A generation ago, the relationship between a financial broker and client was expected to be essentially transactional — centered squarely on the buying and selling of assets. Today, many clients prefer a more relational approach, seeking out wealth advisors and financial planners who are able to provide long-term, active guidance on their financial accounts.
The evolution of the financial-planning industry has been spurred on by advancements in technology that allow advisors to offer real-time, robust insights into the health of their clients’ accounts that would have been impossible just 15 years ago.
“When I first got into financial planning 17 years ago, the expectation was that you’d meet with your financial planner maybe once a year and leave with a binder full of recommendations,” said John Boardman, founder and CEO of Ballast, Inc. “But the problem with that was it was so static. And inevitably, after a few days or months, something in the client’s life would change, and those numbers would become obsolete.”
John Boardman
Today, Boardman encourages his clients to view financial planning as an ongoing process — one that’s reactive to dozens of variables that are themselves constantly changing. And thanks to advances in financial-planning technology, they can.
Boardman can now sit with clients and show them, via robust computer-generated projections, how slight changes in savings per month, or a few extra years of work before retirement, will likely alter the trajectory of their retirement savings.
“They are able to see the impact of that input variable on their long-term financial picture, immediately. It’s the visual display of seeing that line move that’s so effective,” he said. “This so-called ‘gamification’ of planning advice is the idea that we’re not providing clients a single number or result on a sheet of paper, but instead we’re imputing 5,000 iterations into a computer, doing the Monte Carlo analysis, and seeing what the likely, or median, result of their financial picture will be. The more input we’re able to enter, the better able we are to provide a customized result for our clients.”
Offering Better Guidance, More Quickly
With the Merrill Lynch app, clients can get real-time updates on all aspects of their financial lives, from the value of their assets and accounts to the remaining balance on their car or mortgage loans, wherever those accounts are held. The ability to monitor their financial health on a day-to-day basis with a single tap has been especially appealing for millennial investors, said Travis Musgrave, managing director of wealth management at Musgrave & Associates/Merrill Lynch in Lexington.
“Many of my millennial clients are extraordinarily bright and extraordinarily driven,” Musgrave said. “They work hard and expect very high levels of service. They’re high demand and want instant gratification. They expect high deliverables.”
Those high expectations often translate into expectations of a broader approach to financial management, including guidance not just on which stocks to buy but also insights on tax and estate planning, drafting wills, and even which life insurance policy to buy, Musgrave said.
And, like Boardman, Musgrave says computing advances in the past decade have allowed advisors to offer clients a higher quality deliverable — a more robust, realistic look at their financial health.
“When I started in this business, our industry would offer clients a straight-line assumption of return. We’d say ‘we think you’ll earn 7 percent’ and extrapolate that out,” Musgrave said. “But our computing capacity now allows us to input data and look at returns that are more geometric in nature or that are more randomized, which offers us a more realistic feel for what the client’s future may look like with higher degrees of confidence. This also gives us the ability to stress test various events, goals and assumptions with the client.”
And, from the advisors’ standpoint, researching the soundness of potential investments has become immeasurably easier thanks to the depth of financial information that’s available online, said Mike Johnson, an investment advisor representative at Dupree Financial Group.
“We can go online to Yahoo Finance or onto the company’s website and access all their quarterly filings. All that information that you once would have had to pay hundreds or thousands of dollars for is now readily available,” Johnson said.
Mike Johnson
Similarly, making adjustments in client portfolios in order to best capitalize on movement in markets is now seamless and can involve just a few taps at the keyboard, streamlining a process that in an earlier generation would have required back-and-forth phone calls and inherent lag, Musgrave said.
The added tech capacity also allows advisors to easily analyze their clients’ portfolios to see exactly what they’re holding at any given moment, Johnson said. As a result, financial advisors can offer heightened, value-added guidance — a selling point that helps them differentiate and market their services to clients who otherwise might have considered more passive-investment, “auto-pilot” options such as ETFs and index funds.
Optimizing the Client-Advisor Relationship
Advances in technology have also expanded advisors’ geographical reach. Thanks to Skype calls and video/webinar technology such as GoToMeeting, financial planners can advise faraway clients over the phone, with both parties viewing the same computer-generated screens, nearly as effectively as in person.
“I had a meeting with a client in Georgia this morning, and we were able to look at the same things as if we were in the same conference room together,” said Boardman, who has clients in more than a dozen states. “Face-to-face meetings are important in terms of building that trust relationship — and I don’t think you can ever completely replace the face-to-face meeting — but with technology we’re getting close.”
Along with all the benefits it’s ushered in, the tech boom has also lowered barriers to entry in the financial planning market, meaning that “it’s easier today to get advice, whether that’s good or bad or indifferent advice, it’s all out there,” Musgrave said.
That makes it even more essential for clients to do due diligence and careful research in order to find an advisor who’s trustworthy and a good fit. Musgrave suggests clients ask advisors about how they’re paid — are their services fee-based or commission-based? — and also seek out someone who’s willing to listen.
“If that first meeting goes something like, ‘Here’s our team. Here’s our model. Here’s what we are going to do for you,’ that’s probably not a good fit,” Musgrave said. “As a client, I would want someone who’s going to engage with me about my life, who asks about my kids and my goals for them, my feelings about risk, and what I want my money to do.”
Boardman agrees: “Clients want to know you have a deep understanding of them personally and their financial history and what they’re trying to accomplish in their financial lives,” he said.
Thus, even as financial-planning technology continues to improve and evolve, advisors feel certain that the human-to-human, relationship-building aspect of the industry will remain vital.