At Narrative Science we have been focusing on building solutions for the Financial Services Industry. Our goal is to make the lives of analysts, advisors and ultimately investors better. In particular, we recently launched our Wealth solution.
After interviewing a number of financial advisors, we found that they were looking for ways to save time, build lasting relationships with clients and attract more prospects to join their book of business.
Market disruptors, such as robo-advisory services and account aggregators, have employed ways to increase efficiencies and cut costs related to managing portfolios and delivering advice. However a gap still remains between portfolio performance and investor understanding and engagement.
Here are 3 ways advisors, both traditional and robo, and their clients can benefit from automated, data- driven narratives.
1. Investors want to know that their account is in “Good Hands” (cue Allstate deep voice guy).
What happens when the market is down? Advisors get call after call from their clients typically asking things such as “What is happening?”, “Should I get out of the market?” or “How will this affect our college savings goal?” Advisors cannot field every call, let alone be proactive with every client to remind each one of the strategy they’ve executed and reaffirm that market upswings and downswings are not irregular.
Regular client communication is getting more difficult for traditional advisors as their client base grows, but it is increasingly critical. It’s not easy dedicating the same time to write up a quarterly summary for a passive investor with a low balance as it is for active investors with large balances. Automating the communication of quarterly summaries, account updates and rebalancing activities can free up an advisor’s time to perform, say, investment research or understand a client’s tax situation. A timely and personalized e-mail rooted in portfolio data (that is also pre-approved by compliance) can give investors comfort that the advisor is aware of the current market situation and that their portfolio is still “in good hands.”
2. Investors want to know why they are invested in an aggressive portfolio when they are 55 years old:
Many advisors and wealth managers today are delivering what they like to call a “holistic” view of advice. Recent acquisitions of account aggregation platforms, enabling firms to get closer to the elusive “360 view of the client,” lend themselves to this trend. By having a fully transparent view of an individual’s accounts and holdings, the advisor is able to take into consideration when their investors have a large stake in company stock or a large lump sum of cash that they inherited. In isolation, when a robo advisor suggests that a 55 year old invest primarily in equities for their retirement account, it may seem odd to the client; however when you see that the investor has a significantly larger balance invested in cash, the 100% equity portfolio starts to make sense. It puts the overall portfolio more inline with a proper asset allocation for a person approaching retirement.
A narrative that explains the advisor’s advice, either robo or traditional, should help the investor understand the investment strategy. Today, advisors review the investor’s information, dig up data on the account and eventually pick up the phone to explain the portfolio. When you look at platforms that have millions of investors, you can imagine how costly that time ends up being. The narrative becomes a proactive approach to explain potential areas of confusion and also gives the algorithm’s or advisor’s methodology credibility.
3. Advisors need more time to prepare.
As more and more advisors move away from the actual portfolio construction part of their business, they may not be 100% up-to-date on their clients’ positioning, and they don’t always have adequate time to fully prepare for every client conversation. For example, they may have a complete and comprehensive understanding of a client’s goals, tax and financial situation, however they might not know that the 12% allocation to PIMCO Total Return has gained 1.2% over the last quarter and is the leading driver of the portfolio’s return. At Narrative Science, our flagship platform Quill has figured out how to convey this information in a concise and consistent manner:
When advisors have a narrative that can tell a story about their client’s holdings, it helps them better prepare for client meetings and dedicate more time to what matters.
It’s easy to see how data-driven narratives can benefit the advisor, as they automate manual processes and equip them with personalized information they can readily deliver to their clients. However the investor also wins, as increased transparency and knowledge about their investments help them stay up-to-date, engaged and hopefully more comfortable about their financial situation. Whatever it is that advisors are doing to save time and cut costs while maintaining the “investors first” mentality, automated narratives are another effective way to keep them ahead of the ever-changing advisory space.
For more information on Quill’s solutions for advisors, please check out our Wealth Management Resource Center.
Check out the recording of our most recent Wealth Management Trends webinar to learn more about what narratives can bring to your portfolio: