The first robo-advisors first launched in 2008 and became more popular a few years later. Today, aside from robo-advisors that focus on investment management, some platforms aim to do more. There is new wealth tech that aims to duplicate the capabilities of single-family offices for those significantly less affluent. Moreover, ChatGPT is on the scene and it is a forerunner to a seismic shift in the private wealth industry as well as many other industries.
Defining the wealthy as having a net worth of US $10 million or more, and taking into account the needs, wants, and preferences of this cohort, it is clear that wealth tech without an advisor involved will be utilized by a very small percentage of them. Even then, the wealthy will be relying on various private wealth professionals for the implementation of wealth management solutions. Another consideration is that it is very likely that many of the wealthy who choose to rely on wealth tech sans advisors are going to potentially be missing out on meaningful financial opportunities.
To deliver exceptional value to a wealthy individual requires developing a deep understanding of the person’s hopes and dreams, concerns, and anxieties. We refer to the process of developing the requisite deep understanding as Discovery. According to Homer Smith, Director of the DK Family Office Practice, Founder of Konvergent Wealth Partners, and co-author of Optimizing the Financial Lives of Clients: Harness the Power of an Accounting Firm’s Elite Wealth Management Practice, “Discovery is the way to truly understand any prospect or client. As wealthy clients often have complex lives and multiple, intricate goals, being able to adjust the Discovery conversations in real-time is critical. Advisors can’t do a good job of Discovery if they’re relying on checklists or some sort of decision tree or some sort of technological solution. People are just too complicated.”
In addition, being able to establish a customized working relationship is very important. These insights and orientations are then matched to possible wealth management solutions and communicated in a way that resonates with the wealthy individual. We refer to this as the narrative. “By matching the objectives of our wealthy clients with family office solutions, and being able to communicate the alignment and value of those solutions, our wealthy clients take action quickly,” says Vince Annable, CEO and Founder of VFO Advisory Group and co-author of Your High-Performing Virtual Family Office: Maximizing Your Financial and Personal Lives.
Today, most advisors are not engaging in Discovery nor are they developing powerful narratives. It is fair to say that the majority of the wealthy are being poorly served. Because such a large proportion of the wealthy are being poorly served, those advisors who are (1) competent with Discovery, (2) can communicate well, and (3) are proactively transparent have an enormous competitive advantage. For example, because so many of the wealthy are poorly served, it’s really quite easy to win the business of the wealthy and even more so the ultra-wealthy, from other advisors.
As for positioning wealth tech as a lower-cost provider, that is not necessarily always the case. “The aim is to deliver superior results,” says Smith. “To deliver superior results, our proposed family office solutions are always cost-effective. The value we deliver is consistently significantly greater by an order of magnitude than what we charge our clients.”
Without question, artificial intelligence is going to fairly quickly enable advisors to effectively deliver an array of wealth management solutions. Technical expertise—at all levels—will be commoditized and accessible to almost everyone. Thus, technical expertise is, or will soon become, a non-differentiator.
Conceivably, there will come a time when artificial intelligence will be able to do Discovery and build powerful custom narratives. But, that is not going to happen soon. Presently, for those advisors adept at Discovery and building powerful narratives, wealth tech is not competition, but then again, probably more than 90% of the advisor community is not competition. If anything ChatGPT and future AI innovations will enhance the success of advisors who can marry the wealth tech with an intimate knowledge of their clients.
RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine (pw-mag.com) and Chief Content Officer for High-Net-Worth Genius (hnwgenius.com). He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.
