for advisor listings – the question remains whether investors will “buy” an advisor like they buy a house.

5 more reasons you should be on social

An annual research study released by Putnam Investments in April 2019 reports that financial advisors are rapidly gaining new clients from social media. Of the 1,021 financial advisors surveyed, 92% said that social media helped them gain new clients in 2018, versus 49% in 2013. 

Source: Putnam Investments, Social Advisor Survey 2019

In addition to gaining new clients, there are other advantages that come with active social media participation, including:
Faster and more efficient communications. Communications occur in real time, on platforms where clients are spending their time and are more comfortable interacting.

New opportunities. Following up on a client referral and making introductions to connect is much easier and faster through social media.

Connections. Making new connections to existing clients’ adult children and heirs are much easier than traditional methods.

Better client relationships. Through social media, advisors have a better sense of their clients’ personal lives, such as marriages, births, travel, career movements, etc., which can help build more personal, authentic relationships and create additional touch points for interactions. 

One Stop Shop

The trend toward offering more holistic solutions continues to accelerate among leading wealth managers. Two recent developments that add traditional banking services to wealth offerings are worthy of mention:

○ The addition last month of the Cash Account to Wealthfront’s investment offering

○ The announcement last week by Carson Group of its partnership with fintech payments firm, Galileo, to offer Money+, a bank-like checking and savings accounts in the third quarter

For both firms, accounts are FDIC insured, offer high interest rates, charge no fees and have low minimums. Wealthfront’s Cash Account, however, is online only. It does not include an ATM card or a checking account version, although Wealthfront promises new features to be added “over time.” For now, it is meant as a high yield cash savings tool more in line with traditional sweep accounts. The planned Carson Group products, in contrast, are designed to replace clients’ need for a bank relationship. They include debit cards, ATM access, online bill pay, and checking features and are intended for everyday transacting.

Regardless of their differences, both developments have been facilitated by technological advances in payments processing and in the familiarity with, and acceptance by, the market of online banks. Both also represent moves by wealth/investment managers to keep more client money in-house and under control and to address the competitive advantage of large brokerages with built in bank affiliations. 

What’s in a Name?

The world was abuzz recently over another royal birth, but there seemed to be even more breathless anticipation of the prince’s name than the birth itself and the significance of each potential naming option. That got us thinking about the importance of names and what to keep in mind when you’re naming a new product, service, process, or any intellectual property.

Make it descriptive. A name should quickly communicate what the business proposition is. Make it easy on your audience to understand what you do. Take, Ticketmaster, for example. Quick and clear.

Make it benefit-oriented. What’s in it for the customer or user? Does Rocket Mortgage leave any doubt? Goodbye red tape, hello approval.

Make it memorable. Ideally, a name makes an immediate impression and is easy to recall. When turbo is combined with tax, the seemingly disparate terms combine for an alliterative name with high impact.

Make it your own. A name needs to fit your culture and emanate naturally from it. If your corporate personality is formal and conservative, your name should align with that.

Survival of the Fittest

The chart below, from the Summer 2019 Morningstar Magazine, is a stark indication of the hurdles asset managers face in the Post-Crash investment environment. 

Source: Morningstar Direct-U.S. Open-End Fund (excluding Money Market and Fund of Funds), ETF, Separate Account, and CIT Historical Data. 

In the early 2000s mutual funds and ETFs enjoyed strong cash inflows. Performance mattered, but even offerings with mediocre Morningstar rankings (2 & 3 stars) attracted net new money. Following the 2008 Crash, success has not been so easily achieved. By 2010, only 4 and 5 star rated products attracted net inflows. After 2013, virtually all positive flows have gone to 5-star offerings only. 

To make matters worse, investment management fees in the Post-Crash period have been consistently declining while net contributions to DC plans, long a staple of steady contributions to mutual funds, have turned negative for the first time since 2000. 

The secular forces that are stressing the asset management business show no signs of letting up any time soon. To survive, managers will have to increase efficiency and cost containment, while providing higher quality and/or lower cost products to the market. In addition, managers must be able to tell their story in a clear and logical manner and demonstrate repeatability of their approach and process.

The Millennials Are Coming!

There are many factors that affect who we are, how we think and what we want out of life. Sometimes, these influences are so great that they shape a generation. Millennials have faced unique challenges and world events that have impacted what they want and need from financial service organizations, and it’s time to begin providing those services.

What defines this generation?

Millennials (1981–1996) grew up during the 2008 recession. Times were tough when they became young adults, and many had to live with their parents longer than prior generations. They got a late start building up wealth and have been slower to marry and start families. It is estimated that this generation will change jobs at least 8 times before they retire.

Why they are a force to be reckoned with

The oldest Millennials are now approaching 40 years old. They are currently the largest generation in the U.S. labor force and stand to inherit an estimated $30 trillion in wealth over the next twenty years.

What they seek from financial service organizations

Millennials are interested in financially preparing for the future, and want to establish relationships with financial service organizations that can provide:

1.Cutting-edge technology

Studies have shown that most Millennials check their cell phones within a minute of waking up for the day. They are dependent on technology and demand apps and software that make financial transactions quick and easy. When marketing to this segment, they prefer to be reached digitally or via social media platforms.

2. The ability to invest according to their values

Millennials, more than any other generation, say they want to use their wealth to change the world. They believe that a company’s environmental, social and governance (ESG) track record is important and factor this into their investment decisions; they also seek relationships with financial organizations that are socially responsible. 

3. Thought leadership

Millennials get a bad rap for being irresponsible. As it turns out, they are just as in control, financially, as prior generations, and are eager to learn. They want meaningful thought leadership that helps address their concerns.

Need help winning millennial clients?

Millennials look to financial service firms they can trust to help them tackle their financial issues, including making up for a late start in saving for retirement and rolling over retirement savings in accounts left behind after each job move. Organizations that provide them with the services they demand, including technology, options for socially responsible investing and compelling thought leadership, are more likely to win their business. 

Avoiding Bias

Making the best decisions about financial service products can depend on effective market research. But, to get an accurate read, it’s essential to minimize the research biases that often arise. Below are a few common biases that we often see and guard against:

Self-fulfilling prophecy

Researchers, often spurred on by clients, may have a subconscious bias toward a desired outcome and ignore findings that refute that outcome. This leads to studies designed with a self-fulfilling result, known as an observer-expectancy effect.

Selection bias

This bias occurs when the research universe is not properly randomized in the selection process. It leads to findings that do not accurately represent the intended population.

Survivorship bias

An acute form of selection bias, survivorship bias is the tendency to include only subjects that are easily available because they have “survived” and exclude those that have not. For example, when looking at customer satisfaction, including only current customers may be misleading if their views are not balanced by those of former customers.

Order bias

Information we are initially exposed to often influences subsequent opinions and actions. To prevent inappropriately influencing responses, through what’s known as anchoring, researchers need to be sensitive to how survey questions are framed, in what order they are asked, and whether to vary the order from respondent to respondent.

Unpleasant experience

Negative events tend to make a deeper impression than those that are positive or neutral. As a result, respondents are more likely to assign a higher value to an unpleasant customer experience than a positive one, which can skew or overemphasize certain results.

The Client-Centric Trend Continues

A couple of items on firms entering new territory to note.

○ First, Goldman Sachs is reportedly developing a wealth management offering to append to Marcus, the firm’s retail banking platform. The offering is expected to be a hybrid robo/advisor-based service that will round out Marcus’ banking, lending and soon to be insurance and retirement savings products.

○ Next, Envestnet announced that it is adding lending to its growing advisor platform through a partnership with Advisor Credit Exchange. Envestnet plans to offer consumer loans by the fourth quarter of this year and commercial loans by 2020.

Both of these developments underscore the continuation of the trend for leading financial service firms to provide increasingly comprehensive service packages designed to meet the broadest range of consumers’ financial life needs. Often, as is the case with Goldman, these packages are built with the specific needs of target segments such as the mass affluent in mind, and with reference to growing databases of client interests, activities, consumption patterns and preferences.

In the words of Envestnet’s CEO, the addition of the lending solution to Envestnet’s wealth management platform is “crucial for Envestnet to provide advisors with the most comprehensive financial wellness service to their clients.”

We expect the trend toward relationship-based, integrated multi-product packages to continue as markets increase their demand for customized offerings built around their needs rather than vendor defined product silos.

It’s All About The Client Experience

Your clients represent your most reliable source of growth, so consider them your greatest asset.

In wealth management, one of your greatest drivers of sustained growth is not the solutions you offer or even the advice you give. It’s how you can make your clients feel about you. Improve their experience and bottom-line growth will follow.

Enhancing the client experience is 100% within your control. Here are four drivers that can create an enhanced client experience:

1. Technology That Engages. Today’s technology platforms need to do more than meet expectations around portfolio management and reporting. They need to leverage client information to exceed expectations through personalized touches and interactions. Through CRM, they can inform and deliver technology-enabled, data-driven touches efficiently and unobtrusively.
2. A Customer Journey Worth Taking. Every stage of the customer journey needs to be examined with a client-benefit focus:
○ Frictionless onboarding. Tech savvy companies are raising the bar on client interactions. Make it easy, even pleasant, to become a client.
○ Retention begins on Day 1. Don’t ignore your clients once they’re a “captive” audience. Curbing attrition isn’t an activity, it’s a mindset.
○ Client communication and interactions need to be proactive and regular. This lets your clients know you’re constantly thinking about them.
3. Organizing Around the Client
Put the client at the top of your company’s organizational chart. That will mean everyone in the organization works for the client, and everyone, no matter what their role, will know it. When a client calls, it’s the boss calling. Make client satisfaction a lead item on your compensation scorecard.
4. Clients as Brand Ambassadors
○ Organize interesting, enjoyable events and ask your clients to invite their friends and colleagues. It’s less aggressive than an outright request for referrals but serves the same purpose.
○ Involve them. Consider setting up an advisory council that you invite your top clients to join. Even if they turn you down, they’ll give you credit for asking them.

Your clients represent your most reliable source of growth, so consider them your greatest asset.