Technology and its discontents
The 2019 Wealth Magnets wrestle with technology, the talent wars, the need to communicate their value prop, and more
Financial planning is not an area one thinks of as technology-focused — and yet for the CPA financial planners in this year’s list of the Top Firms by Assets Under Management, technology and its ramifications are very much top of mind.
That’s not to say it’s the only thing they’re concerned about: When asked which issues they think are most pressing for their field, many of the 2019 Wealth Magnets cited the war for talent, competitive pressures old and new, the perennial issues of market changes and managing clients, and even the existential need to clearly define and communicate to clients the value proposition of financial planning.
But it was technology that dominated their answers, on its own or woven into other issues.
“Keeping pace with the various technology platforms available to financial planners is one of the most important issues,” said Laura Beimler, operations manager at Virginia-based Alliant Wealth Advisors. “Since the industry is relatively small, it has not attracted any developers large enough to build an integrated technology stack. So planners are left implementing stand-alone applications for planning, portfolio accounting, trading/rebalancing, CRM, financial planning, data aggregation, etc., and then building data feeds between all platforms in an effort to be efficient.”
“There will continue to be a greater adoption of technology, both client-facing as well as employee-facing,” added Jennifer McEachin, marketing account manager at Wipfli Financial Advisors in Milwaukee. “Pairing the power of an advisor’s expertise with cutting-edge technology is no longer a nice-to-have but a must-have. Access to technology tools is now an expectation of clients at all stages of wealth building.”
One downside of technology, according to some Wealth Magnets, was the ongoing automation of investment management and the rise of the “robo advisor” — a development that forms a major part of a tangle of concerns about competition, fee pressure, and the need for financial planners to articulate a compelling value proposition.
Competition and value
“The growth of the RIA industry will lead to a more competitive, fee-only environment,” warned Robert Klingensmith, managing director of wealth management at Virginia-based PBMares Wealth Management. “Good for clients, not so good for RIAs.” Besides that, he added
that the field faces “fee compression as more virtual services become available, and low, to no-fee investment options grow in popularity. Reduction in overhead and the ability to serve broader audiences means lower fees. Good for clients, not so good for RIAs.”
Juan Aguilar, director of operations at San Diegobased Rowling & Associates, drew a straight line from competitive pressure to the need to stand out from the crowd. “One of the struggles with financial planners is developing and crafting their value proposition to clients,” he said. “We live in a time where robo advisors are rampant, broker-dealers are competing with RIAs, and the Vanguards of the world want their market share as well. It is that competition, as well as the push for lower fees across the board, that will make it more
difficult to compete.”
Despite those concerns, he remains optimistic. “Our firm is honing in on the ‘why’ rather than addressing ‘what’ we can do to compete,” he said. “This, so far, has produced dividends with referrals and growth we haven’t seen in years past.”
Looking for people
One of the top concerns last year, the search for talent remained pressing for many Wealth Magnets.
“Attracting quality professionals into our practice to
accommodate the growth will be a continuing challenge,” said K. Scott Barchus, president of Aldrich Wealth in Oregon. “We are recruiting aggressively, trying new methods of connecting with potential applicants and building a strong, structured intern program to allow us to create our own pipeline of future talent.”
Recruiting and retention can be particularly hard for a field that prioritizes professionalism and client service. “We are committed to hiring exceptional overachievers who believe being a fiduciary is critical to a client’s success,” explained John Marchisotta, managing partner of Pivotal Planning Group in New York. “With unemployment at record lows, it has been more difficult to find qualified employees. Therefore, employers need to think outside of the box and have a culture, systems, training and a compensation plan designed to attract top talent. This is forcing more consolidation within the industry simply because size does matter.”
As we regularly note in this report, there are two concerns that are permanent features of the wealth management landscape, and they were no less on the minds of the Wealth Magnets this year than in previous years: the combination of an uncertain market environment with unruly clients.
“The volatile markets and uncertainty are making it harder for clients to stick to the plan. Clients are wanting to time the market or are fearful of putting cash in the market,” said Monica Hamilton, director of financial planning at North Carolina’s GreerWalker. “We are certainly educating our clients and discussing the benefits of their allocation. We are also monitoring and discussing cash needs to ensure the client’s plan is appropriate.”
Even if they’re not making risky moves, clients still require managing. “The most important issues in the coming year are how to properly manage the clients’ expectations with regard to the changing regulatory environment, the volatility of the market, and the effect that it has on their portfolio, as well as looking at the value we can bring as tax professionals in implementing their financial plan,” said Charlene Wehring, owner and managing member of Texas-based Wehring Wealth Management. “We are addressing these issues by having conversations and meetings with our clients as we keep them informed. We are approaching these issues from a proactive position rather than a reactive position.” AT