As we move into a new era of investing, client preferences are shifting and advisers need to move swiftly to meet their needs writes Arnie Selvarajah, CEO of Bell Direct, powering Desktop Broker.
Today’s investor is different, and tomorrow’s client will be different again. Investment Trends[1] research shows that time and again, clients are placing greater emphasis on their relationship with their adviser – and this doesn’t just translate to scheduling more meetings.
In a recent sit down with Investment Trends Research Director, Recep Peker, we discussed the growing desire of investors to understand their financial wellbeing and how to set goals to provide this financial peace of mind.
This trend is only set to continue. While Investment Trends data shows the Australian market continues to be quite segmented between delegators (those who want their adviser to do everything), validators (those who want their adviser to check and confirm decisions) and self-directed investors (those who do all, or the majority, themselves), investors, irrespective of their advice preference, all want a similar experience from advisers.
The client of tomorrow has higher expectations, is more engaged and more educated than previous generations and is demanding more from their adviser around transparency. Advisers have no choice but to evolve their proposition in response.
Learnings from other markets
Across the U.K. and U.S. markets, advisers have recognised the power of engaging clients through interactive, online tools to show them in real-time how they are progressing towards their goals. At all times, clients want to be able to check their finances quickly.
In fact, the ability of advisers to provide a clear link between goals and the decisions being made is so crucial that the clients of some leading robo-advice providers in the U.S. are more satisfied than the average advised client in Australia[2].
This difference is based on the fact outperforming U.S. robo providers have created platforms which effectively engage clients, offer a human element and make the link between financial goals and the advice received exceptionally strong.
In the U.K. [3] there has also been a greater focus by platform providers on offering client engagement and modelling tools. The platforms that do this well have greater adviser satisfaction and loyalty, because they enable advisers to efficiently demonstrate value and keep clients engaged.
In Australia, the is also significant focus on client engagement by financial planners, but the suite of tools available is not as advanced as in the U.S. and U.K. For Australian advisers and product providers, the big takeout is the importance of client understanding and buy-in. This will enable the conversation to shift from individual investments and their performance, to financial goals and education – where clients truly see value.
The actual investment then become simply a by-product of how to achieve their desired lifestyle. If the adviser can do this well, Investment Trends research[4] shows the client is more than happy to stay with the adviser, even as industry issues emerge.
Taking action
In both the U.K. and U.S., advisers are increasingly outsourcing the investment management aspect of their roles. In the U.S. over 54% of financial advisers are outsourcing at least some portfolio management activity to free up time and focus on client engagement[5].
In both markets, managed accounts have become an effective way to outsource. Not only are managed accounts providing a way to outsource investment, but they are also offering clients greater transparency and involvement via online portals. These platforms show a client’s overall holdings, individual investments and performance data all in once place.
Certainly, Australian managed account providers have been able to learn from the more advanced US and UK markets by offering more sophisticated models. And the improvements in the 20 years since managed accounts first entered the Australian market have helped to increase adoption rates by financial advisers. In 2019, 35% indicated they have used and intend to continue using managed accounts[6].
However, these numbers show that despite the shift in consumer demand towards education and tools that help them visualise their whole financial position, too many advisers are yet to take action.
There’s no time like the present for advisers in Australia to learn from the U.S. and U.K., and swiftly consider the benefits of technology in securing client retention and satisfaction, and meeting the needs of tomorrow’s client
Keep an eye out for our upcoming checklist on choosing a managed accounts solution or contact Desktop Broker for more information.
[1] Investment Trends: June 2019 Financial Advice Report
[2] Investment Trends: December 2018 Global Robo-Advice Report
[3] Investment Trends: May 2019 UK Adviser Technology and Business Report
[4] Investment Trends: June 2019 Financial Advice Report
[5] Cerulli & Associates 2017: Adviser Metrics
[6] Investment Trends - February 2019 Managed Accounts Report