How Wirehouses and Broker Dealers Can Harness Technology to Increase Client Engagement

If you’re wondering whether your advisors are staying put or not, here are some things you should know:

• Some already might have a foot out the door: 15% were considering leaving their wirehouse in the next one to two years, according to a 2022 study by J.D. Power.
• Attrition is costly, both in terms of hiring and training replacements, and advisors taking clients with them, with approximately 40% of client assets following advisors when they switch firms.

There it is: some are already on their way out, and that decision, should it follow through, would have a lasting, negative affect on firms.

Financial institutions like wirehouses and broker-dealers have been making substantial investments in their advisor teams as part of the process of growing assets and serving as one-stop shops to help customers meet their financial goals. But with the constant threat of advisors leaving large enterprises in search of greater autonomy and flexibility, how can firms better retain personnel and protect the investment they have made?

Simply put, give advisors the best tools that help them get closer to their client. If customers are happy, advisors should be content to stay put. The best advisors care the most about serving customers and prioritize the customer relationship.

When advisors falter at prioritizing a good client experience, people notice. And they react.

More than half of investors fire their advisor due to a lack of emphasis on the relationship. According to a 2023 survey of investors by Morningstar [1], this includes two leading shortcomings:

• About 32% of investors who dropped their advisor did so due to the quality of financial advice and services, more than any other reason.
• 21% noted the lack of quality of the relationship with the advisor.

As your advisors look to improve their relationship with your firm, they’ll assess what tools you’re providing to set them up for success.

Among advisors classified as brand evangelists—those with the highest levels of satisfaction and loyalty to their firms—91% say the technology offered by their company has improved during the past two years, according to J.D. Power.

We think this kind of advisor satisfaction is due to having the right tools to have comprehensive discussions with clients about their needs, goals, and values.

Conversations with clients don’t easily veer towards these deeper topics without guidance and strategy. Advisors may need ready-made tools and exercises to uncover a person’s financial goals[6] and values.

It needs to be easy for advisors to communicate the value of their advice at every step of the client journey. Figure 1 below shows an example of the process:

As it happens, three out of the top four factors most important to investors were specific to personalization, according to a 2023 survey we conducted.

Investors said they want;

• Personalized and tailored financial advice that meets their specific goals and needs.
• An advisor’s ability to understand client tolerance for risk and appropriately align their investments to that level.
• Specialization in handling specific financial situations, such as retirement planning or estate management.

The right financial technology can help advisors realize each of these goals for their clients. The primary characteristics to look for in that technology are holistic data views, customized reporting, and clear communication methods.

In that vein, here are five things to consider when selecting a platform that can materially boost the quality of advisor-client relationships, drive customer satisfaction, and in turn raise retention rates at your firm:

1. Advisors need tools that help them easily focus on client goals. Engagement first means your advisors need to first focus on client goals, before money enters the discussion.You need to use a tool that combines goal-setting and investment planning into a single workflow. There are tools for this that allow you to create, manage, and store goal plans in one, centralized location. This kind of efficiency helps investors understand the link between today’s investments and meeting tomorrow’s goals with client-friendly and reports.
2. Advisors need to effectively gauge a client’s risk tolerance. Knowing a client’s risk tolerance is integral to developing an investment plan. Risk tolerance is a person’s willingness to take risks, in exchange for the long-term possibility of reward. While most advisors use risk tolerance questionnaires, they don’t always have sound methodology. Morningstar’s risk tolerance questionnaire has been completed more than 2 million times over 20-plus years, and dovetails with academic research that says risk tolerance is a consistent personality trait. It doesn't change with market wins or losses.
3. Software should make it easy to integrate goals and risk tolerance with an investment plan. With proven risk profiling, you can set better expectations about client portfolios for more productive conversations. Advisor Workstation allows users to explore investment options with clients, create a plan based on risk tolerance and goals, and optimize performance within those parameters.
4. Allow advisors to meet regulations confidently. The right software solution can score the risk of any portfolio and show if it fits within the client's risk tolerance. This allows advisors to easily document their decision- making progress, all the more important as North American regulators increasingly ask for advisors to show their work. This level of transparency helps advisors show they are acting their clients’ best interests and stay aligned to key regulatory requirements for advice and proposals.
5. Workflow platforms should easily integrate well with your own system. Despite all of the talk about integration, we realize the industry is far from a one-stop solution. As you hone your own platform to help advisors boost client relations, you need a solution can easily mesh with your existing technology. Look for software that lets you connect to your firm’s preferred technology stack, keep advisors aligned with your compliance program, and monitor advisors’ output and their compliance.

The bottom line here is that achieving consistent client engagement requires technology that gives advisors the flexibility needed to create personalized experiences.

The right tool will offer research, investment planning, and proposal tools to build trust, showcase advisor value, and deliver great advice at scale to support a growing business. Subsequently, your advisors get more time to build relationships, more support for existing and emerging compliance demands, and a broad foundation for great advice that moves investors toward their goals. Take some time to explore and implement the best technology for your firm, and watch both advisor and client satisfaction steadily rise.