Tech-driven financial advisors can unlock multi-fold value and differentiate themselves

Present-day financial advisors are navigating unique opportunities and challenges. Technological advancements, innovations, and pandemic-induced changes have transformed how financial services are provided to customers. Alongside, many investment activities that accompanied substantial charges in the past are now free of cost. As a result, it is not uncommon to see propositions such as 'no-cost trading', 'zero-commission trading', etc.

This brave new world has prompted wealth management advisors, specifically insurers and brokers, to look for unique ways to stand out and compete. While technology has been disruptive, it has also levelled the playing field, by opening new avenues for service differentiation.

The digital opportunity

Ever since trading commissions started moving towards zero, the industry has witnessed knee-jerk reactions. As recently as the summer of 2021, the Abu Dhabi Securities Exchange (ADX) halved its trading commission — going from 0.05% to 0.025%⁽¹⁾ — while extending trading hours in a bid to improve liquidity in the market. Instances of smaller market players getting acquired by their larger counterparts are becoming common. At the same time, mobile-based upstarts have gained a strong foothold in the sector.

For brokers and insurance advisors, particularly those living and working in the GCC (Gulf Cooperation Council) or the wider Middle East, the post-pandemic fintech drive has complemented the structural, digital transformation underway since the past decade.

This movement towards “near-zero” or “free” has now been expanded to other competitive offerings from digitally savvy financial services providers. Many of them are in a position to offer a similar value proposition (investment advice and asset management) to relatively small-capacity advisors. For brokers and insurance advisors, particularly those living and working in the GCC (Gulf Cooperation Council) or the wider Middle East, the post-pandemic fintech drive has complemented the structural, digital transformation underway since the past decade. There is a consensus among advisors on the ability of technology to unlock new opportunities, bring wider access, and create sustainable business models.

Most importantly, advisors can leverage technology to communicate the value they can provide the clients. Through better communication and showcasing of their work, wealth management experts can demonstrate how they are helping investors and why it goes beyond “free trading”. The key ability is to “un-commoditize” these free or almost-free services. By doing so, insurance specialists can indicate how they have overhauled their financial offerings and taught clients to avoid mistakes while dealing with complexities. Above all, clients can be reminded that advisors are always going to be at their beck and call, especially in times of uncertainty and high market volatility — both being quite prevalent nowadays.

Exceeding client expectations with a combination of trust and technology

The expectations of clients change rapidly in today’s environment, which makes adopting digital tools all the more important for advisors. Doing so will help them provide more engaging experiences and stay relevant in an ever-evolving market. Digitalization has also enhanced customers' awareness of changing value propositions, requiring advisors to adapt and ensure their clients have no "fear of missing out".

To deliver trustworthy services, stockbrokers, insurance agents, and other types of investment advisors can turn to third-party providers who offer more agile platforms.

By no means does technology adoption necessitate in-house developments. Advisors can engage third-party service providers to increase their digital dexterity. This is best summed up in the whitepaper “Modernizing the Trust Company Client Experience⁽²⁾” by SS&C Technologies, a multinational financial technology company headquartered in the US. According to the company, “New digital players and upstart firms have changed how investors with a high net worth look at their wealth management options. To deliver trustworthy services, stockbrokers, insurance agents, and other types of investment advisors can turn to third-party providers who offer more agile platforms.”

Moreover, technology has to be embraced so that regular, personalized, and tailored communications can be maintained with clients. In this regard, powerful client portals and other tools can easily give investors a snapshot of their entire portfolio, help them track investments, ask questions, and raise any concerns with the advisor(s) as and when convenient. In addition, advanced rebalancing technology is a good way for agents and brokers to depict their work and the savings that they are helping their clients achieve. For instance, a sophisticated tax-loss harvesting system combined with a scalable and tax-sensitive approach has the potential to add thousands of dollars into an investor’s portfolio.

Advisors can utilize the digital tools at their disposal to show the value that a client receives by paying for professional advice. Furthermore, they can demonstrate how ESG (Environmental, Social, and Governance) considerations can be explored to differentiate their offerings further.

The way forward

Digital transformation is not going to stop anytime soon. And the finest advisors, agents, brokers, and financial services firms are actively embracing it to stay ahead of the competition. For example, cloud technology is rapidly taking the place of legacy mainframe systems, which make the deployment of modern client-facing applications faster, cost-effective, and super convenient.

In a nutshell, going digital doesn’t just enhance the client experience. It adds operational efficiency while also helping save costs. If the traction of new fintech platforms is anything to go by, business does not just hinge on reputation. Today, it demands staying ahead of the curve through new products and services. And technology is seemingly the best tool to do so.

References

1. https://www.bloomberg.com/news/articles/2021-08-28/abu-dhabi-exchange-cuts-trading-fees-extends-trading-hours

2. https://www.advent.com/resources/all-resources/paper-modernizing-the-trust-company-client-experience/?__cf_chl_captcha_tk__=FWJpCP4H9foLtQ4e1zM3YiVxN75wfn..JQ5kRq2z8Uo-1638603290-0-gaNycGzNC70