The advisor’s dilemma – The tightrope of immediate expectations and future goals

By Valuefy

October 10, 2018


The relationship between Wealth advisors and their clients is similar to that of a parent and a child. The client (read child) in this relationship is always tempted by the lure of quick returns and a focus on immediate expectations.

It may be the latest Crypto investment that catches the client’s fancy, or a new mutual fund with very high returns in the last year, or even a stock tip suggested by a peer. However, the advisor (parent) has to step in as the voice of reason at such times. The advisor has to help them meet their long-term financial goals while still giving them adequate short-term returns to keep them invested.

Advisors face a three-pronged dilemma when it comes to clients: Knowledge, Time Allocation and Willpower. The advisor of today is capitalizing on technology and turning to investment platforms equipped with advanced analytics and advisory to overcome them.

Knowledge dilemma:

The advisor is always caught between relaying all of the information to the investor or simplifying it and on a need to know basis. It may seem judicious to tell the investor every small detail, however, such an information overload may often lead to choice paralysis.

 Solution: Strong user experience and data visualization

Investment platforms of today are equipped with user-friendly interfaces and data visualizations. This helps break down and convey complex data in simple charts and graphs that can be easily digested by the investor.

Time allocation dilemma:

In the case of most wealth management firms, the most precious resource is advisor time. A single advisor may be handling up to 20-30 client portfolios in a single year. An advisor has to divide his schedule in a way that every investor gets a fair share of their time. Often advisors have to spend so much time researching and getting up to speed on a customer portfolio before a call/meeting that valuable hours are wasted in preparation rather than customer service.

Solution: Automation of the monitoring and review process

Advisors are now choosing to spend time onboarding a customer onto an investment platform so that investors can monitor and review their portfolio at any time by logging into the system. New age investment platforms equipped with Robo advisory and detailed analytics can help advisors automate most of the research that goes into investing, saving valuable advisor time. These platforms also may have simplified app versions, that can be accessed on the go, so that the advisor can be on top of things 24×7.

Willpower dilemma:

An advisor is only human, in many cases, they might find themselves emotionally attached to a certain fund or scheme. This might be because they have got them attractive returns in the past or because of some underlying bias towards a brand. In such cases, it is hard to be objective even when the scheme is underperforming and it tests the willpower of the advisor.

Solution: Strong decision architecture with Robo advisory

Robo advisors help temper the gut instinct of a human advisor with insights and recommendations powered by data. Advisors are often blinded by bias and refuse to make tough decisions such as dropping a fund or booking a loss. The investment platforms of today simplify their detailed analytics into actionable insights and recommendations, helping advisors overcome their blind spots and rebalance their portfolio to chart their course to safer waters.

The mutual benefits for investors and advisors

Adoption of ‘Investment platforms’ by Wealth management firms gives advisors the ability to focus on customer service and ensures that investors have complete transparency on their portfolio.

There is a slow yet steady push towards leveraging Analytics and AI in the space. Indian investors are picking up on global cues to demand world-class technology from their wealth advisors.

Although the ‘investment technology’ space is still nascent in the country, there are already a few emerging market pioneers. Wealthfy, the Robo advisory enabled investment platform from Valuefy was recently awarded ‘Best Wealth Management Technology Platform’ at AIWMI’s  India Wealth Awards 2018, the biggest and most prestigious showcase of excellence in the Wealth management industry. Over 30 leading institutions like Reuters, Aditya Birla Group, Kotak AMC and WGC have already adopted the platform and other Financial institutions are following suit.

Eventually, the adoption of investment platforms will become the new status quo. These platforms help make the process of investing more transparent. With the focus on simplification, rather than obfuscation, investment platforms are helping empower Indian investors and advisors alike.

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