Wealth Magnets: Technology and its discontents

Register now

Financial planning is not an area one thinks of as technology-focused — and yet for the CPA financial planners in this year’s list of the Top Firms by Assets Under Management, technology and its ramifications are very much top of mind.

That’s not to say it’s the only thing they’re concerned about: When asked which issues they think are most pressing for their field, many of the 2019 Wealth Magnets (see the full list here) cited the war for talent, competitive pressures old and new, the perennial issues of market changes and managing clients, and even the existential need to clearly define and communicate to clients the value proposition of financial planning.

But it was technology that dominated their answers, on its own or woven into other issues, and in many guises — as an efficiency tool, a boon to client service, an enabler of competition and more.

“Keeping pace with the various technology platforms available to financial planners is one of the most important issues,” said Laura Beimler, operations manager at Virginia-based Alliant Wealth Advisors. “Since the industry is relatively small, it has not attracted any developers large enough to build an integrated technology stack. So planners are left implementing stand-alone applications for planning, portfolio accounting, trading/rebalancing, CRM, financial planning, data aggregation, etc., and then building data feeds between all platforms in an effort to be efficient.”

“There will continue to be a greater adoption of technology, both client-facing as well as employee-facing,” added Jeff Pierce, CEO of Wipfli Financial Advisors in Milwaukee. “Pairing the power of an advisor's expertise with cutting-edge technology is no longer a nice-to-have but a must-have. Access to technology tools is now an expectation of clients at all stages of wealth building.”

Wipfli is conducting a holistic review of its current technology stack and how employees and clients are interact with it to develop a roadmap and inform where and how the firm uses technology going forward. “We are weaving the technology into the human elements of the client experience to create internal efficiencies while providing external conveniences,” Pierce explained.

For New Jersey-based Withum Wealth Management, it’s very much a client-service issue, according to principal and chief compliance officer Carmine D'Avino: “We are investing in technology that enables us to provide wealth management services through an evolved, digital experience,” he said. “We increasingly see clients wanting mobile access to their investment and financial information. As consumer preferences advance, we're expanding the use of digital dashboards and interactive tools centered on helping clients understand their finances and plan their financial futures. The goal is to continually engage, educate and demonstrate our value across all demographics and generations of clients.”

One downside of technology, according to some Wealth Magnets, was the ongoing automation of investment management and the rise of the “robo advisor” — a development that formed a major part of a tangle of concerns about competition, fee pressure and the need for financial planners to articulate a compelling value proposition.

Competition and value

“The growth of the RIA industry will lead to a more competitive, fee-only environment,” warned Robert Klingensmith, managing director of wealth management at Virginia-based PBMares Wealth Management. “Good for clients, not so good for RIAs.”

Besides that, he added that the field faces “fee compression as more virtual services become available, and low, to no-fee investment options grow in popularity. Reduction in overhead and the ability to serve broader audiences means lower fees. Good for clients, not so good for RIAs.”

Juan Aguilar, director of operations at San Diego-based Rowling & Associates, drew a straight line from competitive pressure to standing out from the crowd. “One of the struggles with financial planners is developing and crafting their value proposition to clients,” he said. “We live in a time where robo advisers are rampant, broker-dealers are competing with RIAs, and the Vanguards of the world want their market share as well. It is that competition, as well as the push for lower fees across the board, that will make it more difficult to compete.”

Despite those concerns, he remains optimistic. “Our firm is honing in on the 'why' rather than addressing 'what' we can do to compete,” he said. “I feel we are more focused on conveying to our clients 'why' we do what we do, rather than focus on external factors that may or may not affect our line of business. This, so far, has produced dividends with referrals and growth we haven't seen in years past.”

Sue Ann Vang, wealth management director of operations at RSM US Wealth Management in Minneapolis took an even broader view of the need for self-definition. “One of the more pressing issues facing financial planners is determining what constitutes financial planning. The industry does not offer a clear definition,” she said. “Some planners merely offer segmented planning in conjunction with the management of a client's portfolio. Other planners offer more comprehensive planning services. Do clients understand what these differences are? Furthermore, can clients assess the value of the services being provided?”

Looking for people

One of the top concerns last year, the search for talent remained pressing for many Wealth Magnets.

“Attracting quality professionals into our practice to accommodate the growth will be a continuing challenge,” said K. Scott Barchus, president of Aldrich Wealth in Oregon. “We are recruiting aggressively, trying new methods of connecting with potential applicants and building a strong, structured intern program to allow us to create our own pipeline of future talent.”

Recruiting and retention can be particularly hard for a field that prioritizes professionalism and client service. “We are committed to hiring exceptional over-achievers who believe being a fiduciary is critical to a client’s success,” explained John Marchisotta, managing partner of Pivotal Planning Group in New York. “With unemployment at record lows, it has been more difficult to find qualified employees. Therefore, employers need to think outside of the box and have a culture, systems, training and a compensation plan designed to attract top talent. This is forcing more consolidation within the industry simply because size does matter.”

Wipfli’s Pierce noted one crucial, if under-appreciated, aspect of the war for talent: “With women increasingly controlling more of the nation's wealth, there may also be a shift in marketing efforts to focus on that demographic,” he said. “We will begin to see more and more women advisors come into this industry and it will be imperative to train the current generation of senior advisors to create a work environment that supports, mentors and trains in a way that motivates and retains the female workforce.”

Perennial issues

As we regularly note in this report, there are two concerns that are permanent features of the wealth management landscape, and they were no less on the minds of the Wealth Magnets this year than in previous years: the combination of an uncertain market environment with unruly clients.

“The volatile markets and uncertainty are making it harder for clients to stick to the plan. Clients are wanting to time the market or are fearful of putting cash in the market,” said Monica Hamilton, director of financial planning at North Carolina’s GreerWalker. “We are certainly educating our clients and discussing the benefits of their allocation. We are also monitoring and discussing cash needs to ensure the client's plan is appropriate.”

“Controlling client risk levels will be an important theme for 2019,” added Benjamin Jones, president and chief investment officer at Allegiant Private Advisors, in Florida. “Late in the economic cycle, with stock markets at all-time highs, investors stretch for risk, hoping to capture rear-view mirror gains. However, prudent financial planners remain vigilant, understanding embedded risk levels are higher later in the cycle.”

Even if they’re not looking to make risky moves, clients still require managing.

“The most important issues facing us in the coming year are how to properly manage the clients’ expectations with regard to the changing regulatory environment, the volatility of the market and the effect that it has on their portfolio, as well as looking at the value we can bring as tax professionals in implementing their financial plan,” said Charlene Wehring, owner and managing member of Texas-based Wehring Wealth Management. “Our firm is addressing these issues by having conversations and meetings with our clients as we keep them informed. We are approaching these issues form a proactive position rather than a reactive position.”

And finally, Arthur Cole, managing partner of Cole, Newton & Duran CPAs in Michigan, offered an exemplary checklist for client relations:

  • Helping clients maintain a long-term perspective so they don't go off track with every movement in the market.
  • Develop constant flow of communication to maintain a solid relationship.
  • Focus more on client behavior instead of reacting to the latest news.
  • Relate to clients on an emotional level to maintain a working relationship.
For reprint and licensing requests for this article, click here.
Wealth management Financial planning Technology Robo advisors Recruiting Change management Top Firms by AUM