The Evolution of Financial Advice

Posted by Philip Kessler, JD on 11/30/18 8:45 AM
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The Great Recession rightfully lingers in the mind of most investors. In response, regulators have since sought to remedy the failings in their oversight procedures and investment managers have sought to rebuild the public’s trust. We believe financial technology will play a critical role in addressing both. For most financial advisors and asset managers, rebuilding trust through the use of technology is easier said than done. In fact, while more investment managers are coming around to the idea of adopting technology, they have still struggled with implementation.  This is a competitive advantage for SWS as a relatively young firm because we were able to build a firm around the application of technology in all shapes and forms. 

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On the financial planning side of our business, we see technology as being particularly compelling from a behavioral science standpoint because it transforms investor habits.  Crucial to this is an interactive user interface (UI) or user experience (UX). In this vein, we have invested heavily in our website and client platforms. This has, in effect, “gamified” the investor’s interaction with us and, in doing so, we feel our clients are better positioned for success. Said differently, we have empowered our clients to master their financial destiny because they can visualize their financial situation and perform their own situation analyses around their savings and investments. By removing what had been a very opaque experience for clients and indulging their intelligence, we think we have bolstered our relationships.

On the asset management side of our business, we are now immersed in an era that is defined by automation, algorithms, and big data, as detailed by the Financial Times recently. But interestingly enough, our interactions with endowments, foundations, and other institutions have led us to the conclusion that these types of investors aren’t entirely dissimilar from high net worth individuals and families in their desire to engage with us digitally. It used to be that institutional investors met with their managers at the end of every quarter and received a customary PowerPoint deck, which seems so antiquated. These days, we are finding that our institutional clients want the same real-time access to their holdings and performance. It is our view that as margins continue to tighten in the financial services industry, the investment managers that enable their clients in manners such as this will be able to distinguish themselves beyond performance alone.

So, what does this mean as it relates to financial advice?

We think the advice in financial planning will remain goals-based, just as advice in the asset management space will largely remain mandate or liability-driven. Still, in both cases, we feel that the level of transparency that is facilitated by financial technology is the clearest way to provide advice and build trust with both investors. In building a firm around this ethos, we think SWS Partners has a competitive advantage irrespective of market conditions, geopolitics, or any other exogenous factor.

Topics: Asset Management, Financial Planning

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