How automation enables advisors to focus on client value, not admin

Wealth advisors have a problem. They need to meet the demands of the next generation of clients if they want to take advantage of what the media has dubbed the "great wealth transfer." But they spend too long on admin, which eats into the time they should be dedicating to value-added activities like serving existing clients and attracting new business.

To empower their advisors, wealth management firms must provide the necessary tools and systems to boost productivity and scalability. If they don’t, they risk getting left behind by their more innovative rivals. We can support this digital transformation, but before exploring our solution, let’s take a closer look at the ongoing opportunity and some of the challenges firms currently face, based on feedback we’ve collected from our clients in the wealth sector.

The great wealth transfer

The world is in the midst of one of the greatest shifts of capital in history. Having amassed significant wealth, thanks to favorable economic conditions in the decades following the second world war, Baby Boomers, the generation born between 1946 and 1964, are in the process of passing that wealth down to younger generations. While estimates of the exact amount vary, McKinsey predicts that investable assets held by Generation X (born from 1965 to 1980) and Millennials (1981 to 1996) will rise by nearly $37 trillion between 2020 and 2030.

This shift presents wealth managers with a once-in-a-generation opportunity. And market share is up for grabs — further research by Greenwich Associates shows that two in five clients are actively looking for a new advisor. But there’s a caveat — the only ones who will benefit are those in a position to build relationships in the right way.

It’s easy to assume younger, tech-savvy clients favor digital channels when interacting with their advisors, but that isn’t always the case. According to Bain and Company, Gen X and Millennials want to deal with an advisor when making a difficult financial decision.

The transition to a hybrid model has already begun. Wealth managers offering a mix of digital and human channels are winning, achieving a Net Promoter Score of 64 compared with 52 for firms sticking with the human-only model and 45 for those focusing on purely digital channels.

The admin burden

Research by our Value Consulting team — a group of experts who provide strategic advisory services to help our clients bring their vision to life — highlighted three key concerns for wealth managers when it comes to the amount of time advisors spend on admin:

"I don’t have a single client view"

Multiple distribution channels, separate platforms in the front and back offices, and disparate workflows prevent advisors from having a single view of their clients. This approach leads to inconsistent customer journeys, slower decision-making, inefficiency, and data silos.

"I’m dealing with sparse and insufficient data"

Even though effective leveraging of data improves the customer journey and boosts acquisition, wealth managers struggle to gather valuable information about their clients. In WealthBriefing’s recently published "2022 Technology and Operations Report," firms only scored themselves an average of 68 out of 100 when asked to rate the reliability, timeliness, and accessibility of the data they collect.

"I have to approve everything manually"

Having to perform manual approvals at various stages of the customer journey — for example during onboarding — increases the burden on advisors due to the amount of time required to ensure procedures are followed correctly. Manual approvals are also error-prone, raising compliance and operational risks while adding friction to the client experience.

Impacting the bottom line

The Value Consulting team dug a bit deeper with our clients to explore the impact of these challenges.

Our research shows that 20% of advisors spend time on basic admin tasks like pulling data from large excel sheets, updating client addresses, changing bank details, and producing performance reports. That means a fifth of each firm’s workforce focuses on back-office activities, rather than upselling and cross-selling existing clients and developing new business. The main reason cited for the wasted effort? Siloed systems.

Time taken up by admin has a material effect on the bottom line. Advisors working for the laggards open just eight new accounts each year, compared with 23 gained by those at firms that embrace technology and consequently have a single view of their clients. In revenue terms, this equates to a difference of over $135,000 in fees earned per advisor, based on average assets per client of $905,000 and advisors charging a fee of 1%.

Of course, as a firm expands, the admin burden grows with it. New hires need to be recruited to service new accounts, and unless the challenges described above are addressed, advisors will keep wasting time and firms will continue to miss out on revenues, just on a much bigger scale.

Empowering your advisors

Wealth managers must innovate at startup speed to tap into the sizable revenue streams resulting from the great wealth transfer — and to retain their best advisors, another important consideration. That’s why forward-looking firms are ditching manual admin in favor of software solutions that break down silos and automate procedures.

Backbase for Wealth Management combines digital channels with human contact so wealth managers can deliver the hybrid experience the next generation of clients expects. By bringing together IT and the wealth management business, our solution enables faster collaboration, reduces the time spent on admin, and allows advisors to focus on what really matters — creating value for their clients.

The platform empowers advisors by presenting a 360° view of each client, offering insight into their products, transactions, document exchange, communications, and more. This holistic view allows advisors to tailor their services to individual clients, providing live support to those who need it and enabling others to self-serve via digital channels.

The platform also comes with digital onboarding, including automated know your customer (KYC) and anti-money laundering tools. Digital onboarding eliminates the need for manual, paper-based processes, which take up time and add costs.

To find out how Backbase can support your firm’s digital transformation journey, learn more about Backbase for Wealth Management.