Changing investor needs and expectations, as well as rising cost pressures, are resulting in an expanded continuum of advice and service models that are available at different price points, and not exclusively at a low cost.
Many Dealers have implemented, or are exploring, new business models. Large, integrated Dealers and emerging fintech challengers are implementing digital wealth platforms and/or hybrid (human and digital)or partially-assisted models. This enhances their ability to profitably serve existing clients with lower levels of assets. And thanks to the more advanced technology associated with these platforms, it also further enables higher-asset investors with a better and more seamless overall experience, helping human advisors scale planning and asset allocation.
Digitally served investors still value access to human advisors who provide financial planning and investment advice, and are looking for the ability to “dial up” or “dial down” their advisory services depending on their stage in life or the occurrence of significant life events (e.g. job change, birth of a child, domestic partnership or divorce). This is driving the development of new, à la carte and moment-in-time advisory services, although this appears to be in the very early stages in Canada relative to developments in the US. All of these models are expected to still need licensed human advisors to support the human relationships, and to handle more complex life event needs.
In this new zone of hybrid (digital and human) advice and services, which spans the traditional, dedicated full-service and order-execution only models, Dealers are increasingly creating “ask an advisor” chatrooms, investment advisor call centres and partially-dedicated investment advisor teams. Many Dealers are increasing their investment in digital tools and investor-education offerings to better support order-execution-only clients. Flexible fee approaches that underpin some hybrid models primarily in the US allow clients to select how they want to pay, including one-time fixed fees, subscription models and combinations to support semi-dedicated relationships.
Even though it didn’t come up expressly in our Consultation, we are aware of the expansion of services beyond what is traditionally viewed as financial planning and investment services. Some firms are introducing new tools and services to support budgeting, lifestyle management and career planning to help clients manage their financial well-being.
Degree of digital transformation varies
Not all Canadian Dealers are investing heavily in direct-to-client digital models. Some smaller and mid-market Dealers are continuing to focus investment on the inperson-advisor business model, by growing investment advisor headcounts through recruiting and transitions from other platforms, enhancing differentiators and ensuring better execution of professional services.
“Success is less about innovation in the industry and more about better execution of professional services.”
– Consultation interviewee
How investors are serviced today