Embracing change: How hybrid advice benefits advisors and investors

|Neil Greenbaum, Head of Advisor Solutions, Nest Wealth

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Neil Greenbaum, Head of Advisor Solutions, Nest Wealth

The wealth management industry is undergoing a transformation. In 2019, Accenture and IIROC released Enabling the Evolution of Advice in Canada which highlighted the intergenerational transfer of wealth, how more women and millennials were entering the market, and how investor expectations were changing as a result. The major findings were that investors are looking for a more holistic approach to advice, are interested in goal-based advice (as opposed to product-led offerings), and looking for digital experiences. The report found that “digital capability and tools represent basic expectations of clients and are no longer differentiators for firms. Firms who lag in the digital space may increasingly be viewed as dated and stale.”¹

Then the pandemic hit. If digital wasn’t a requirement for firms beforehand, the pandemic certainly made it a necessity for business continuity as lockdowns were introduced. And while the world is beginning to open up, clients’ expectations for digital experiences and hybrid advice are not going anywhere.

Digitally transforming a practice may seem intimidating, however, overcoming the initial fear of change will greatly benefit advisors. The shift towards hybrid advice presents a great opportunity for work-life balance, bringing on more clients, and providing better service. According to a recent survey by Ernst & Young (EY), 56% of Canadians are interested in using more digital tools in the future. However, when it comes to asking questions and planning for life’s big moments, Canadians aren’t ready to embrace purely digital interactions.² The hybrid approach is what they are looking for.

When advisors embrace hybrid advice and partner with a digital wealth platform, their role changes. When using a traditional model, an advisor would typically spend about 70% of their time doing administrative paperwork and operational/compliance-based tasks. When an advisor makes the shift to a hybrid model, they significantly reduce the amount of paperwork involved in onboarding, plus, are no longer required to do portfolio management. Rather than spending time researching mutual funds and rebalancing and adjusting portfolios, advisors get more time to focus on financial planning, growing their business, and building stronger client relationships.

Switching to a hybrid advice model means no longer being chained to a desk, allowing for a better work-life balance. Advisors have the freedom and mobility to work from anywhere – at home, at their cottage, or even on a beach in Hawaii. Advisors can gain a true sense of independence with the freedom to grow their business as they see fit. Eliminating quotas, minimums, and override/dealer fees.

Advisors can take on more clients which can be difficult under a traditional model, especially with newer investors. The resources required to service a new client typically result in requiring high mandatory minimum investments to be profitable. When the onboarding process gets digitized, time spent on paperwork is reduced along with the cost of managing the client. Thus, giving advisors the capacity to take on more clients and support newer investors who may not have met the old mandatory minimums. Reducing overhead to take on more clients results in more revenue, increasing the profitability of an advisor’s business.

Clients are truly better serviced using a hybrid model. Digital wealth platforms help reduce management fees allowing advisors to be much more competitive. There is a significant increase in transparency for the client since they can log in to the platform to see their investments anytime, any place. The biggest benefit to the client is that it frees up an advisor’s time to focus on the things that matter to them most: goal-based advice. Advisors will be better suited to help their clients meet their financial goals. Whether it’s buying their first home, saving for their first child, or preparing for retirement and estate planning.

According to the EY survey, advisors using a hybrid balance of digital tools and meaningful relationships can differentiate themselves in a post-pandemic market where investors will want both.³ Advisors should embrace switching to a hybrid advice model to achieve a more balanced life, increase revenue, and ultimately provide a better service to their clients.