Providing bespoke advice in the face of automation

As investment products become increasingly commoditized and delivery methods are automated, bespoke advice will only become more valuable, speakers at a Vantage Series event said on Monday in Toronto.

The value of advice and the importance of customization were among the topics discussed at the event, which was presented by the Investment Industry Association of Canada (IIAC) and the Knowledge Bureau.

With commoditized products, advisors who serve mass market households will turn to third-party solutions, while those serving high-net-worth clients will continue to rely on bespoke solutions, IIAC president and CEO Ian Russell told the audience.

Other speakers offered tips for delivering bespoke advice and presenting clients with a clear value proposition.

David Hurd, wealth and asset management consulting leader at EY Canada, referred to an EY survey conducted last year that found 44% of Canadian respondents planned to switch wealth management providers in the next three years (compared to one-third globally). The finding can be viewed as alarming or as an opportunity, he said.

The top three trigger events for switching were leaving a job (67%), inheriting or receiving money (64%), and having a child (63%). Hurd noted that such major life events span the early career years to retirement, so advisors must be vigilant and proactively offer advice.

Personal attention and pricing were top motivations for switching providers. The challenge with personal attention, Hurd said, is providing tailored advice consistently at scale and to a level of personalization that consumers have come to expect. Firms must arm advisors with the tools to personalize and scale advice. “Invest now,” he said.

With pricing, the key is providing value for cost, he said. The EY survey found that many clients don’t trust that they’re charged fairly (45%), and a majority wanted to pay differently. Hurd also stressed the importance of trust, which Canadians rated as more important than their global counterparts did.

Successful firms will provide clients “broader financial wellness,” Hurd said, with offerings beyond those of the traditional broker.

The EY survey found that clients globally were interested in, but weren’t yet receiving, financial education and training (70%), coaching on life goals (68%) and insights on market trends (66%). Hurd said these results serve as a reminder to advisors to communicate their value to clients and also to offer tangibles, like plans, that clients can review.

As delivery methods, such as transactions and accessing accounts, become automated and streamlined, advice will remain essential and become more valuable, said Stuart Raftus, president at Canaccord Genuity Wealth Management (Canada), who also spoke at the event. As a result, the pressure is on advisors to “demonstrate and articulate precisely” their value propositions, he said.

In a firm survey, Canaccord Genuity advisors said planning services were as, or almost as, important as investment management, Raftus said. The survey also found that 84% of the firm’s advisors said tailored service and product offerings were “very” or “extremely” important to clients.

“Bespoke outcomes and customization is really what clients are looking for,” he said. Of similar importance to clients were fee structure, firm reputation and access to an online portal.

An effective value proposition includes holistic services such as tax, succession and estate planning, he said, as well as accessibility provided by apps and mobile platforms to easily track investments and make real-time decisions. Further, advisors must demonstrate value by building trust, developing relationships and thinking strategically about how to create and preserve wealth for clients.

Catering to boomers and millennials

As advisors develop their value propositions, one thing to consider is that baby boomer clients will continue to dominate the industry, with needs that are shifting from wealth creation to wealth preservation, Raftus said.

With that shift, Hurd highlighted the need for advisors to communicate the value they provide on the downside. Firms must put tools in place to manage risk and advisors must articulate risk management to clients in simple terms, he said.

Advisors should also consider the future pipeline of clients: millennials. Compared to older generations, these younger clients are more likely to question the value of advice and to challenge fees, and less likely to demonstrate brand loyalty, Raftus said.

Accordingly, he urged advisors to avoid becoming “entrenched” in how they deliver value. Advisor complacency will “prove to the next generation, who are already questioning the need for advice, that they cannot rely on investment advisors, and they’re better off just doing it on their own,” he said.

Millennials want authentic individualized experiences, transparency,  empowerment to make choices and customization, he said. For advisors, that means being “increasingly flexible” in what they offer and deliver.