When the subject is frictionless financial services on demand, there’s no better starting place than direct indexing, fractional trading, and separately managed accounts. Until recently, these popular investment strategies were the province of ultra-high net worth individuals. Digital capabilities made these strategies available to a more diverse investor base, further demonstrating the value of eradicating friction in financial services.
But that’s just the beginning. For consumers, digital technologies offer a real-time look across what they have in savings, where they’re investing and how those investments are doing, what they have in their retirement and non-retirement accounts, debt on the books, and available lines of credit.
A holistic picture of an investor’s financial wellness requires connecting the dots on the three-legged stool of banking, lending and investing. These can no longer be treated as three separate pillars. Increasingly, consumers expect these key components of financial wellbeing to be seamlessly coordinated, not separated into three disparate silos.
If a wealth manager has insights into those three parts of their client’s life, they’re able to send them relevant and timely messages. Like a water bill that’s abnormally high. Or perhaps an extra amount of money that was deposited into one of their accounts. What should be done with this money? Should it be invested or used to pay down a debt?
Instant access to this information enables decisions to be made in real time. This puts your client in the driver’s seat, right where they belong. This is value-added service that can only be provided by tech-forward advisors powered by a service-focused custodian.
48 Hours To Open An Account? Why So Long?
For financial advisors, it all begins with onboarding new clients. This first touch point sets the client’s experience. In legacy settings, when customers want to open a new account their advisor sends them paperwork and they sign near the yellow stickies. Then they FedEx it to the bank and someone asks them to wire money to fund the account.
Why do we tolerate a minimum of two days to open an account? What happens in those 48 hours? Opening a new account should be fast and easy. Frictionless eliminates delay.
A focus on frictionless also spells the end of batch processing, multi-day and overnight processes, and even same-day settlement. To achieve real-time service levels, we need – and clients demand – a new architecture for our industry’s foundational systems.
Unfortunately, many financial advisors still use old technology built around silos. In fact, a recent survey found financial advisors are so burdened by administrative and operational tasks that the average advisor can only spend 8.8 hours per week meeting with clients.
Client fees are high to cover those overhead expenses, yet advisors still can’t spend sufficient time on what’s most valuable to their clients — conversations about the complexity, the emotions and choices that mark our financial lives.
The Modern Custodian’s Pledge: To Serve, Not Control
To help advisors move toward a digital, frictionless future, modern custodians should provide advisors with a platform designed to serve, not control. It should be a platform that will facilitate – not dictate – the relationship between advisors and clients. Nor should the modern custodian offer only pre-packaged, off-the-shelf solutions.
Instead, the modern custodian should provide the digital platform supporting customizable tools and technology that enable clients to save, spend and invest their assets in a completely original model of the advisor’s design.
The modern custodian isn’t central to the relationship between advisor and client and doesn’t want to be. There should be nothing standing between the client or advisor and where they put client money: the asset manager, ETFs, mutual funds, or individual stocks.
To be sure, developing real-time digital dexterity demands an upfront investment in technology and tech-savvy staff, but it will pay attractive dividends over time. Not only can advisors handle more clients and spend less time doing so, but their practice will benefit from greater operational efficiencies.
For example, compliance and other back-office tasks can be standardized, with pop-up reminders when updated paperwork or action is due. And advisors can customize and tailor targeted communications such as blogs and educational messaging to keep their clients informed, and videos that resonate with their touchpoints. Most important, customized digital functions can attract and retain a loyal NextGen client base that will drive higher practice value.
To power their transition to digital services, advisors should begin by creating a timeline to upgrade their digital capabilities, based on the firm’s growth strategy. This includes defining goals that focus on what their clients need, and the technology required to serve them.
Then, advisors should select a provider with a record of building innovative and integrated solutions that have helped advisory firms transition to digital efficiently and profitably. Through digitalization, among other things advisors want to find ways reduce costs, comply with regulations, and aggregate data.
The basic services clients expect to receive from a digital experience range from receiving information, including portfolio updates and research, to executing transactions, transferring money, and holding meetings with their advisors.
The industry is still in the early stages of this digital transformation, but it is moving in the right direction. Because it’s becoming clear to everyone that frictionless means more – better and faster – for everyone.
Bill Capuzzi is the CEO of Apex Clearing, a digital custody and clearing engine powering fintech disruptors and attempting to drive modernization in the financial services industry.
This article was originally featured in Financial Advisor, here