Wealth managers play ‘robo advisers’ at their own game

Automation and big data mining are helping human planners compete

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Financial planners are fighting back against the rise of “robo advisers” by arming themselves with the weaponry of their automated foes.

Robo advisers — digital platforms that use artificial intelligence to provide low-cost online investment services — are tipped to take business from traditional wealth managers. But human advisers are using the same technologies that underpin such platforms to provide clients with more tailored advice and communication, which wealthy investors are willing to pay for.

Tools that help manage interactions with clients — known as customer relationship management (CRM) systems — will soon be able to analyse data such as a client’s social media activity to work out their investment goals, says Gauthier Vincent, head of Deloitte’s US wealth management consulting business.

“Advisers are thinking, ‘There’s a lot of info out there I would love to have to create rich profiles of prospects so I can increase the odds of success when I [contact] them,’” he says.

Technology is also helping advisers streamline estate planning and compliance, as well as shaping how, when and what they communicate with their clients. For instance, advisers plan to use technology to send tailored messages with portfolio details and projections to calm clients during periods of market volatility.

“For an adviser to call 100 clients, that will take a week or two,” Mr Vincent says, but these emerging tools allow advisers to “work with clients [in a way] that was previously unheard of.”

Some wealth companies have high expectations for what they can achieve with the new technology and are setting aggressive goals. Tej Vakta, head of wealth management services at Capgemini, a consultant and technology provider, says one bank he works with wants to increase the ratio of clients to each of its advisers from 55 to around 350. The bank is trying to achieve this by targeting clients with around $250,000 in assets whom it believes will become millionaires within 10 years.

“Banks want to go after these [clients] but have a limited workforce [and are asking] what are the different things they can do with machine learning, with automation, with large virtual advice,” Mr Vakta says.

Many advisers fear they will be left behind as more complex tools develop and clients demand tech-savvy service. Ensuring that technology tools are efficient is one of the top three challenges cited this year by FT 400 survey respondents. Those who are able to blend technology with a human touch stand to benefit: a 2015 survey by Fidelity, the asset manager, found that advisers who made greater use of technology had significantly more assets than competitors.

But how these tools are used by advisers will be critical to improving the client experience, says Ben Marks, chief investment officer at Marks Group Wealth Management, and an FT 400 adviser.

The 12 people in his practice — which oversees $800m in assets — note all client interactions in its CRM system, which can be used for data analysis. Staff also discuss clients in team meetings so everyone is up to speed and can deal with inquiries from clients directly. “From a client experience, that helps,” Mr Marks says. “It makes them feel special.”

The company recently began using financial planning technology, but the system alone is not enough to meet clients’ needs. Mr Marks had to hire a specialist to input and analyse the relevant data. “There still has to be a human being involved, so I wouldn’t say it necessarily saves us time, but it certainly adds an incredible amount of value,” he says.

Mr Marks’ company is using a combination of technology with a human touch to communicate with clients, too. “You can use technology to help distribute information and formulate your recommendations, but I don’t think you’re going to replicate that human element,” he says. “People want and pay for advice no matter what generation they’re from.”

National brokerages that offer a range of investment services, colloquially known as wirehouses, are also increasing their use of technology to gain better access to new and existing clients. This month Merrill Lynch, a wirehouse with around 16,000 advisers, updated its web portal to give clients easier access to services. Over the past few years the company has developed technology that monitors clients’ investments and liabilities.

“The technology has allowed data analysis to come to be extremely extensive and comprehensive, not only internally, but as we present it to each client,” says Kent Pearce, a Merrill Lynch adviser.

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