Wealthtech - Revenue Generator or Expense Item? Or Both?

The numbers don't lie - advisors who embrace and leverage technology in their wealth management practice tend to outperform those who don't.?Cerulli's recent research shows that almost 30% of practices that heavily utilize wealthtech have experienced higher growth in new client acquisition over three years, whereas only 9% of practices that are 'light users' have seen similar growth. But how and which aspects of the client lifecycle to automate can be a challenge for advisors and firms. After all, isn’t wealth management a “relationship business?”

From onboarding to performance reporting, by leveraging technology to provide personalized, efficient, and engaging services, wealth managers can attract, retain, and grow their client base while building strong, long-lasting relationships. Here's how to get the most out of it, throughout the entire lifecycle.

Onboarding: Streamlining Client Integration

First impressions matter. The onboarding process sets the tone for the client's experience with your firm. The right onboarding technology can create a seamless, efficient and personalized new client experience.

So, how do you choose the right program for your firm? Determine your needs. The more clearly you can identify your needs, the better positioned you'll be to choose the right solution. Look beyond the jargon and extras and talk with potential vendors about customization and ongoing product support. You may need to modify parts of the program to meet your firm's specific needs, and you will absolutely need support when issues arise.

Portfolio Management: Enhancing Investment Strategies

Understanding that only some firms have the freedom to choose their preferred portfolio manager, if yours can make this decision, here's what you should consider.

Start by aligning your portfolio management strategy with your firm's investment approach. Do you need a program that supports both active and passive management? A robo-advisor might be ideal for lower-net-worth clients due to lower account minimums. A hybrid approach can also work, directing higher-net-worth clients to traditional programs while using robo-advisors for others.

Evaluate how the software handles asset location, tax loss harvesting, and rebalancing. Check if client communications can be customized with your firm's branding and if automation is available for efficiency. Lastly, ensure the software integrates with your existing CRM, onboarding, and financial planning tools.

Trading Solutions: Optimizing Transaction Efficiency.

Trading tech can be a powerful addition to your practice, freeing up time for you to focus on financial planning. Consider what will most benefit your clients and your team when looking at options. Will they want research and/or technical analysis? What types of securities do they want, and are those supported on the platforms you're considering? Also, look at features like household rebalancing, especially if you have families as clients.

Financial Planning: Crafting Client Roadmaps

A good starting point is to identify the type of planning your firm does. Are you more focused on cash flow or goals-based planning? Are your clients younger, older, or both? These jumping-off points can help you to weed out programs that aren't focused on your firm's needs. Think about the user experience and interface. Since you will likely use this product in tandem with your clients, it's vital that the interface is easy to navigate and meets clients where they are.

As with all other wealthtech components, you'll also want to ensure that the software integrates with your existing platform components for a seamless experience.

Fee and Billing Software: Ensuring Efficient Revenue Management

Advisors spend nearly twice as much time working behind the scenes as they spend with clients. Leveraging the correct fee and billing software can help change that.

As many advisors shift towards a fee-for-service model, the software must handle RIA compliance and offer flexible billing options. Conversely, if you're using an AUM model, consider whether there are options for excluding certain assets, contributions, or withdrawals from fee calculations.

You may also want to look at what customization is available (and whether it's worth the cost), as well as e-signatures and a client portal, to cut down on paperwork and boost efficiency.

Performance and Reporting: Delivering Clear Client Insights

Performance and reporting software are the final wealthtech components in the customer lifecycle. When looking at the right programs for your firm, consider first how you plan to calculate performance. This will depend on your clients - some might prefer a basic rate of return, while others will request a dollar-weighted or time-weighted return. Clients may also wish to view their data in different formats – in graphs vs hard numbers. Also, consider how your clients wish to receive the reports –do they want hard copies or prefer web-based reports instead?

In a field where trust and personal connections have traditionally been the cornerstone of business, today’s challenge is to integrate the timeless value of human interaction with the innovative capabilities of technology-driven experiences. By strategically leveraging wealthtech at each step of the client lifecycle and choosing the systems and applications that meet the needs of both the firm and client,?wealth management professionals can enhance efficiency, drive business growth and greatly improve client satisfaction.

https://www.forbes.com/sites/aprilrudin/2024/07/10/wealthtechrevenue-generator-or-expense-item/