Financial Advisors Should Ask: What Would Amazon Do?

Too few financial advisors know what their customers are doing with all of their money or understand their real potential. Data and analytics can give advisors information to win with the best customers. It’s like giving someone a map of where all the Pokémon are hiding.

We know from a recent study by Cerulli Associates that 57% of wealthy American households are working with five or more financial advisors and that almost 64% work with four or more advisors. Meanwhile, only 17% of advisors thought their clients had money in other accounts or in self-directed investments. Being able to predict how much money your clients likely have elsewhere is the type of data that wealth advisors could have at their fingertips.

Managing wealth today requires a hybrid, or bionic, approach — part human, part artificial intelligence. Wealth advisors who take an old-fashioned approach to marketing campaigns, relying on information gleaned from phone calls and personal contact, are not generating the returns they could enjoy by incorporating this type of information into their work routine.

Learning From The Amazon Way

Amazon uses data to anticipate what you want to buy before you even know yourself. The company looks at the shopping habits of people in different areas, their previous searches and purchases, wish lists and how long they hover their cursors over certain items to predict what they might want to buy next. Similarly, wealth managers can aggregate their own client data with an incredible amount of detailed information available about investors and their behavior.

Imagine how effectively financial advisors could serve clients if they knew everything from the number and types of vehicles a person owns to their charitable donations and the personal and family activities they engage in. That information is available to advisors today, and it’s a stunning amount of data — from positions held in each financial account, credit data, marketing and demographic data, mobile usage, the sports teams they support, to automotive records that even tell you what cars they drive and whether they are owned or financed. Collating that data creates a virtual three-dimensional, detailed view of each prospective client. Using a data set of thousands of data points takes the guesswork out of the concept of “know your customer.” Finally, advisers know how engaged each customer is from online behavior and insights learned from their personal interactions that can help create a personalized plan for each customer. Altogether, this creates a cognitive marketing ecosystem that will help advisers boost assets under management.

Armed with this information, advisors can learn which clients have the most potential. They can place clients into one of four categories — protect, develop, maintain or monitor. A protect account is well developed and should be closely serviced, a develop account has more potential assets and should be aggressively pursued, and a maintain account has little likelihood of growing in size. A monitor account should be managed to reduce costs. One scenario developed for a specific client by Wealth Insight Services — a product resulting from a collaboration leveraging Broadridge’s extensive investor proxy data, Experian’s credit and demographic data expertise and other data sources — identified 34% of households as develop accounts.

This anonymous data comes from the more than 122 million investors Broadridge services through its proxy business, and once that information, with our clients' consent, is run through predictive analytics, it reveals important trends about each investor. Based on each client’s profile, are they likely to prefer mutual funds or low-cost ETFs? How much money does the client likely have stashed away in other accounts? And, crucially, does it make sense to market to that client in an attempt to increase assets under management?

The Customer Experience

Even with all this information, a good financial advisor still has a lot of work to do in order to ensure clients are happy. Retirement plan sponsors must learn from firms such as Amazon, Uber and Starbucks that have built their brands by focusing on improving the customer experience.

For example, there’s no point in knowing all you can about your customer and then sending paper marketing materials if they prefer digital communications. And spending money on new furniture in your retail offices may be a waste of money if your customers prefer your mobile app. Connecting with customers in the right way is crucial because by 2020, customer experience will overtake price and product as the key brand differentiator, according to Walker Information.

Effectively using data and analytics to better serve customers could be as big in wealth management as the shift from traditional brick-and-mortar stores to online vendors such as Amazon has been over the past two decades. In the end, the financial advisers offering the best customer experience will rule the day.