Differentiation in Financial Services Will be Defined by Customization
July 15, 2021 — Boston
Investors seeking professional advice want solutions customized to their needs and goals. Providers that can create this experience hold the keys to client acquisition and increased assets
True personalization of financial plans to optimize the probability of reaching established goals, while also respecting clients’ subjective preferences, is wealth managers’ best opportunity to provide differentiated services and maintain a premium pricing strategy, according to Cerulli’s latest report, U.S. Retail Investor Products and Platforms 2021: Redefining Mass Customization.
For investors seeking a true partner in their financial journeys, it is important that the advice they receive is specific to them and not just a recommendation offered to everyone in the same general circumstances. This is particularly true during the advisor selection process. Affluent investors consistently cite transparency (58%) and finding a provider willing to commit the time (54%) and effort necessary to understand their unique circumstances as the most important criteria in their consideration of new providers. Furthermore, 44% of investors rate receiving solutions customized to their needs and goals as just as important as portfolio performance (43%). “Investors want to know that the products and services they are receiving are optimized to help them achieve their personal goals,” says Scott Smith, director.
Platform providers are taking note, adding new opportunities such as fractional shares and direct indexing, which greatly broaden the opportunity to deliver portfolios personalized down to the level of individual securities at scale. “Details are important to investors and technology is the enabling factor,” says Smith. The research suggests that firms consider advisor-facing tools to optimize clients’ investments and aggregation technology that provides visibility into held-away assets or integrates all assets onto a single platform. “Collecting and using data enables providers to accentuate their value by personalizing portfolios,” he adds.
While technology is the critical component of automation and personalization, very few (4%) of investors express interest in purely digital platforms without human support. Cerulli believes that the most impactful developments in the near term will be those that leverage digital tools to allow human advisors to better connect with and guide their financial goals. “Ultimately, the success of any advice relationship requires not just a strong set of algorithms, but also ongoing collaboration that uses an advisor’s expertise to help clients reconcile their preferences and biases into a compelling personalized plan,” Smith concludes.
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Note to editors
These findings and more are from The Cerulli Report―U.S. Retail Investor Products and Platforms 2021.