Integrating Human and Machine Advice: Current State and Future Requirements

Several recent articles and pieces of news pertinent to robos and advisors create an interesting mosaic of the current state of human and machine advice:

The image created by these items depicts the struggles in the advisory business to settle on a clear, promising strategy for integrating advice channels.

The Limits of Disruption

When robos appeared on the scene several years ago, they were heralded as the future of wealth management, a democratizing blow for the industry, and a mortal assault on traditional financial advice. Any who have seen the hype machine movie before won’t be surprised that none of those things turned out to be true. In the real world, the biggest “robos” in terms of assets are those of Vanguard and Schwab that operate as hybrids while the “pure play” B2C robos have struggled to accumulate assets and breakeven on customer acquisition costs.

The reason for this discrepancy between reality and hype is simple: Irrational as it may sometimes be, most people want humans involved in their financial planning. A 2016 survey conducted by EMI and Boston Research Technologies showed not only that most want human involvement, but also that those who were more open to algorithm-driven investing didn’t neatly map to pre-conceived demographic categories. The bottom line is that you can’t will customers and prospects into following your vision for a service offering. Moreover, making assumptions about their behavior based on intuition and truism doesn’t create a strong foundation for success.

Changing Perspectives

The truth is that the majority of customers want a hybrid model. Many of the leading wealth managers understand this and have implemented or will implement various forms of hybrid offerings. In fact, as I mentioned earlier, the largest robos are actually those launched by existing wealth managers Vanguard and Schwab.

But any business heading down the hybrid path needs to recognize that their old models of and assumptions about client management and messaging will likely need to change. Specifically:

  • If portfolio management is outsourced to machines, it becomes a commodity and value must be defined in terms of relationships and communication—an idea that has been around for some time but which has not gained universal acceptance because it is hard to execute.
  • If you are advocating for clients to use your automated platform, you need to recognize that you are now responsible for their adoption of and satisfaction with the investment management software. Firms and their advisors need to be ready to assist clients onboard, answer their questions, and help them realize the full value of the software.
  • Pushing the wrong clients towards a robo solution is a lose-lose situation that will cost time and assets. Firms and their advisors need to have ways of identifying where clients are likely to fall on the spectrum of interest in and comfort with automated portfolio management, recognizing that age and net worth will likely not be great proxies.

Notes from InVest 2017: From Fear of Robos to Hybrid Optimization

When you attend a conference that has a particular thematic focus two years in a row, you have the opportunity to observe the progression of the discussion. InVest 2017, following on the inaugural InVest 2016, very much offered this opportunity.

From my perspective, 2016 was about the retirement advice industry coming to terms with digital advice and moving from seeing human and digital advice channels as competitors to seeing them as complementary. By the 2017 conference, the attendees had come to recognize and understand the necessity of a hybrid model and now were focused on how to manage and optimize that hybrid structure. Two discussion panels exemplified the new focus:

The Empire Strikes Back had a panel of senior executives from large financial services companies (Citi, UBS, Bank of America/Merrill Lynch, and JP Morgan). They all talked about the need to start from a place of understanding the business opportunity offered by digital—an improved client experience, increased efficiency, cross-selling—and to use that understanding to shape digital advice strategy. Throughout the session, the panelists repeatedly highlighted both the opportunity and risks that face big advice providers. The opportunity is to leverage technology to enhance and build new relationships; the risk is that existing clients could be turned off. Specific comments from the panelists illustrate these dynamics:

  • “The industry is moving from product distribution to client relationship management and digital is a big part of that new delivery model.” (Venu Krishnamurthy, Head of Citigold, Citipriority, Citi Personal Wealth Management)
  • “We learned that we couldn’t just rely on our industry experience to deliver a strong digital experience; UI matters a lot.” (Richard Steinmeier, Head of Emerging Affluent and The Wealth Advice Center, UBS Wealth Management Americas)
  • “Clients don’t just use us for one thing, so we have to think about digital advice in the context of overall relationship and be aware of how everything fits together.” (Kelli Keough, Global Head of Digital Wealth Management, JPMorgan Chase)
  • “You have to look at decisions about digital implementations on the basis of the value to client relationships.” (Aron Levine, Head of Consumer Banking and Merrill Edge, Bank of America)

In the Hybrid Strategy IRL (“in real life”) session, panelists from the front lines of client advice talked about how the foundation of the hybrid structure has to be the client and that technology should support, not hinder, the necessary and valued human interactions. In their words:

  • “You have to know who your clients are and how the technology will help you manage and deliver value in their eyes.” (Ryan Parker, CEO, Edelman Financial Services)
  • “Technology should be used to help advisors have better conversations, and to help deliver better outcomes. The guiding questions should be: “What can you automate?”, “What can you augment human with?”, “How do you segment?” (Ben Jones, Managing Director – Intermediary Distribution, BMO Global Asset Management)
  • “Don’t make the mistake of falling in love with the technology” because “our product is our experience…the rest is pipes and plumbing.” (Parker)
  • “Always go back to question: how does it help the client experience?” (Paul Duval, President, Genesis Wealth Advisors)
  • “Technology is empowering. [Clients value our ability] to have tough conversations. The more efficiently we can get “housekeeping” done, the more time we have for those conversations.” (Duval)

As this year’s InVest approaches it will be interesting to see the current state of thinking about the hybrid model, and how far down the road of grappling with the strategic and operational challenges that will likely come with implementing the model companies have come.

CS Boston February Meeting Notes: Challenges and Strategies for Scaling Customer Success for the SMB Market

In late February, after weeks of snow-bound hibernation, Customer Success leaders from around the greater Boston area emerged from their offices groundhog-like, didn’t see their shadows, and continued on out to Brainshark headquarters in Waltham. There, we had a lively Q&A with Pat Kelly of Brainshark and Jeremy King of InsightSquared about the challenges of and strategies for scaling CS operations to meet the needs of smaller customers. Here are key points of our discussion:

  • Challenge 1: Helping SMB customers think about ROI. Enterprise customers typically have to justify any significant purchase and so think about SaaS applications as an investment for which there needs to be a return. Since SMBs frequently don’t apply the same rigorous discipline around procurement, they often jump into a purchase without thinking through the ROI case for the application or the value they hope it will deliver.  Strategy: Provide training and tools for use in the onboarding process to guide customers in identifying their key measure of value. Ideally, some aspects of these tools and this effort would be extended forward into the sales process so that at least some insight into pain points and needs is captured prior to implementation.
  • Challenge 2: Keeping momentum during implementation despite frequently rescheduled and canceled meetings. The reality is that SMB staff wear many hats and, as a result, are pulled in many directions and face changing priorities. This means that it’s hard to get them to commit time in their schedules for training and business reviews and even harder to get them to keep those meetings.  Strategy: Make the time you do get with SMB customers as productive as possible by pushing them to accomplish more between meetings and by keeping the agendas of meetings very focused. When possible, shift relationship-building and value-added content delivery to non-meeting interactions (see Challenge 4 below).
  • Challenge 3: Staffing effectively to meet customer needs without sacrificing profitability. As mentioned above, SMBs often require upfront help to define their objectives and present more challenges then Enterprise customers when it comes to making steady, managed progress towards those objectives. Partially as a consequence of these issues, SMBs frequently have more questions. All this would seem to lead to a CS burden equal to, if not greater than, that of Enterprise customers.  Strategy: This challenge necessitates a different approach to staffing – and on larger CS teams often leads to the creation of a dedicated SMB team, with its members carrying a larger book of customers. The members of this team typically don’t have extensive experience at the Enterprise level, so they don’t have to unlearn habits that don’t translate well to SMB customers.
  • Challenge 4: Providing value-added guidance outside of a 1:1 model. For almost all B2B applications, Customer Success is not only tasked with driving adoption, but also with providing best practices and advice on related strategies for maximizing impact (e.g., guidance on general marketing strategy for applications focused on specific aspects of marketing). Due to the much more limited time available for each customer, CSMs for SMBs can’t dedicate meeting time to providing this value-added content.  Strategy: Move value-added content into more broadly distributable assets and deliver them via a strategic communications program. For example, related strategic advice can be presented via live and on-demand webcasts; best practices can be delivered via case studies and infographics promoted through emails.