Clients come to advisors seeking strategies to maximize the probability of achieving their goals. In working with their advisors, they wish to evaluate trade-offs, understand risks, and see how their investments will work to achieve their goals in a simple, intuitive manner.
While digital investment advice platforms (a.k.a. "robo advisors”) rose to prominence by addressing an improved digital experience, they fail to fill the void of many elements, along with other uncoordinated strategies.
The shift is underway from largely uncoordinated products, accounts, and tools to comprehensive and coordinated household solutions that can improve investor outcomes. Here, we examine the elements that robos and other uncoordinated strategies fail to connect.
Chief among the reasons—is that an overwhelming majority of investors prefer some degree of human interaction to make investment decisions and life choices.
Clients tend to form an emotional attachment to advisors who help achieve their goals (e.g. retirement, college savings, etc.). Because of this, industry leaders are moving away from a focus on beating arbitrary benchmarks for each product and account, and toward achieving goals across clients’ household holdings. Investing, especially when considering all the issues around retirement, is complex.
The technology exists. What's been missing (until recently) is integration—the connective tissue that brings it all together in a coordinated way. An integrated platform should be flexible enough to support the varied advisor types and unique ways they serve clients. The platform must enable those fundamental interactions—the handholding, understanding, interpretation, experience, and guidance—that only a human advisor can provide.
Virtually all investors have multiple accounts, products, advisors, and custodians and little to no coordination or optimization of their holdings to maximize returns and income at the household level.
The goal is to give advisors the power to provide household-level advice, so investors can benefit from optimizing all their holdings and achieve improved financial results.
The challenge with robos and other uncoordinated strategies is organizing systems to coordinate data so it's consistent. These strategies fail to optimize the multiple accounts found in an investors’ household portfolios to minimize taxes and manage risk simultaneously. This should be done through tax-smart asset location and risk management consistent with the investor’s objectives.
LifeYield creates an ecosystem that guides advisors and clients on how to improve outcomes trade by trade and, most importantly, how to quantify the benefit of those improvements in dollars and cents. This not only demonstrates to investors the benefits of coordination but also reflects the value of the advisor. Operationalizing household-level portfolio management to improve investor outcomes is the key trend we see for our industry over the next few years.
There is a shift underway from largely uncoordinated products, accounts, and tools to comprehensive and coordinated household solutions that can improve investor outcomes. This whitepaper walks through all the major elements of a modern wealth ecosystem and how they benefit both the advisor and the client.