The financial services industry, like many others, continues to seek ways to reduce friction in the customer journey. Achieving financial wellness requires a proactive and informed approach by advisors and their clients. But along the road to building a productive investment management relationship are many areas of potential friction: from the emotional nature of financial decision making for clients, to inefficient systems and processes on the advisor’s side.
The source of friction in financial management
To reduce friction related to taking financial action, wealth management firms need to first factor in what causes friction in the investor journey and realistically, what can be done to reduce it.
Let’s start with investors. As a financial advisor, it’s more than knowing your clients’ kids’ names. The 2022 book, The Psychology of Money, does a great job of framing the complexity of the investor challenge, with financial success being more about how we act than what we know. The book emphasizes that financial decisions don’t happen on spreadsheets, but in dinners with family or, of course, in meetings with a trusted financial advisor.
In decision making moments, investors may be processing investments on an emotional level. This can be rooted in their financial experiences while growing up, past investment decisions, near-term financial objectives, and current market conditions. Connecting clients to investments that make sense based on their unique profile, objectives and risk tolerance, will require more than a spreadsheet. Investors and FAs ideally need a strong relationship based on trust and empathy. And even more fundamentally, the time needed to build one.
With that said, let’s look at the reality for advisors. The need to spend more time with current and potential clients is not a new challenge. What is new, however, is the growing demand for financial advisors to address investor concerns over some pretty substantial unknowns, including market volatility and swings, as well as the emerging Great Wealth Transfer.
In addition, advisors are facing an increasingly fragmented set of software systems needed to manage the needs of clients while staying compliant and responsive. With this kind of pressure, it is no wonder advisors are both retiring and failing at record rates.
Clearing the way to deliver great advice.
- In our last blog, Operational Efficiency for the Back Office: The Time Is Now, we discussed ways wealth management teams can potentially find hundreds of hours each year, just by driving operational efficiency in areas like client onboarding, account oversight, and certain compliance-related tasks. With those hours reallocated to client engagement, advisors can spend more time tapping into the emotional concerns related to making investment decisions. But what do those conversations look like? And what tools are available to advisors to further reduce the friction to aid clients in taking financial action?
Having a strong foundation for offering investment options to clients is the key to further strengthening relationships, and ultimately increasing profit margins.
Here are three client-facing ways we believe can improve the customer journey and reduce the friction in taking financial action:
- Offering the right products based on wealth complexity. Once a new account is open, it may feel like the hard work is over. But choosing the right allocation of assets for a new client is where the relationship building and trust begins. A modern managed account platform should offer targeted models that can also be blended to quickly meet a client’s needs. SigFig’s Digital Advice Pro has made this possible in approximately 10 minutes, versus the roughly 35 minutes that it might take in a more traditional process or platform.
- Reinforcing confidence in the model options available. Giving financial advice is a huge responsibility, especially in markets with known uncertainty and inherent risk. Advisors may be better positioned to perform better for their clients when they have confidence in the models they are recommending. SigFig’s Digital Wealth Platform offers a second layer of model due diligence. By reviewing and researching all of the models and portfolios being offered, our platform is designed to save significant time for financial institutions and help increase the speed and confidence of advisors as they make their recommendations.
- Knowing that reassurance that is just a click away. More often than not, a client’s need for financial advice will happen outside of an annual review. One of the best ways to reduce friction in financial action is to make connecting with a financial advisor spontaneous and easy. With SigFig, your advisors can be a click away with remote engagement tools to enable clients to fund their investments and make decisions in the natural course of life. Advisors can hop on a virtual interaction through SigFig Engage, loaded with embedded tools like Docusign to reduce client hesitation or uncertainty by demonstrating tradeoffs in the moment.
Technology cannot change the fact that most financial decisions have an emotional component. But the right technology can enable advisors and their clients to get to the heart of their financial choices, and make them with greater confidence and less friction. Getting this right can unlock real potential for financial institutions to retain both advisors and clients and increase the potential for improved financial performance.
See disclosures at https://sigfig.com. All content presented herein and discussed in any referenced or linked materials is provided for informational purposes only and is not intended to provide any tax or legal advice or the basis for any financial decisions. Information presented is believed to be from reliable sources, but we make no representations as to its accuracy or completeness. Opinions expressed are those of the individuals presenting them and are subject to change, and not necessarily those of Nvest, Inc. or SigFig Wealth Management, LLC. Hyperlinks are provided as a convenience. We disclaim any responsibility for information, services or products found on linked websites.