The Wealth Management Activity That Soared 300% in the First Quarter

Investors decisively affirm interest in the so-called hybrid model of advice.

(Bigstock photo)

(Bigstock photo)

The so-called hybrid model of wealth management — a digital or robo-advisor service that can also connect clients with human advisors — is being heavily sought and used in 2020, giving affirmation to businesses that some RIAs view as competitors.

More investors are opening hybrid accounts and there has been a “rapid rise of appointments with coaches and advisors” this year, according to a report published Thursday by Aite Group, a research and advisory firm focused on financial services.

New account openings at Fidelity Investments’ hybrid offering, called Personalized Planning & Advice, were up 300% in the first quarter of 2020 compared to the fourth quarter last year. The financial services company also said there was a 150% increase in the number of coaching sessions with the advisors available to those clients, a spokesperson told RIA Intel.

Along with outreach about resources available to investors, such as information online about market volatility, Fidelity sent clients text messages reminding them they could schedule a time to speak to one of their “financial coaches” about their portfolio and answer any other questions they might have.

Schwab Intelligent Portfolios also experienced upticks in new account openings and engagement with the affiliated advisors, a spokesperson said. The company did not share details about the growth of either.

Appointment bookings with advisors or coaches were up 100% to 150% at firms surveyed by Aite in the first quarter. The company’s recent report was based on interviews in April with five U.S.-based firms that together accounted for over 25% of the $298 billion robo-advisor market (which includes hybrid firms as well as others). Aite also used company reports to inform its research, according to the report’s methodology.

“The increase of coaching and advice appointments is further evidence of the efficacy of the hybrid model. Clients enrolled in hybrid offerings see this as an optimal time to have a second set of eyes on their financial positions,” the report says.

Investors are taking to digital solutions, which another recent report also supports. Digital wealth platform use in the U.S. by 18 to 54 year-olds rose to 34.8% in 2020, from 27.8% in 2019, according to Parameter Insights, a Toronto-based research and consulting firm focused on wealth management technology and investors. Clients of Parameter Insights include Vanguard, The Bank of Montreal, and Franklin Templeton.

Hybrid-model wealth management businesses lean on call centers, video conferencing, and other means of digital engagement to boost the productivity of their advisors or coaches working remotely. Since the Covid-19 pandemic and work-from-home orders forced the wealth management industry to suddenly operate similarly, the hybrid model was well positioned to grow this year. “Clients are often comforted by having access to human advice in times of stress or before a major decision. These are some reasons the hybrid model has become increasingly popular relative to pure digital offerings, especially for clients with more complex financial lives.”

The increased volume of appointments strained the scheduling capacity of the advisors and coaches, according to Aite. “While this shines a spotlight on the utility that clients find in hybrid offerings, it also highlights capacity constraints during times of crisis. Firms with hybrid models have found it infeasible to rapidly increase human-led advice capacities,” Aite said.

But hybrid wealth managers are continuing to improve self-service resources so clients can answer questions on their own, and companies are leveraging data and analytics to ease capacity constraints, according to Aite.

The pandemic also led to a historic market activity, including the fastest-ever drop into a bear market, the Cboe Volatility Index, or VIX, hit an all-time high, and credit markets “essentially closed over a period of days during March.”

Those were unusual circumstances. Call volume at Schwab’s hybrid offering has already returned to normal, the company said. The volume at Vanguard Personal Advisor Services is expected to moderate, a spokesperson told RIA Intel.

Still, the hybrid model, while growing, is not necessarily going to replace more traditional advisor relationships, Eric Sandrib, a research associate at Aite Group, said.

What is “important here is that the optimal client servicing model must be determined by client’s needs and preferences. Firms that are focused on building products around the client will have multiple options, seamless movement between models, and offer clients what they want when they want it.”

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