The Client Experience Is The New Holy Grail

Charles Paikert

28 June 2024

Morningstar calls it an investment conference, but concerns about the evolving role of the financial advisor in a world rapidly being transformed by artificial intelligence were front and center this year.

“Technology doesn’t disrupt financial advisors directly,” Michael Kitces, co-founder of the XY Planning Network and publisher of the Kitces Report, said in a keynote address, “the change happens when we take the technology and use it in our own practices.”

Kitces noted how computers, the internet and robo algorithms dramatically changed financial services – but didn’t decrease the demand for financial advisors.

Instead, these generational disruptions motivated advisors to transform their business, which they did, making their practices more efficient and advice and planning oriented.

AI and a new generation of clients are forcing advisors and wealth managers to respond again, according to Kitces and other conference speakers.

Fee-based planning, digitization, deep expertise and niche specialization are now table stakes. The new Holy Grail is enhancing the client experience.

Winners
Hightower Advisors' CEO Bob Oros said he tells advisors to recall the experiences they have with businesses in their everyday lives and what makes them memorable.

Within five years, advisory firms that are able to provide clients with an outstanding experience in and out of the office “will rule the day,” Oros said.

Kitces recommended that advisors read The Experience Economy: Work is Theater & Every Business a Stage, by B Joseph Pine and James Gilmore. He cited travel agencies as a perfect example of a business that was disrupted by technology but have successfully pivoted to providing customers with experiences.

While anyone can use the Internet to book their own airplane flights and hotel rooms, travel agencies have stayed in business by offering carefully planned, customized and all-inclusive itineraries with concierge service to resorts like Disneyland or destinations like Tuscany.

“What kind of experience you give the client,” Kitces said, “has nothing to do with technology.”

Beyond numbers
A critical part of the experience, according to Morningstar behavioral scientist Danielle Labotka, is providing emotional, and not just functional value to clients.

Advisors should strive to be comforting, supportive and personally relatable to clients, Labotka said. Clients valued advisors who addressed their lack of confidence about making financial decisions, Morningstar research showed, helped them stay on track during market volatility and “really got them” as a person.

Optics are also important, said Paul Cieslik, senior vice president for Capital Group. He cited the example of an advisor who covered her walls with pictures of clients visiting exotic places that were a dream come true – the ultimate experience.