Some analysts perceive the wealth management industry as slow to change. The bureaucracy of large corporations, combined with ever-increasing regulatory pressure, has put a damper on growth and adaptation. Therefore, wealth management hasn’t undergone the same kind of rapid evolution that industries like retail and media have experienced in recent years.
However, technology has been staging a quiet revolution in wealth management. Over the past two decades or so, paperless communication has fundamentally changed the way advisors, broker-dealers, RIAs, and clients interact with one another.
These changes have been significant, but there’s a long way to go. Forward-thinking investment firms will see the opportunity to leverage these trends in order to achieve greater efficiency and increase growth.
A Client-Driven Revolution
What drove the paperless communication revolution? One major contributing factor was client expectations.
In the past, communication between an advisor and a client took place in person, over the phone, or through the mail. However, doing business this way doesn’t come naturally to many millennials, who are becoming more important sources of business.
From booking airline tickets to making dinner reservations, millennials are used to doing things online, often leaving out the service representative entirely. In situations where contact must be made, many young people report feeling uncomfortable.
As millennials start to invest more, wealth management firms have had to adapt to provide avenues of communication that are more convenient for them. Email, video chat, and social media have played increasingly large roles in the average advisor’s day-to-day work. In addition, more specialized tools like online dashboards have fundamentally changed the game.
These online dashboards allow clients to take more ownership in their financial futures, enabling them to research investments and perform simple financial tasks on their own. Financial advisors can monitor these activities and use them to inform their decision-making, bringing them closer to their clients and helping them understand their needs a little better.
Cutting Out the Middle Man
Paperless communication hasn’t always been a direct benefit for broker-dealers and RIAs. In some cases, online platforms have enabled individuals to bypass the advisor structure entirely, purchasing investments based on their own research or relying on the algorithms of robo-advisors.
However, these options generally attract investors at lower income levels who might not be a good fit for wealth managers. Advisors still play a huge role in managing the wealth of higher-income individuals.
The issue is that many of these high-income investors are older, while the lower-income investors tend to be on the younger side. There is a threat that as these millennials age and earn more, they may stick with these low-fee low-touch options rather than transitioning into a more personalized service relationship.
To combat this trend, advisors and wealth management firms must start offering some of the same benefits that robo-advisors offer, while capitalizing on their areas of weakness. By enabling simple online transactions and increasing the transparency of the decision-making process while offering high-touch, personalized advice, advisors are likely to win over some of these clients.
Getting into the 21st Century
On a fundamental level, it’s vital that wealth management firms update their processes so they don’t appear “old-fashioned.” Requiring investors to come into the office to sign papers and taking weeks to process new accounts and transactions are artifacts of a time gone by — today’s investors expect convenient service and immediate results.
Therefore, firms should develop paperless communication capabilities with an eye toward migrating to an entirely paperless office, which offers numerous cost-saving and regulatory benefits. Paperless systems reduce the frictions that could turn off potential clients by providing state-of-the-art web-based services and reducing the need for in-person visits and paper touchpoints.
Leveraging Social Media
Paperless communication also plays a huge role in marketing and outreach. Advisors who used to court clients by handing out business cards find themselves focusing more and more on social media.
Social media also provides an opportunity to build and strengthen relationships with existing clients. Rather than only talking to a client during scheduled meetings, advisors can communicate with them regularly on LinkedIn, Facebook, and Twitter.
Since many clients do research about potential business relationships on social media, Wealth management firms must also leverage these networks to build awareness about investing trends, new features, and to keep an open line of communication with clients and advisors.
However, financial professionals must be careful to follow SEC and FINRA regulations when engaging in any online communications. Something as simple as posting a link on a firm-related account could run afoul of these codes. It’s important to carefully scrutinize any third-party information posted to ensure it doesn’t contain false or misleading information, as this can sometimes be viewed as an endorsement that may entangle the firm with this third party. Disclaimers should also be a key component of any such communication.
In this ever-changing environment, wealth management firms must adapt to chart a course toward long-term growth. By adopting and promoting paperless communication, firms can help their advisors attract new business while providing more convenience to existing clients.
The paperless revolution is here, and those who invest the necessary resources in these technologies are bound to gain a competitive advantage.
Interested in learning more about how Docupace can help benefit your business during its transition to going paperless? Contact us today for more information!
