Digital wealth firms may seem like a threat. But you can benefit from their growing popularity by paying attention to how they use tech tools and serve clients, says Michael Holder, senior counsel for BMO Private Client Group.

Holder presented at the Strategy Institute’s annual registration reform summit. He gave the following four examples to show how these automated advice firms in Canada design KYC and client information forms (he based these tips on how BMO set up its SmartFolio platform).

  1. The forms typically include a series of behavioural questions to gauge clients’ risk tolerances.
  2. Online systems also define key financial concepts as investors work through KYC forms.
  3. These systems use tools that prevent clients from leaving sections of forms blank, and flag inconsistent answers on forms.
  4. The forms include reminders that advisors are available to help via phone calls or video conferencing.

Overall, adds Holder, questions included in automated KYC forms should always be asked in the way and order that advisors would ask them, or in the way investors usually answer them best. Then, in-house advisors should phone clients to discuss their answers and sutiability for investments.

For more on the rise of digital wealth firms, check out a selection of our event live tweets below.

Live tweets – Strategy Institute’s 2016 Conduct and Compliance event

Around 2:30pm, we’ll hear from Michael Holder, BMO, on #fintech. Specifically, on how #roboadvice offerings are meeting Canadian regulatory requirements.

Holder has taken the stage! He’s going to talk about U.S. vs. Canadian #roboadvisors, and offerings that fall in between. #fintech

U.S. can have algorithm-based, online-only #roboadvisors, but most have human element. See #FINRA‘s latest report.

On the domestic front, CSA notice 31-342 talks about how Canadian #robos work. #Robos have been useful for lower-income clients and prospects.

All across North America, says Holder, tech has been a major disruptor since 2000. So pay attention to how tech tools and firms affect the financial advice industry.

Holder: #fintech refers to infrastructure innovations that challenge traditional banking. New tools streamline money management and access.

What clients like is #fintech tools offer 24/7, transparent, online services, says Holder. People know what they’re getting.

#Roboadvisors, or automated investing services, are online onboarding services. If designed in way advisors think, [those services] can feel very human, says Holder. For example, questions can be asked in the way and order advisors would ask them, or in the way investors would answer them best.

Automated services can also refer to automated, model portfolios offered by advisors, PMs; these have been around for long time: Holder.

Canadian #roboadvisors should actually be referred to as cyborgs: Holder. Advice comes through online channel, but portfolio managers involved.

Preferable model of automated advice is where client inputs info, but where advisor then phones the client to confirm that info and the client’s suitability, says Holder.

Also, robo-advisor models should include clients getting alerts and trade recommendations, and people’s investments should be continually monitored in-house.