Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Reframing advice with technology
According to a new report from EY, How will you reframe the future of advice if today’s client is changing?, the global market for wealth advice is poised for transformation, with a blend of people and technology delivering financial advice, but technology must be targeted and explained to clients in order to be successfully introduced.
“By 2030 the experience of advice will be radically different than today. Wholly personalised advice, delivered via a seamless blend of people and digital technology, will enhance clients’ quality of life and strengthen industry profitability,” the EY report says.
According to EY, wealth and private banks (WPBs) worldwide will need to encompass the following features in order to offer successful advice business models:
- Forward-looking, data-powered, automated insights;
- Individualised experiences tailored to the specific needs of the client;
- Holistic advice across a broad spectrum of traditional and new wealth products;
- High levels of transparency and trust, underpinned by an overt duty of care;
- Stronger, clearer value creation for all stakeholders;
- Enhanced global participation and accessibility.
Advantages in going digital
While many advisory firms are working to upgrade their advice and technology capabilities, ingrained cultural habits can make it hard to achieve effective digital transformation. “Those that can do so will enjoy compounding advantages over those that cannot meet clients’ growing expectations,” the report says.
Importantly, gauging levels of the appetite for self-direction and digital solutions will be key to optimising client engagement. “The results can be surprising. For example, EY research shows that clients seeking financial education are among the keenest digital adopters and that European clients are more open to digital channels than those in North America,” the report says.
Most firms have yet to tap the full potential of technology into their advice models. “While the WPB industry has made significant strides in digitising the delivery of advice, there is huge untapped potential to bring data and technology to bear on the generation of advice itself,” the report says.
“Fast-growing pools of client data, combined with rapid advances in artificial intelligence (AI), offer the potential for firms to make a quantum leap in their ability to generate insight-rich advice automatically. This then can be shared instantly via digital channels or used to maximise the value of personal interactions.
“The latter will become ever more important as digital adoption reduces the frequency of human contact and increases the risk of depersonalisation,” the report says.
Clients like digital tools
Digital investment tools, such as automated portfolio rebalancing after market changes or key life events, are viewed positively by the wealthy, especially in Asia-Pacific and among millennial clients, the EY report found. (See the figure below).
Over time, machine learning will also help advice businesses to maximise the value of ever more complex client and financial data. Data analytics will be used to forecast client behaviours, helping firms to plan client journeys and optimise the delivery of human and automated advice. “The combination of multiple technologies drawing on ever-deeper pools of data will accelerate firms’ ability to provide virtual client assistance, to build prospective leads, and to automate routine processes, such as client onboarding and suitability checks,” the EY report found.
However, for clients to share their data, advice firms need to show a clear return-on-data to encourage personal disclosure. “That might involve explaining how data is used and demonstrating links between data, advice and value,” the EY report found.
Similarly, another recent report from Russel Investments has found that advice firms should explain the value and benefits of technology to clients. In a report, Tips on reframing your cost drivers as client value, Russel Investments recommends that advice firms explain the cost of client relationship management (CRM) and modelling software and other technology solutions to give clients confidence that the financial advice they receive is not a simple one person job or back-of-the-envelope deal, but that advisers are using the best technology solutions available to deliver better outcomes to clients.
“Where some clients have concerns over the cost of advice, look for different ways to frame different elements of an adviser relationship – what they see and what they may not. There is potential to highlight some of the less known or behind the scenes elements of your advice, which can be important to the overall client experience,” the Russel Investments report found.
