Cost cutting or added value: Switching clients to hybrid advice

The level of client engagement in hybrid advice can be the dealbreaker between whether clients view digital tools as a cost cutting exercise or as added value. 

Speaking at the Stockbrokers and Investment Advisers Association (SIAA) conference in Melbourne on 19 May, a US investment advisory specialist discussed the implementation of hybrid advice and subsequent client uptake. 

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Will Trout, director, Securities & Investments Practices, Datos Insights, speaking remotely from his base in Texas, shared his insights into the hybrid advice market in the US and how it could be enacted in Australia.  

His survey of 9,000 high-net-worth consumers in the US with US$5 million ($7 million) or more of investable assets each questioned them on their hybrid experience. While he said hybrid advice – where human advice is supplemented with digital tools – made sense, it could be a sub-par experience for some clients and had a lot of unrealised potential for both clients and firms. 

Some 70 per cent of respondents said hybrid advice delivery made their financial experience better but the remaining 30 per cent said it made no difference or it actually made their experience worse.

“There is a gap between what firms think they deliver and what the clients say they receive,” Trout said. “Clients see a loss of value from hybrid advice if they encounter difficulty switching between the two, if it is difficult to integrate or if they incur friction.”

Other clients say they feel ‘shunted’ between the two forms of advice, feel they are ‘doing the adviser’s job for them’ and become more frustrated with the advice process.  

“But weaknesses can become potential strengths, we need to attack them head-on.” 

Interestingly, this was particularly the case during periods of market volatility where hybrid clients were more likely than human-only clients to seek contact from their adviser indicating many only ‘tolerate’ digital tools when markets are relatively calm. 

“This data point struck me very hard,” Trout said. “It is remarkable that during times of market stress such as bear market, correction, geopolitical event that surprises markets then those clients who are hybrid and consider themselves as digitally comfortable and engaged actually want to talk to an adviser more than those with the traditional advice relationship.

“Some 58 per cent of hybrid clients want to hear from the adviser on the same day or the next day. Advised clients do too but not to the same extent. So that’s an insight showing firms have put their clients in this hybrid ‘box’ but haven’t realised that in times of market stress then they really, really want to hear from the adviser and their preferences reverse. Clients want to hear from a person, not a portal.”

The key part of improving the process, he said, is the client engagement levels which is the biggest behaviour trend for clients and the highest leverage variable. Firms which successfully improved their engagement saw an 8x increase in client satisfaction and 4x improvement in value perception regarding fees.

“Engaged clients have regular meetings with their adviser, they receive personalised emails, the adviser makes regular, proactive contact with them and the adviser anticipates the client needs.” 

This engagement and satisfaction level was also reflected in the fees that firms could charge for hybrid advice. Those clients who had low engagement expected their fees to reduce while those with high engagement expected fees to stay the same or even increase. 

“Some view it as ‘added value’ whereas others view it as a cost-cutting exercise by their adviser. It isn’t that people are resisting digital but they still value the relationship they have with their adviser and want that connection with them.

“These engaged clients say ‘I’ll pay your fees even more, they feel like they’re getting great value’ but then no level of engagement really pushes down pressure on fees and those clients are angry,” he concluded.