“If you can’t keep up, you can’t play” is a schoolyard taunt now echoing across wealth management. The pace of change in our industry has been remarkable and continues to accelerate. We are at the apex of a steepening demand curve driven by a new generation of investors who require easy access to near real-time information delivered with context and substance.
As recently as a few years ago, when an investor was speaking to her advisor about a corporate event, the advisor would say something like: “This stock is going to split,” or “This bond paid a dividend.” Why? Because that is really all he could know given the information at hand. The advisor wouldn’t have verifiable data at the ready to offer insights on how that event would affect the investor’s portfolio balance and tax effects, and if any trades would be needed to maintain the health of the portfolio.
As we enter 2024, the above answers simply wouldn’t cut it. Today’s investor would challenge with: “What does that mean?” And she would expect the advisor to detail the substantive impact of the corporate event in the context of her portfolio, and provide advice based on agreed-upon financial plans. Advisors who cannot do that in 2024 are not keeping up, and in the future, won’t be able to play.
To service today’s clients, wealth managers and advisors need to ensure their businesses are positioned to understand these new expectations, tailor the client experience based on that understanding, and clearly communicate the important and pertinent information they expect. So, for 2024, a key focus for every wealth management enterprise should be to adopt solutions that address these client—and-therefore, advisor—expectations. We can categorize these expectations into three interlocking sets:
1. Hyper-Personalization
Every investment and transaction generates fresh data that is critical to managing every client’s portfolio in near real time. So, advisors need platforms that deliver that data as it materializes to address the client’s needs and goals on their time frame. As the data cache grows, advisors then have more information to help investors understand how investment selections affect their portfolios and what is required to manage their overall financial lives. When new information is presented to advisors, they must know its origin—how verifiable, and therefore reliable, it is right now. They must also, simultaneously, be able to see how the data will be received by clients—most commonly, via a client portal that allows them to visualize the data and how its effect on the portfolio. The advisor’s platform must provide context help them address client concerns as they are raised and provide potential strategies and investments in an easily digestible way. To do so, their platforms must also offer access to a broad spectrum of investment products and services, including different types of alternative products, to improve their investment outcomes.
2. Connected Data
To facilitate a hyper-personalized client experience, an advisor’s technology stack needs a data infrastructure that extends into all areas of a practice. Data from different sources (e.g. client, issuer, security master, reference, pricing, and regulator) must irreducibly accompany every transaction during the process. End-of-day reconciliation is no longer sufficient. Intraday data needs to be consistent from client touchpoints to books and records settlement. That implies, of course, that the data architecture must ensure information integrity—no data can be discarded at any point in the process just because that aspect of the workflow algorithm doesn’t use it.
3. Complete Digitization
Hyper-personalized experiences and connected data are only possible when all aspects of practice management are digitized. KYC Data, regulatory reports, performance analysis, and all communications must be digital, enabling cloud-based operating systems designed to run at pace and grow at scale with the advisors that rely on them. Today’s clients expect the right information, presented in a digestible visual form and they expect it right now. They will simply not wait for days or weeks for reports and updates. We in this industry need to provide digitized content and processes to enable them to securely obtain the information and explanations they need, from any location and at any time.
Know an enterprise that can pull this off? Me neither. So far as I can see across the wealth management universe, no single firm can carry the entire load when it comes to data aggregation and delivery in anything like near real time. Firms of every size suffer from inconsistencies among different eras embedded in their tech stacks.
For example, an advisory firm can have a new order management system that drives like a Lamborghini, but maintains a processing system that more closely resembles a rusty U-Haul trailer. Forging targeted, tailored partnerships with connected service providers can give wealth managers and advisors secured, shared data structures that can enable scaling vertically; so data is delivered seamlessly from client portals to books and records across product types from mutual funds to credit derivatives. Such partnerships can level up data flows across an organization’s different systems.
To use a Star Wars analogy, Anakin Skywalker’s podracer won because it was comprised of independent ramjets that, linked together, could change a vehicle’s overall shape on his prescient command. Enabling a metadata architecture via modern cloud and API technology can give advisors a platform with the necessary breath, speed, and flexibility to win.
Year-end planning gives advisors and the enterprises they serve the opportunity to step back and figure out what they need to in order to win the race. Ask yourself: are you keeping up?
Stephen C. Daffron is Chairman and CEO of BetaNXT, a Motive Partners portfolio company and a leading provider of frictionless wealth management enterprise solutions, real-time data capabilities, and an enhanced wealth advisor and investor experience.
This byline was first printed in Wealth Solutions Report.
