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Financial Advice

Building a Virtual Practice

There are many benefits to having a virtual advisory business, here's how to make it work.

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When I started my advisory business, I made a choice to build it as a virtual practice from day one. Then came the pandemic, and financial advisory firms industrywide faced the challenges of managing workflow, communicating with colleagues and clients, and running their businesses remotely.

As the pandemic ebbs and in-person business resumes, advisors shouldn't overlook the benefits of maintaining a virtual practice. The virtual model allowed me to launch a less expensive and cost-efficient model from the onset.

In this column, I'll walk through why a virtual practice makes sense, the pros and cons of a virtual practice, and lessons I've learned about how to make it work.

The Pandemic's Impact

There's no doubt that the pandemic has accelerated younger investors' shift to digital instead of in-person engagement. According to a recent J.D. Power survey, 55% of full-service investors under 40 prefer digital channels for communicating with their advisors, compared with just 26% of older investors. Additionally, 71% of younger investors and only 38% of older investors have increased their frequency of interaction with their advisory firm during the pandemic. For instance, engagement by phone increased by 33%, website by 25%, email by 24%, and mobile apps by 23%.

Although the survey focused on the next generation of investors, there are advantages to maintaining a virtual practice for just about every client segment as this trend toward digitalization that has accelerated in the wake of the pandemic will likely continue. For those firms that successfully navigated this transition, the next step is to fully implement interactive tools that provide an equally enjoyable experience for clients either in an in-person or virtual setting.

Next are the pros and cons of a virtual practice. First, the pros:

Location-independent: Thanks to the Internet, social media, and modern technology, you're not limited to working with clients in your geographical area. Building a virtual practice means expanding your reach and becoming visible to hundreds of thousands of consumers seeking financial advice across the country.

In addition, running a virtual practice means that you are not bound to any particular location. For instance, my family and I moved to Atlanta from New York with little to no disruption to my practice. In fact, I was able to grow my client base as well as my support team during this time frame as well.

Time and flexibility: Similar to how telehealth is changing how therapists work with their clients, a virtual practice can remove some the hurdles that keep clients from getting financial advice. For example, there's no issue of travel time to in-person meetings at your office, making it easier to stick to scheduled meeting times.

After all, money is a personal subject, and for some folks it can cause anxiety that stops them in their tracks. Lowering the barrier to entry can help those otherwise hesitant clients take the needed baby steps toward feeling comfortable meeting with their advisor and building a trusting relationship.

Increased efficiency: From my experience, meetings are far more efficient when using video conferencing technology such as Zoom. We get a lot more done in less time because we have the ability to share screens and easily log into accounts together. For example, if you're a financial advisor, you know there are limited ways to view held-away client assets. By using video conferencing technology, we share a screen as the client logs into a 401(k) and make adjustments on the spot, or review stock options and restricted stock unit vesting schedules.

The cons include that there are few, if any, face-to-face interactions. Some clients may feel video conferencing is not quite as personal. There are a few things advisors can do to mitigate this, including creating a stellar client experience in terms of actual service. However, even for some clients, this may not be enough to offset their need for in-person meetings. It may just be a question of finding the right fit.

Technology Matters

If you're building a practice to serve clients virtually, it's vital to ensure that the proper infrastructure is in place to support remote processes and workflows. Since I built my firm to be remote-first from the onset, this was an essential aspect of growing and scaling my firm. Indeed, the technology you implement will vary based on the nature of the firm and the clients you serve. Still, forward-thinking advisory firms are those that will utilize technology as a tool to enhance the client experience, deepen the client relationship, and create digital workflows that are seamless and secure regardless of physical location.

For instance, now that my firm has grown and there is a need for support staff, collaborative software allowing for the secure sharing of client data and other information has become essential. Platforms like Slack and Zoom have become extremely useful as they pertain to improving collaboration with colleagues, as well as using various channels to communicate with and serve clients. In fact, the continued implementation of these cloud-based applications for wealth management firms is critical. It will allow firms to hire and retain the best talent regardless of location. Although having the right tech stack is important, that doesn't mean it has to be expensive. If you want to take the lean approach, below are a few core software platforms that will assist in building a remote-first advisory firm:

  • Video conferencing (Zoom, Skype, Google Hangouts)
  • Internal communications (Slack, Microsoft Teams)
  • User-friendly client portal
  • Secure file sharing (Egnyte, ShareFile, Dropbox, Virtru)
  • Data gathering (PreciseFP, online forms and questionnaires)
  • Performance reporting
  • Financial planning
  • Trading and rebalancing
  • Customer relationship management

Moving forward, there may not be a need for advisory firms to transition to being fully remote, but most clients will want at least the option to meet virtually--something a hybrid model can achieve and help you reach more clients.

Samuel Deane is a financial advisor and CEO of Deane Wealth Management, an independent investment advisory firm for millennials in technology. He specializes in comprehensive financial planning, equity compensation, and tax planning. The views expressed in this article do not necessarily reflect the views of Morningstar.

Samuel Deane is a freelance writer. The opinions expressed here are the author’s. Morningstar values diversity of thought and publishes a broad range of viewpoints.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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