Why is compatibility important in wealth management?

What makes a good business relationship?

As with personal relationships, it’s a little bit of everything. There has to be mutual respect, honesty, shared values, and most importantly – common interests!

This is particularly true in wealth management, where an advisor-client relationship on a personal level is critical for success.

Why is the advisor-client relationship so important?

According to the World Wealth Report (WWR) 2019 from Capgemini, only 44% of high- net-worth individuals (HNWIs) feel they connect “very well” on a personal level with their wealth managers. Moreover, according to the WWR manager survey, the entry of customer-centric BigTechs will be one of the leading factors impacting the wealth management industry in the near future. Now, more than ever, it’s imperative for wealth management firms to promote meaningful relationships between their advisors and clients.

It’s with this in mind that Capgemini has created its Augmented Advisor Intelligence (AAI) solution. AAI enables wealth and asset management firms to leverage data and artificial intelligence (AI) to maximize advisor effectiveness.

AAI delivers six components that comprehensively provide predictive, prescriptive, and proactive actionable insights for every interaction across the prospecting through advisory lifecycle. These components include compatibility scoring, value-based segmentation, model financial advisor (FA), best practice recommendation (BPR), propensity scores, and know before they know (KBTK).

In this blog, let’s take a closer look at compatibility scoring, which enables wealth management firms to increase prospect conversion rates, as well as customer retention, among other business outcomes.

Why is compatibility vital to an advisor-client relationship?

Try matching a millennial client with a baby boomer advisor. Chances are it won’t work, because the two are so different in terms of perspective, personality, and values. Compatibility, and finding the right match, are important.

Financial advisors are the quarterbacks in a wealth management firm. Just as a quarterback scans and understands everything on the field before throwing or passing the football, it is imperative that financial advisors take a holistic approach while providing wealth management advice to their clients.

AAI helps the financial advisor (quarterback) understand what he’s seeing on the field. AAI provides insights into advisors’ behaviors, personalities, and preferences. It also looks at their portfolios, which gives information on clients’ behaviors, interactions, and preferences. It then creates AI-powered personality maps to see how compatible advisor and clients/prospects are.

Client retention and prospect Conversion

AAI’s personality maps can give advisors a better chance of retaining existing clients. As preferences and behaviors change for clients, the personality maps also change, empowering firms to ensure that advisor-clients are in sync. Creating phenomenal connections with financial advisors may also transform loyal clients into advocates to colleagues, friends, or family. In fact, according to the WWR 2019, firms that ranked in the top 25% for strong personal connection were almost 26% more likely to be recommended than those firms that were in the bottom 25%. Additionally, these “connection leaders” were almost twice as likely to get net new assets under management inflows.

The personality mapping also helps with prospects in the sales cycle. Personality maps can tell firms which advisors are better equipped to serve certain prospects, increasing the likelihood of connecting with them and converting them into clients. In fact, imagine an advisor attending an event where he is given a list of prospects, along with some information about them. He’d have to make his way around the room and try to connect and make an impression with at least a handful of them. Now, imagine he is armed with a list of prospects and compatibility scores, showing him who is positioned to be closer to his personality. He now has a better chance of prioritizing interactions with prospects who would be more inclined to respond positively to his message. Converting a prospect into a client is made easier by compatibility scoring.

The use cases around compatibility scoring are endless. But one thing is certain – it is a key driver in enabling wealth management firms to maximize advisor potential, effectiveness, and ultimate success.

In our next blog, we’ll examine some of the other components of AAI.

To learn more about AAI, connect with me on LinkedIn or Twitter.