Personalized Service in the Digital World

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Since my Sept. 18 post in the Investment News techconnect blog, “Financial technology trends advisers can’t afford to ignore”, I have been in a number of conversations about how a new crop of web-based investment management/financial planning services are affecting the industry.

Opinions have run the gamut from, “Advisers are toast, everything is moving online,” to “No way, X type of clients will always want personalized service.” As you can well imagine, the tenor of those comments were colored greatly by where the commenters are in the industry or what their business models look like.

Although investor sentiment varies somewhat during different economic cycles, somewhere around 25% to 30% of investors are do-it-yourselfers, and another 20% to 25% want regular help from advisers. The largest chunk is somewhere in between. They make some of their own decisions, but sometimes they want help.

The Consumerization of Technology

I suspect that those numbers increasingly will tip toward more self-service as the consumerization of technology continues to spread. Many of today’s consumers carry better technology around in their pockets than their advisers have on their desktop. Affluent consumers in particular are utilizing a wide variety of software-as-a-service with increasing regularity, and there have been lots of investing and financial planning offerings in the past five years.

This trend will be exacerbated as a $41 trillion bubble of wealth works its way down to Generations X and Y. Members of those younger generations have grown up with technology, they are comfortable with (and often prefer) online services, and many do not have relationships with traditional advisers.

Does that mean that the days of the one-on-one client/adviser relationship are coming to an end? I don’t think so, but I do think they are already changing.

As younger investors grow older (the oldest Gen Xers are already in their 40s) and take on more responsibilities in all areas of life, and as their financial lives become more complex, they may want more adviser help. But the form and method of that help will likely take shape in the form of more video conferencing, online collaboration and other forms of electronic communication.

Enter the “Robo-Advisers”

Raef Lee, managing director of the SEI Advisor Network, recently blogged about “5 Ways Robo-advisers Will Change the Way Advisors Work”, which he enumerated as increased peer pressure, a call for transparency, pressure to accommodate a younger generation, more technology and access to comparative data.

I think all of those are valid points, but what concerns me the most is that the pace of change exhibited by most advisers and firms is much slower than the pace of external change. A device known as the iPad reached 50 million users in just 18 months, and that’s just about the time it takes for a new idea to work its way into the budget approval process at many firms.

And of course, it’s not just about buying and deploying new technology. I often ask, “Remember when laptops revolutionized financial services?” Yeah, me neither. Today’s technological advancements definitely have the potential to make seismic changes, but advisers will have to adopt and utilize these new tools in ways that the clients actually value.

Merely providing “personalized service” is not really a differentiator today, and it will be less so in the future. Hordes of travel agents, book and music stores, and electronics retailers all bet that their customers would value their personalized service over online solutions, but only well-focused niche specialists have survived in the face of these sea changes.

(This article originally ran in my regular blog on Subscribe for free and keep up with all of my latest content there.)