Why Automation is Critical for Wealth Management


Last Updated on May 10, 2022 by Connor Prendergast

Learning something new is a conscious decision. Implementing what we learn, particularly when it overrides cultural bias, is something else entirely. Willingness is only part of the equation. It needs to be combined with hard work to effect real change.

Automation is a topic we’ve been learning about for decades. Science fiction authors have written about it. Other industries have whole-heartedly adopted it. In wealth management, many are confused by it. How can we use it and why is it important?

Financial advisors, in general, tend to look at automation through a narrow lens. Some will tell you it’s good for rebalancing. Others will talk about robo-advisor applications. Blueleaf uses it for client communication and reporting. Each of these is a subject worth delving into.

Automatic Asset Allocation and Trading

Applying a model to a client portfolio is only the first step in what could be a long and tedious process. Active investment managers follow that up with daily active trading to tweak and adjust that model. Is that how you want to make a living? Good luck scaling your business.

Wealth managers in the digital era set the model and apply rules to trigger trades. If you’ve used Blueleaf’s WealthGuard application, you know how this works. You apply the model, set your tolerance ranges, and the system alerts you when you need to rebalance.

Let’s take that one step further. Blueleaf has recently launched a rebalancing application where you can add your model and the system will line up the trades for you based on the rules you set.

Why is this necessary? With the constant volatility of today’s market, rebalancing can’t wait for a quarterly or annual cycle if you’re to stay anywhere near your intended target model. Rebalancing with a spreadsheet might be a little painful if you’re doing it once a year for your fifty clients. But try running that spreadsheet everyday for even 10. Nevermind 100 or 1,000. We need automation to keep up with it now.

Automated Communication and Reporting

How much time do you spend composing updates for clients? How long does it take to compile monthly or quarterly reports? There is no reason why you can’t use automation to handle those tasks. If you don’t, further growth will be impossible at some point. 

Take that last scenario and apply it to an entire firm. Scaling a practice is wonderful. It means you’re successful at what you do, but how will your team react to being overworked? Taking the pressure off with automation is one of the keys to a healthy organization.

Your clients don’t need or want giant static reports every quarter. They want frequent, simpler updates.

At Blueleaf, we deliver on-demand automated reporting across multiple communication channels. e.g. Client gets an email, clicks on a link, and there’s the report. That’s what they’re looking for.

Robo-Advisors Aren’t A Direct Threat But Automation Is Necessary To Keep It That Way

According to Statista, assets under management by robo-advisors topped $1.3 trillion in 2021, with an annual projected growth rate of 20.11% over the next four years. That’s not putting any advisors out of business, but it is a significant pool of assets we’re collectively losing.

Complicating the situation, the number of prospective financial advisors coming out of college is going down, while more than fifty percent of existing advisors are due to retire in the next ten years. The rest of us must pick up the slack. We can’t do that without automation.

Despite their increased popularity, robos are not considered a serious threat to human wealth management firms, but a decline in quality of service and a shortage of qualified financial advisors to take on new clients could change all of that. Preventative steps need to be taken.

Here’s the situation: we’re living in a different world, one where data is the key to everything. The sheer volume of data that is required to run a wealth management firm mandates an automated component to your practice management plan. It’s that simple.  

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  • 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.

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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.
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