Tech Talk: Disrupting the Industry

Brendan McConnellBrendan McConnell, Chief Operating Officer

Over the last two years we have seen a tremendous amount of change driven by technology in the financial services industry—an industry that has gone from lagging around technology innovation to one that is very much at the forefront. With change comes disruption, and we are beginning to witness a tremendous amount as wealth management firms adjust to offer technology-driven investor experiences.

One recent disruption that has seemingly dominated headlines is that of the online digital advice firms, perhaps more widely known as the “robo advisor.” In most cases, these platforms provide a lower-cost, time-saving alternative for the average investor complete with a more frictionless experience through the use of technology. These firms have set a new baseline around portfolio management, and traditional advisory firms are reacting.

Charles Schwab, Fidelity and Vanguard are three major institutions now offering, or planning to offer, their own digital wealth platforms. They are making a conscious and deliberate investment to deliver this type of technology to the segment of investors who would prefer less human interaction and faster execution of transactions. These platforms also allow the financial advisor to bring additional scale to their own practices.

At Brinker Capital, we hear concerns from financial advisors on how this new class of investment management is impacting the industry and, more importantly, how it’s impacting them. Suffice it to say that the real impact on the rise of technology in the industry will ultimately be a positive impact for advisors and investors. These new technology innovations are making their way into the hands of financial advisors to in turn offer to their clients. This will lead to a more efficient and productive advisor with the ability to serve a broader audience of consumers looking for financial planning and advice. The future-ready advisor will be one that can offer comprehensive financial planning while maximizing the technology available in the industry.

Technology is changing the way consumers view financial advisors. The services that consumers value most from advisors has certainly started to shift. This has upended the advisor value stack. At a recent Fidelity Investment conference, Sanjiv Mirchandani, President at Fidelity National Financial Clearing and Custody, outlined Fidelity’s vision of the future advisor (images below) with a simple and easy-to-understand visual of the current advisor value stack.

The traditional financial advisor value stack:

Advisor_Value_Stack_Traditional

Source: Sanjiv Mirchandani, Fidelity

Now, technology and investor preference has upended and squeezed the top-end of the value stack:

Advisor_Value_Stack

Source: Sanjiv Mirchandani, Fidelity

What Fidelity is identifying here is that investors are putting greater importance on financial planning and behavioral management when selecting a financial advisor. This is the opportunity for a financial advisor to demonstrate their value and justify their fee over the digital advice offering. Fees are less of a concern with advisors who are following this new value model. The new future-ready architecture is one that supports goal-based financial planning and a digital experience. Advisors who focus on these values seem better positioned to succeed in this evolving landscape. Advisors should focus less on the portfolio management, outsourcing these duties, and more on a planning centric client relationship maximized by technology.

The views expressed are those of Brinker Capital and are for informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

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