Wealth Advisors Have a BlackBerry Problem…and Digital is Making it Worse


Last Updated on November 13, 2020 by Carlo Navarro

Mike Lazaridis and Douglas Fregin hit a home run in 1999. The original BlackBerry disrupted the consumer electronics space and launched a new era in hand-held communication devices. At one point, the Canadian company had control of 50% of the US smartphone market.

Today, you won’t find a BlackBerry device in any consumer retail electronics store. What happened to the rising star? Steve Jobs came out with a touch screen device in 2007. Attached keyboards went out of style. BlackBerry manufactured its last device in 2016.

This is a familiar story. BlackBerry failed to keep up with the market. Consumer expectations changed in response to something new. Consumers didn’t complain that Blackberry was bad. In fact, they had great customer service scores. New customers just stopped showing up and existing customers slowly left. Customers voted out the old in favor of the new and innovative but also the more useful and more valuable.

Is your Advisory Practice in the Same Situation?

BlackBerry could still get the job done but couldn’t deliver as much value as the iPhone or Android. And it doesn’t deliver value in the ways consumers now expect. Human financial advisors are still the best choice for clients seeking quality wealth management. Unfortunately, they’re up against new and evolving client expectations.

Automated wealth management and digital solutions are a real threat to traditional financial advisors.

Some firms have adjusted to the wave of new client experiences driven by technology but most are still behind the curve. Robo-advisors and consumer investing apps are shaping client expectations. And most of your clients will never say anything.

Making the situation more challenging, the new digital offerings are not only shaping client experience expectations but they are adding pricing pressure. Betterment charges 25 basis points to manage assets. Wealth managers typically ask for 100.

We are not suggesting you lower your fees. Taking that approach with a robo-advisor is like playing chess against a computer. You’ll lose more than you win. This all means that to offer a better value you’ll need to do it in an environment where you can’t win on price and where client experience expectations are rising. But you will need to be close enough on price that your differentiators matter. Lowering costs becomes the only way to maintain profitability, but that’s becoming increasingly more difficult.

Check out a blog post we wrote:

How to Keep Your Edge in a Wealth Management World that Won’t Slow Down

Cost-cutting is a challenging path

Certain costs are fixed. Your monthly lease payments are constant, and trading and platform costs are also fixed by your custodian. You could change to a less expensive custodian but changing to someone new is daunting and risky. You may frustrate or even lose clients.

Some costs won’t make much of a dent. You could look at technology but the truth is for most firms it is less than 10% of expenses so a seemingly great win of saving 20% of tech costs will only net you a 2% cost saving overall.

Your largest cost is people if your firm is larger than a single advisor. The hard part here is that unless you’ve got part-time staff that is paid hourly, cutting staff is more painful than most firms are willing to bear.

For most firms, growth while holding costs steady is the best strategy for improving margins. But holding costs steady while growing means becoming more efficient. For the most successful firms, that has meant making process changes supported by technology to allow current staff to handle more clients. 

Your iPhone Strategy – Serving the Whole Client

Have you heard of an app called Fundrise? It’s a crowdfunding platform to invest in commercial real estate. Anyone can open an account with just $500. They are just one of dozens of options your clients can use to invest and/or save money online.

Acorns has ETF portfolios and a Roth IRA option. Robinhood sells fractional shares, giving its users the option of investing in higher-end companies. Digit will help them pay off credit cards. All of these applications are interesting but they have a few things in common. They all offer very narrow services and they can’t deliver holistic advice.

Where advisors stand to win is by serving the whole client. It’s become table stakes in differentiating and solving the cost-cutting challenge.

Differentiating Your Firm from Automated Platforms

The key to overcoming any competitive challenge is to first understand where your advantages lie. The personal level of service you offer clients is your true differentiator from automated platforms. The trick is to focus on this while remaining efficient. If you’re growing, that means doing more with the same resources.

How do you do that? You can automate the simple stuff, and many of you have automated traditional reporting as well as rebalancing and trading. Some firms have even eliminated traditional reporting in favor of on-demand, client-facing systems. 

But the most effective firms — the ones who are able to support 200-400 clients per staff member — have implemented systems that automate and increase the number of client interactions. That leaves advisors free to focus on engaging each client where they add the most value while also communicating with each client more often in a more relevant way. In doing so, their systems drive both efficiency and growth.

In this efficient, new world, the reality is that the tech stack can no longer take a back seat — it has become an essential component of efficiency, which drives your ability to serve the whole client.  

Your best competitors are doing this. Staying ahead of them and being efficient enough to take on digitally-enabled firms requires constant vigilance in all of the areas we’ve covered in this article. Modern advisors compete on a combination of price, value, and personal service tailored to their client segment.

Today, we have highlighted some of the problems that wealth managers face. Over the next few weeks, Blueleaf will be publishing content that will help you find solutions. 

Suggested Articles:


  • Kevin D. Flynn

    Kevin D. Flynn is a former Head Coach at Blueleaf and founder of Flynn Consulting, LLC, a business and financial coaching service for startups and small business owners.

Get NEW posts and shows delivered to you.

The Augmented Advisor blog and podcast help financial advisors learn ways to improve their business with in-depth content from the industry's leading thinkers

We don’t spam! Read our privacy policy for more info.

Kevin D. Flynn is a former Head Coach at Blueleaf and founder of Flynn Consulting, LLC, a business and financial coaching service for startups and small business owners.
icon-angle icon-bars icon-times