In a 2020 study by McKinsey & Company, more than 42 million households, representing 13 trillion in wealth and $66 billion in potential annual revenues, were identified as prime targets for virtual advice. Not robo-advice, but virtual advice — a big difference. In the same study, over the last 24 months, 42.5 percent of affluent customers who switched their primary wealth management relationship did so to a direct, digitally led firm. McKinsey also estimates 30 percent of affluent clients are likely to subscribe to a virtual model, with that percentage increasing dramatically year over year for decades to come yet pressed incrementally forward by the onset of the current global health crisis.
The Rudin Group, in an article by Think Advisor, concluded that 64 percent of high-net-worth individuals are counting on their future financial advisor relationship to be entirely digital. Seventy-two percent of investors under the age of 40 said they would be comfortable working with a virtual financial advisor. And approximately half of millennials, 50 percent or more, said they would find a new financial advisor if their advisor wasn’t using technology. The pandemic has pushed forward a decade or more of technological progress in areas ripe for adoption. Convenience is the norm, and it’s the norm in virtually every component of your life as an advisor, not just your clients.
The modern consumer demands modern experiences. We are not exempt from this shift in expectation. Overwhelmingly, among the most common complaints about our industry is the slow adoption of technology. Paperless account openings have been available for years, yet advisors are still using physical paper and ink signatures. Client portals and cellphone applications are notoriously cumbersome, clunky and disengaging, let alone our traditional roots in pushing forward into a brave new world. The idea of that alone seems insurmountable at times.
It’s critical that we recognize that business norms have evolved. Technology plays roles in several aspects that drive value, operations, strategic positioning, agility, scalability, employee and client experience, and even how you are viewed from an M&A perspective. Things like the cost of bringing an acquired organization up to speed in the ease of doing business are imperative to consider.
The pandemic’s universal disruption to the way we work and the way that we used to get things done has accelerated the shift to remote work for many. Most organizations did not have a chance to plan or prepare; it just happened. But now leaders have the time and the resources to be intentional about their decisions for the future. So, let’s consider three points: adoption versus avoidance, integration versus aversion and innovation versus efficiency.
Adoption: The importance of adoption is no longer a question. It’s certainly not a question of if or when, it’s already been answered. As a matter of fact, it’s right now. Adoption versus avoidance is so much more about EQ and exponentially more so than IQ. What’s needed is a very honest assessment of where you stand, where you need to go and the gaps that exist in between. And there are certainly third-party tools that exist to help advisors understand these gaps.
Aversion: Your clients are using technology in a way, in many instances, that leap that of our own as advisors. I believe there’s a quadrant of consideration: can and cannot, will and will not. And I believe beyond a reasonable doubt that MDRT advisors both can modernize their practice and are willing to modernize their practice. And that’s a place that we can all start together.
But before we do, it is so important to consider the following: innovation and efficiency do not coexist. If you try to integrate too much at one time, you’ll find yourself in a place of disruption, not only for your business but for your clients.
It’s important that we start one pain point at a time. Let’s consider the three-point process of change:
- When there’s a problem, create a process.
- Unpack your practice and score your process.
- Start with the pain points one at a time.
What we did in each category is create a subcategory of tasks. These tasks as an example in prospecting are phoning, social media, email, prospecting, referrals, etc. What we did in each subsequent category is complete the same exact process. We extrapolated them out and identified the tasks that related to successfully completing each category.
Once that was done for each point of the process, as the practice leader, I rated each task on a scale of 1 to 10. How time consuming is the task? 1, very time consuming; 10, not time consuming at all. Next, I rated the same tasks on an energy scale: “This task gives me negative energy.” “This task gives me positive energy.” So, for each subsequent task, I had both a time score and an energy score.
I encourage you as practice leaders to evaluate your sales process and unpack and score it throughout the process of a week, not one day — give yourself an entire week. Rate that task below a 7 on the time-consumption scale, and tasks that rate below a 7 on the energy scale need to be solved with tech delegation, insourcing or outsourcing. Ask yourself the following questions: What technology or tools can be implemented to solve for these sub-7 items? What team members have aligned interests, talent and capabilities to fill the gaps on the sub-7 items? And if you haven’t identified the internal members, it may be time to hire or delegate externally to a third party. This process for us has been transformative.
Let’s look ahead to what’s on the horizon of tech integration. What do we see coming?
We believe advisors with a deep adoption of digital tech and virtual accessibility not only present a greater value proposition to their clients but will build practices of the future that are more profitable and saleable at a greater multiple. Naturally, there is a forthcoming tipping point in which millennials, Gen Zers and iGeners are driving the expectations of client engagement. Their wealth accumulation and their affluence continue to increase, and our industry is going to be forced to adapt entirely. We see a forthcoming redefinition for the way that business models will be valued.
Last but not least, as it relates specifically to technology, we envision the continued evolution of tools tailored for advisor practices specifically that achieve the horizontal integration of technology within our practice. Currently, most technology, whether it be Zoom or email or text message or your CRM, exists in silos. We see in the future a horizontal integration of those tools that create an improved and more efficient delivery to underwrite the best practices that we use to serve our clients seamlessly.
David W. Olson Jr., a two-year MDRT member with two Top of the Table honors, is a leader in holistically integrated financial consulting, commercial finance, wealth management, group benefit and retirement planning design. He was also recently recognized as a “40 under 40” business leader in his home state of Michigan.
