Hubbis’ Head of Learning on Accentuating the Human Advantage in Wealth Management

David MacDonald, Head of Learning Solutions for Hubbis, is a passionate believer in the power of human involvement in wealth management. He believes that in the world of wealth management professionals should only be fearful of the digital revolution if they are complacent and not proactive in harnessing technology to enhance their skills, the delivery, their communication and thereby future-proof their roles and their careers. People need people, he believes and projects that this will long be the case, so professionals in this industry should enhance and emphasise their uniquely human skills while leveraging technologies to improve their own capabilities and proposition. And he advised the delegates at the Hubbis Asian Wealth Management Forum in Singapore that all this should take place against the backdrop of a well-formulated plan.

A straw poll of attendees at MacDonald’s Workshop highlighted that many of them are client-facing wealth management advisers. “You deal with the clients, so the most important thing in your future career is you and your relationship with your clients,” MacDonald began. “Those client-facing professionals that can communicate incisively, sensitively and meaningfully with their clients and who can identify and articulate their added-value, can prosper in Asia’s high-growth wealth management market.

Helping Advisers Enhance their Proposition

He explained that his Workshop was designed to focus on the crucial and uniquely human skills and behaviours that the delegates might want to consider in their quest to remain relevant in the hearts and minds of the clients that they already serve and that hope to help.

He asked if the audience felt they were taking the right steps to future-proof themselves? “If you are not,” he cautioned, “then beware, as we are reaching an inflexion point that consulting firm Mercer highlighted in a study, concluding that artificial intelligence, machine-learning and robo-advice are gaining ever more traction. Like self-driving cars, like Amazon’s impact on the world of retail, like Netflix’s power over the world on online streaming, this is not going away. You need to realise that, strategise, plan, and react.”

He warned delegates of the dangers of not refining their human skills to align with and complement AI and machine learning. “Those who recognise this need can provide their clients with excellent advice and outcomes,” he said. “Those who do not heed this advice might risk obsolescence.”

Humans Will Prevail

But MacDonald explained his strong belief that the advantages of human interaction in the wealth management industry will remain extremely important, but that to achieve a dedicated and highly client-centric service, the human connection should be emphasised and digital tools such as artificial intelligence and machine learning should add to their skills, not take them out of the picture.

“Many of you here today have a long career ahead of you in which technology and AI will play an ever-increasing role,” he remarked. “As I said, Mercer believes we are at an inflexion point, some people call it the fourth industrial revolution. The pace of change is so rapid that we are in danger of being overtaken by it.”

Mercer’s Cautionary Tales

He highlighted how Mercer extrapolates that as the speed of change increases, and the reach of that change extends, potentially in the not-too-distant future, all businesses could be run artificially without human intervention.

“So,” he wondered, “why would clients waste their time with a human being who might let them down, might not offer good information and who then charges them money for it?”

MacDonald’s theory is that if advisers want the outcome of their client conversations, their interactions, their engagements to evolve, they need to take into account the fact that the clients can now do a lot of things without their involvement, cheaper, quicker, and more reliably.

Capgemini's Analysis

MacDonald then cited the results of a survey conducted by Capgemini in its World Wealth Report 2018. He noted that according to the report, high net worth individuals (HNWIs) across the globe continue to demand hybrid advice, with more than 50% globally saying that it was highly important. The conclusion, according to Capgemini, is that hybrid advice forms a critical top-line growth enabler for firms, with 68.7% of HNWIs globally indicating hybrid advice was a significant factor regarding decisions related to asset consolidation with their primary wealth management firm.

“And we know out here in Asia particularly,” he noted, “people very rarely rely on one advisor, one wealth manager, or one banker. They spread it around, that is part of their risk management.”

Moreover, MacDonald presented another finding from the Capgemini report, that HNWI clients in Asia are more receptive to the concept of Big Tech companies such as Google or Amazon moving into the world of banking and finance than HNWIs in any other part of the world.

The Tech Tsunami

“Wealth managers beware,” MacDonald warned, “as almost three-quarters of Asia’s HNWIs said they would consider Big Tech entrants, whereas the rest-of-the-world figure is only just over 50%. And countries such as Indonesia and India register results well over 90%. In short, do not take any client relationship for granted, find out what it is that the client values and what no Big Tech data factory can do for them.”

“Here in Singapore,” he added, “the figure is 70%, that’s a lot of people saying - absolutely, if these brands or others like them started offering wealth management solutions it would be of more than a passing interest to see what they might be able to offer. So, it is no longer just the banker next door who is your competitor, it is Big Tech, fintech, all sorts of tech-enabled competitors.”

The Darwinian Theory

MacDonald then highlighted a quote from the naturalist Charles Darwin, who said that it is not the strongest of the species that survives, nor the most intelligent, but those who are most adaptable to change.

“You need a strategy to work hand in hand with AI, fintech, automation, call it what you want,” he implored the audience, “thereby freeing you up to do more of the human things, because the tech can take care of some of the boring admin elements, the less human things, that should be a key part of your strategy.”

“When it comes to building that essential trust with clients, human relationships rule,” MacDonald proffered, before urging the audience to think about how they could improve their relationships with their clients. “Emphasise and exploit your human connections while augmenting your capabilities with digital tools such as AI and machine learning,” he instructed, “… because if you do not, you risk losing your clients.”

First There Was Trust

If the relationship manager hopes to be able to encourage his client to reassess priorities and then change his course of action, trust must first exist, and the client and relationship manager need to move forward in some form of ‘partnership’ relationship where there is a commonly acknowledged path and a tailored outcome. But trust in the financial services industry, MacDonald observed, is not always easy to achieve or maintain.

“If we are going to remain relevant,” he advised, “we must do something to fix the statistics that show half of our clients already don’t trust us, because, in five years’ time when they latch on to any new Facebook wealth management platform or offerings from other familiar online brands, things will be truly challenging.”

“Wealth management is all about selling, and selling means influencing others to think and do things that they have not yet considered,” MacDonald continued. “To succeed, you must be able to convince and prove to your client that they cannot do without you. Trust, reliability, relationships, these are the human competitive advantages.”

Emphasise Your Difference

“Being human,” he elucidated, “will only be intrinsically valuable if we can isolate what it is that differentiates us from machines. Already, there are algorithms that can calculate how wealth should best be distributed in an investor’s portfolio. If there is no need for human contact, and it can be done faster, cheaper and more reliably, then why use a human wealth management adviser at all?” To offset that danger, it comes down to building and expanding that essential trust with clients and building your human skills.

But what are some of those skills? What are some of the things that only humans right now and for the foreseeable future are capable of doing and that AI, machines, robo-advisors, and algorithms, are not?”

Seeing the World from Different Viewpoints

Empathy, MacDonald proposed, is one essential for the adviser’s success. “You must see the world from their perspective, not from your perspective. Empathy is a key skill.”

Communication and questioning, specifically questioning, are other vital attributes and skills, he observed. “For me,” he said, “questioning is the most important aspect of our communication in our professional lives, potentially some of our personal lives too, but in our professional lives our ability to question to a deep level, to a thought-provoking level, to a persuasive level, I think is the key skill that I struggle to find in many that I interface with.”

He quoted a well-known statement that observed that all buying decisions are based on emotion and that people use facts and logic after the decision to justify the decision. “We must get to where the emotions and decisions lie within our clients, somehow. When you are making big decisions around large sums of money or the future of your family, it is tough for a robot or algorithm to draw that kind of thinking out through a couple of questions.”

Connect to the Client’s Future

Imagination and vision are also essential characteristics. “How many people talk to your clients regularly about their dreams for the future?” he wondered. “This type of stimulating talk enacts critical thinking and leads to visioning and imagination being called for in the discussion.”

The early discussion is essential, he advised. “Think about how you achieve a positive feeling early in the meeting. And appearing wise rather than simply smart is also essential. Another of my favourite quotes states you can tell who is smart by their answers, but you can see how wise they are by their questions. So, questions are one of the best weapons in your armoury.” But importantly, he advised the audience to engage the clients with questions, not interrogate them. “Engage them emotionally,” he implored.

MacDonald then expanded on this by explaining what engagement is. “What you see as your next step? How quickly would you like to take action? How much do you want to commit to this new idea? How important is it that you achieve it? Any of those things are ‘engage’ type questions, giving you ideas on what the next steps should look like, getting the client to take ownership of the next step. If you are constantly saying to your client, I think you should do this, I suggest you should do that, I recommend you should do this, they do not own the solution, and ownership is such a very powerful persuasion tool,” he observed.

Ownership Results in Action

Accordingly, if the client feels ownership over the idea, the dream, the fear, the future goals, the aspirations, if they own it, there is a much higher likelihood that they will take some action. The adviser helps them to articulate it through the power of his, or her, questions. “You don’t tell him what it should be or what you think it needs to be, but if they take ownership, they are more likely to act on it and stick with it.”

MacDonald closed his Workshop by identifying several skills that will help improve critical thinking. Conducting research, and identifying biases is vital. “Are we all aware of our buyers’ biases,” he wondered, “what they are, how they were formed, why the clients are sticking with them and how to overcome them? Learn to infer from what you are hearing. This helps you to remain relevant, to focus on your human skills.”

Encourage the Decision, Don’t Demand It

He closed with the reiteration that selling is all about influencing people to change. “It is a uniquely human skill to engage people at an emotional level, and that is not done best by shoving your product range under someone’s nose and saying - so which one do you want? Questioning, getting the client to think emotionally about their future situation, what they are trying to avoid, or what they are trying to create, these are all essentials. Think about what you need to do to elevate more of your clients to the status of a partner. A human partner, not a robotic partner.”

MacDonald also introduced the concept of human skill training. “There are certain dimensions of behaviour that are scientifically measurable,” he elucidated, “and one of particular importance in wealth management is the opportunity/fear dimension of how we engage others. This measures our predisposition towards optimism or pessimism. The 2,000 or so assessments that I have done with individuals across the region in the past 10 years show some 80% of people fall into the pessimistic category.”

He therefore advised not to load clients up with fear statements, trying to scare them into certain decisions, as they will not relate to you positively. “Instead, talk about their goals, their aspirations, make them feel positive about the future,” MacDonald advised, “and this will improve your relationships with your clients.”

MacDonald ended his talk by reiterating that those in the wealth management industry would do best to truly focus on improving relationships with their clients and joining forces with digitalisation rather than discounting it.

Become the Trusted Adviser

“Talk to your clients, ask them what they want and need,” he entreated, “and work hard to become their most trusted adviser in these changing times. By being genuinely perceptive of the relationship needs of the people that you deal with, and by being clear on what human value you can contribute to whom, you will be successful. Good luck!”

“Change your reality,” said MacDonald on closing his talk. “AI will only get more powerful, more ubiquitous. So, be more perceptive of the human relationship needs of your clients, not the return needs, not their asset class needs, not their risk needs, not their financial planning needs, their relationship needs. They need you to be their human relationship manager and deliver on that. Accordingly, you must establish which of these needs or which of these human behaviours each and every one of your clients’ needs and they are all different.

Don’t treat everyone the same or expect that they feel the same in terms of what you deliver to them. Be unique and make your clients feel unique.”