Wealth Management in 2017: Oh, the Humanity!
Financial advisers and wealth management professionals who have followed discussions about automated investment advice platforms, or robo-advisers, should have noticed a recurring theme by now: Humans cooperating with machines can deliver better client outcomes than either people or machines working alone.
Computer programs are being designed to handle the human side of client interactions. And humans can try thinking more like computers. But the effective advisory firms of the future will be those that combine people with technology in ways that use tech’s unique strengths to solve tech problems, while human employees use the insights stemming from their own humanity.
At the 2017 CFA Institute Wealth Management Conference, speakers explored different aspects of the adviser’s role and the ways that a human perspective can be applied to deliver value to clients.
The conference opened with John Bowman, CFA, unveiling research conducted by CFA Institute and Scorpio Partnership. The study found that clients remain interested in broader wealth needs beyond a higher investment performance scorecard. To better serve their clients, advisers can fuse automated investment solutions with more complicated topics, like family enterprise management, philanthropic strategy, and specialized investments.
Another way that advisers can distinguish themselves is through a mix of communication, integrity, and financial acumen. “If done effectively,” Bowman said, “it’s the right balance of EQ, emotional intelligence, and IQ, technical expertise, that will distinguish the future adviser.”
Scott Welch, chief investment officer at Dynasty Financial Partners, built on the idea of distinguishing an adviser’s services through enhanced communication during his presentation on implementing a goals-based investing framework for clients. Welch noted that performance reports are the most tangible proof of the value that advisers deliver to clients. These reports represent opportunities for advisers to show clients how their needs are being met.
Goals based investing takes away all the noise and focuses solely on the client's personal expectations. @scottd_welch at #Wealth17
— John Bowman, CFA (@BowmanJohnL) March 7, 2017
For advisers, talking with clients about how investment strategies have been implemented can be as important as the implementation of the strategies themselves. Making a real connection with clients makes it easier to guide them through the investment process successfully.
Adrienne M. Penta, senior vice president and executive director of the Brown Brothers Harriman Center for Women & Wealth, also stressed the value of building relationships with clients. Her presentation on overcoming unconscious bias in relationship management explored an approach she calls “conscious inclusion,” actively working to build bonds in the face of demographic differences.
To best serve clients different from you, be very intentional in offering info in the way they want to receive it. @adriennepenta #wealth17
— Charlie Henneman, CFA (@CHenneman) March 8, 2017
Advisers may not notice when their internal biases are making it difficult to build trust with people who they perceive as different. Recognizing and overcoming unconscious instincts will be essential skills for financial professionals looking to serve future generations of wealthy individuals. Instead of struggling to project a sanitized, unrealistic image of impartiality, Penta recommends shedding our biases by embracing our individual identities as humans.
"When we serve diverse clients, we need to create rapport in the absence of commonality." @AdriennePenta @CFAinstitute @CFAevents
— BluOceanGlobalWealth (@BlueOceanGW) March 8, 2017
Diane Garnick, managing director and chief income strategist at TIAA, noted that differences among people can require radically different approaches to investing. For example, as a demographic, women spend fewer hours in the workforce and earn less during their working years. Garnick said this creates a “Gender Retirement Gap” that has to be addressed when constructing financial plans.
Compelling rationale for lifecycle funds to be tailored by gender reflecting women's risk needs. @TIAA 'S Diane Garnick #wealth17
— Bob Dannhauser (@robdnn) March 7, 2017
Even after different saving patterns have been taken into account, Garnick explained that women and men have unique spending needs during their retirement. “Equal savings at retirement does not result in an equal standard of living,” she said. Women live longer and incur larger health care expenses, so Garnick stressed the importance of providing female clients with financial products that can accommodate these differences.
At the end of the conference, Joel P. Bruckenstein, an expert on applied technology for financial professionals, noted the frailty of all human clients served by advisers.
#Wealth17:Joel Bruckenstein, President, (T3): if the average age of your clients is rising, you have a dying practice
— Jerry Laurain (@JL1618) March 8, 2017
Bruckenstein’s presentation on wealth management technologies, and what they mean for practitioners and clients, went on to examine results from the 2016 Financial Adviser Cybersecurity Assessment along with the 2016 Financial Planning magazine survey to highlight changes in consumer preferences over time and the current state of financial technology for advisors.
Recordings of these sessions and other wealth management webcasts are available in the CFA Institute multimedia library. Social media highlights from the conference are accessible below:
#Wealth17 Wealth Management Conference
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
