digital advice solutions

#ItzOnWealthTech Ep 9: Digital Advice Trends with Randy Bullard

“Digital adoption is a one-way street in all markets. People don’t install Uber, try it, then delete it and say, ‘I’m going to go back to hailing cabs.’ That doesn’t happen.”

— Randy Bullard

Randy Bullard leads SigFig’s growth and partnership development in the wealth management industry. Prior to joining SigFig, Randy was one of the founders of Placemark Investments, an innovative provider of wealth management programs and services for broker-dealers and RIAs (acquired by Envestnet in 2014). At Placemark, Randy led the development and growth/operation of outsourced UMA wealth management programs, partnering with firms including Smith Barney Consulting Group, RBC Wealth Management, Oppenheimer Asset Management, TD Ameritrade Institutional, and BMO Nesbitt Burns. He’s widely published and a frequent speaker on topics related to digital wealth management, the evolution of wealth management programs, unified managed accounts, and ETF-based wealth management solutions.

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This episode of Wealth Management Today is brought to you by Ezra Group Consulting. If your firm is evaluating new technology or looking to improve your current wealth platform, you need to contact Ezra Group. Don’t spend another day using technology that doesn’t offer an elegant user experience. Your advisors and clients deserve better and you can deliver it to them with the help of Ezra Group.

Topics Covered in this Episode

  • What does digital advice mean? [03:02]
  • How digital advice is related to advisor movement and how firms are thinking about building their platforms [04:20]
  • How advisor’s understanding of what digital advice means is changing [10:12]
  • Discussion about reports of the client uptake of digital advice offerings still being slow [13:19]
  • When will we see more managed accounts in digital advice? [18:18]
  • How firms can best integrate digital advice with the rest of their infrastructure [25:46]
  • SigFig as a TAMP [31:42]
  • Trends around asset managers delivering more technology direct to advisors [33:07]
  • Will all asset managers eventually become TAMP’s? [34:27]
  • Non-personalized call center advice organizations [36:05]
  • Product services and integration beyond wealth [41:02]
  • Using big data vs. asking questions to determine client’s preferences [47:06]
  • How regulators will respond to digital wealth going forward [52:02]

Companies & People Mentioned:

If you are interested in more information about some of the topics Randy and I discussed, these blog posts would be useful:

wealth management consulting

Complete Episode Transcript:

Craig: Welcome to the wonderful world of wealthtech. I’m your host Craig Iskowitz, a strategy and business consultant to broker-dealers, asset managers, and fintech firms. I’m bringing to you this Wealth Management Today podcast to share innovations, trends and ideas about the industry, and things that I find interesting.

Today’s guest is someone I’ve known for quite some time. Randy Bullard and I go way back, longer than either one of us cares to remember, and I’ve been looking forward to this episode for a while. Randy and I worked out what we’re talking about, all about digital wealth, and we cover a wide range of topics from wealth complexity to understanding changes in digital wealth and players like Vanguard PAS and Personal Capital. We really cover a lot of ground, so I think you’ll enjoy this episode. Let’s get started!

Craig: I’d like to welcome to this episode of the podcast, Randy Bullard. Randy is General Manager of Wealth Management for SigFig, which is a provider of digital wealth solutions. Randy, welcome!

Randy: Thank you very much Craig, great to be talking with you today about all things digital wealth.

Craig: And it’s great for you to be here. I know we talk a lot, we’ve known each other for a long time, so I’m glad you were available to get on the podcast and for us to have this discussion.

Randy: Yes, it’s exciting.

What is Digital Advice?

Craig: So we’re talking digital advice trends. And I know we were bouncing some ideas around before and we’ve got a list of things to talk about, so I thought we would start at the beginning of it and then ramp up into it really quickly. So what do you think digital advice means?digital advice solutions

Randy: It’s a broad term and it’s funny, if you Google digital advice (I do this a lot, I try to stay up on all the trends) and you get all kinds of crazy stuff. The term is used extensively in the mortgage industry and overseas, but I really think of digital advice as applying digital technology to evolve and change how it is that consumers receive wealth management service. 15 years ago, 100% of that was done by human financial advisors of one form or another. You and I know there’s a lot of different channels, different kinds of financial advisors, different legal and regulatory structures, but increasingly the last few years with robo advice and all kinds of iterations on hybrid advice models, there’s a lot of different flavors and I consider all of those to be forms of digital wealth or digital advice.

Craig: True, it does start to morph and change over times. When we’re talking digital advice, a lot of firms are seeing it as an accelerator of growth and for client service. So with firms looking to grow and the competition, there’s a lot of stress on these firms on how they’re going to keep growing, how is digital advice playing a part, and how is that related to advisor movement and how firms are thinking about building their platforms?

Randy: The digital wealth programs that we engage in and have a lot of dialogue with big financial institutions about, it’s all about growth, but it comes in a lot of different flavors. A lot of firms, for example, retail banks that have got large bases of depository client assets, it’s about how can they turn those from bank-only relationships to banking and wealth relationships. So for them it’s growth of cross-selling customers into wealth. When you’re talking about FA’s, digital wealth is generally around increasing wallet share. So using account aggregation and analytics and planning services to effectively create arguments or sales opportunities to pull in outside assets and then net new; how most advisors that have grown their practice through belly to belly selling or asking for referrals, it’s hand to hand combat, one client to the next.

And really it’s pretty slow, if you look at a typical FA, they add one to three new relationships a year, just enough to keep up with a loss. But digital, once an advisor figures out how to do it (most still happened, but some have) and bring on a net new client digitally, and that they’ve got a new digital funnel and new way to bring in clients other than meeting them at a Starbucks or meeting them in their office, then it becomes a net new customer channel. And then for big institutions, increasingly they’re trying to figure out how do they increasingly service more and more of their customers directly, and affiliate the service delivery with the brand rather than with the name human financial advisor. So that has them shifting budget and resourcing away from advisor recruiting, and towards digital channels and development. It also has a lot of firms figuring out how do they invest in and stand up a call center and hybrid-based advice models, and start to innovate in areas other than the rat race of recruiting, retaining, hiring financial advisors, and the expenses associated with that.

Digital Recruiting

Craig: Talking about advisor movement, that firms in the past felt that their growth was very dependent literally on advisor recruiting. So digital obviously gives them another channel where it’s not a one-to-one relationship between advisors and advice solutions

Randy: Today, yesterday, 99% of advice was delivered by human financial advisors, and it’s not going to be a fast trend away from that, but it is a one-way trend. More and more service will be delivered directly by firms through digital and hybrid channels. So the energy that has historically gone into advisor recruiting I think is going to be going down. I think some of the exorbitant payouts that have been used to have advisors move from firm to firm is going to wane. The independent RIA model is growing and strong, and only getting stronger. But I don’t think the battle for advisors is going to be the future growth focus for most firms, it’s going to be delivering increasing digital capabilities and being able to service clients without having to necessarily compete for advisor recruiting.

Craig: When you’re marketing a digital advice channel, aren’t you going up against Vanguard, Personal Capital, Betterment, and Wealthfront?

Randy: Yeah, you are. So that strategy only plays well for firms that actually have a retail brand; for firms that don’t have a retail brand and aren’t inclined to be a retail brand, if they’re more of a brand to the industry, a brand to a financial advisor, then yes, that’s a pretty big switch for those firms. But some of our partners that we work with, they’ve got very explicit strategies for wanting to see more and more, a growing percentage of their clients being directly serviced by the brand and the organization.

Craig: Is that because the advisor becomes less important and they can swap advisors if they need to?

Randy: It’s driven both directions. One is, consumers more and more want to consume the service digitally, period. Digital adoption is a one-way street in all markets. People don’t install Uber, try it, and then delete it and say, “I’m going to go back to hailing cabs.” That doesn’t happen. Digital adoption is one way, and people see that. So putting in place a digital wealth solution that allows the consumer to choose how they want to consume the advice, whether it’s all digital, whether it’s all human, whether it’s some hybrid approach, whether it’s a personalized advisor or a non-personalized advisor through some organization; firms whose mission is to provide wealth management service to consumers. If that is their mission, then they’re going to effectively orient their digital strategy around that consumer, rather than being all about, we need to build a platform for advisors so that we can recruit advisors, because that’s the only way we get consumers. That was the mindset of as recently as five or eight years ago, and it’s not the mindset of real leading, growth-oriented wealth management firms now.

What Advisors Think About Digital Advice

Craig: One other thing you mentioned which I thought was interesting was how advisors understanding of what digital advice means is changing. And you said some advisors think that data aggregation is digital advice, and I don’t think of it that way. I think of data aggregation as augmenting. You committed an augmentation of human advices on the portal or it’s something you use to gather assets or more of a holistic conversation, but then once they see how digital advice works, then it turns into a net new customer channel for advice solutions

Randy: Yeah, it can. Different firms and different advisors are using it in different ways. One of our partners, the anchor of their business case was using account aggregation and a function we call guidance, which is effectively an analytic on those outside assets, as a means for an advisor and the platform to provide value to the consumer around, “You said that you want to be diversified in this way, you said this was your risk tolerance, but when I look at your assets held away, I see something other than that.” So it effectively becomes a sales tool and a wallet share increased mechanism, primarily aimed at existing customers, performing that kind of analytic on outside assets. So it’s one tool, but for one of our partners that was a big part of their business case, was a belief that they have approximately one third wallet share, and by putting clients through that type of process they almost double wallet share. So that’s an experiment that’s in process, but that was their strategy. We had another partner that it was about net new clients; that advisors historically didn’t have a way to digitally onboard a customer. That the client acquisition model was face to face selling and a paper-based account opening process. And that if they could effectively have a purely digital onboarding process, if they could effectively onboard a client with nothing more than an email address and have a much broader reach, a way to digitally engage clients and bring them into a funnel, that there was a whole new way that they could grow net new clients. So that’s another strategy

Craig: Has your guidance product shown results?

Randy: It has, yes. It’s relatively early days, but that one partner program has done quite well and has got really nice growing, month over month sales. And that particular partner, they lead with the account aggregation and guidance analytics. So it’s a relatively high bar. To come into that process, the very first thing they ask of a client is, link your outside accounts so we can give you an analytic on that and help you make good decisions around those outside assets. So it’s a relatively complex, initial interaction with a customer, but by doing it that way if the client engages in that process, they get really good follow through and really good account opening rates.

Client Uptake of Digital Advice Still Slow

Craig: Speaking of client engagement, I’m seeing some reports that client uptake of digital advice offerings is still slow?digital advice solutions

Randy: Yeah, I think we’re in the third inning of the transition into digital wealth. And the first inning was a bunch of firms building stand-alone robos and launching them with a bit of a, “if we build it, they will come,” mentality. And I don’t think any of those have done very well. It doesn’t mean that they’ve done horribly, but I think everybody builds business cases on rosy adoption curves that just haven’t played out. So the second inning has been about firms trying to figure out that they have producing wealth channels, financial advisors, customers walking into branches; they have an existing business, how do they look at digital as an enabling growth capability to help improve all of their existing channels. And that means different things in different channels for different customers and different advisor types. So that’s where all of the energy in the market is, and I think that’s much more logical. Don’t think of digital as a channel, think of digital simply as an enabling technology that takes a lot of different forms, depending on the customer type and the advisor type that you’re talking about.

Craig: It’s a tech-enabled advice delivery. But haven’t we always had that?

Randy: We have, so from that standpoint you can say there’s really nothing that new about digital. What is new, I think, is the consumer. We’ve always had technology, but it’s always been technology that’s been in the hands of an FA for doing what an FA does a little bit better. The difference here is now the consumer is directly consuming all kinds of services, wealth just being one of them; all kinds of services directly digitally. Wealth is a much higher consideration purchase and much higher consideration engagement than hailing a cab or ordering a burger. So it’s not going to have the same type of adoption mechanics as well, but it’s happening really fast. So that’s the main difference, is now that consumers are engaging, digital is no longer about making advisors more effective. It’s about how do you directly engage the consumer in the time, place, and fashion that they prefer, and then what’s the changing, evolving role of both the human financial advisor as well as the provisioning institution in engaging the customer that way.

Advisor Adoption of Digital

Craig: So another good lead-in. We just talked about client uptake, what about getting full-service advisors to adopt digital advice?

Randy: That’s exactly what we’re doing with two of our partners right now; we’ve got a full-service advisor, digital roll-outs in process. And it’s interesting, because some of the advisors that I’m talking about are true high-end, high net worth, full service, traditional advisors; others are more of a retail branch type advisor. Different profiles, different client segments, so digital means a little bit different thing to those types of advisors. For an ultra high net worth, full-service advisor, digital is either an engagement model that they can use for all of their customers. Some firms are looking at it as a small account solution, so take all your sub x, say $500,000 or $250,000 customers and digitize those relationships as a way to get efficiency and improve client service. Others aren’t looking at it that way, they think it’s a way to engage all of their clients digitally. And even within individual firms, different advisors are thinking about it differently. Some are very forward-thinking and think if their clients are wanting digital than they need to be integrating digital into how they service them. In the retail branch world where traditional bank advisors, there’s a huge opportunity for digital to fully automate and eliminate paper and processing steps associated with taking your client from walking in the front door of a branch to they’re a client with an invested account, and do that real time in a very consumer friendly way digitally; that’s a huge improvement over a traditional managed accounts processes.

Craig: It should be, considering how clunky traditional managed account processes have always been.

Randy: Yes, you and I would know that well.

Managed Accounts in the Digital World

Craig: Quite well, but one thing we don’t see much in digital advice are managed accounts. It’s usually a bunch of ETFs or some sort of smart beta index. When will we see more managed accounts in digital advice?digital advice solutions

Randy: I think it’s a little bit semantic. At the end of the day, almost all the digital advice programs are papered into a discretionary managed account. They just happen to be a managed account of low-cost ETFs in a relatively stable, strategic allocation. But I think that’s just a sign of where the market has gone, as the default, mass-affluent wealth management solution. SigFig, as an example, could implement active strategies, mixed mutual fund ETF portfolios, or even a UMA architecture if that’s what somebody really wanted. But I think a lot of the market has come to the conclusion that direct to consumer digital pairs best with low-cost strategic asset allocations.

We do have some of the programs that we’re operating where using our copilot platform, firms want to implement mixed strategies. We’ve got a firm that wants us to implement on top of their strategic asset allocations and ESG SRI tier of models. So you profile the client through discovery if they’re environmentally inclined, and then that would channel them into that tier of models. So I think there’s certainly going to be more innovation as digital permeates more use cases and more advisor types, but I don’t think you’re likely to see the complexity of so many of the managed account platforms that you and I spent years consulting to and innovating in. I feel like the industry has migrated to a more simple solution architecture as a default, and that’s probably a good thing.

Craig: Could be. So you are not seeing any call from your clients for UMA structures?

Randy: I wouldn’t say that we’re not seeing any demand for that. In fact, I’d say almost the opposite. Everybody asks about it, but when it comes down to let’s talk about what advisors are going to use this, what customers are going to use this, what do you want your advisors doing in a digital wealth relationship, most firms view advisors picking products and creating custom configurations as something that is going to be increasingly isolated to high net worth and ultra high net worth clients that have higher degrees of wealth complexity.

And that for clients that have got relatively low wealth complexity, and what I mean by that is they don’t have outside holdings that substantially impact how their investible assets should be invested, they don’t have outside taxable gains to offset or shelter; it’s basically somebody with mostly liquid, investible assets. For that client profile, they don’t want advisors picking products and creating custom allocations and operating in a flexible UMA architecture. They want advisors and clients to be going into solutions that are constructed based on a guided consulting process into some kind of model.

So while firms want to have a UMA, it’s usually to focus on higher net worth, higher wealth complexity, and their preference is to channel their digital strategies into more streamlined, bucketed solutions based on client risk-return profile and needs assessment. So we get asked about it, but we have yet to really get down to the point where a firm says yes, I want you to implement a complex, flexible UMA architecture within a digital wealth solution. Usually when you really get down through a discovery process, that’s not what they need or want. They tend to gravitate towards simpler models based on where they’re aiming in the market.

Digitized Separate Accounts

Craig: So how about SMAs? Is anyone asking for standalone SMA strategies?

Randy: No, no. We have the dialogue all the time, but usually that falls into the same UMA bucket it. Where are you going to use a single asset class, active SMA strategy? Usually you’re going to pair it with other strategies or usually you’re going to use it if the client has external holdings that give them their exposures and other asset classes. And again, all of those things mean higher wealth complexity, so rather than trying to systematize any of that through a digital wealth platform, they carve that off. They say that’s where our FA’s use our existing SMA UMA platform. But for all clients with lower wealth complexity, a million and a half dollar portfolio of liquid assets, we need to implement an asset allocation based strategy here. There’s no reason to go off into SMA product land; better to put a client into a diversified solution. And I’m not being prescriptive, all of our partners have different strategies. We don’t care whether it’s ETF’s or mutual funds. I’m long past the point in my career where I have strong opinions around product preferences. I just see on balance, I talk to dozens and dozens of firms all the time about their digital wealth strategies. And I’m not seeing firms really having much interest to put SMA or UMA type strategies in their digital wealth platforms.

Craig: So if they’re not doing that, are they doing more alternatives?

Randy: Some. I think the industry is still anchoring on strategic asset allocations of ETFs. I think that’s the anchor solution architecture that most digital wealth platforms are going to use. They’ll use their own unique capital market assumptions, they may have their preferences around ETF provider x versus y, but for the most part they tend to anchor there. We do see a lot of interest in smart beta, we do see a lot of interest in using traditional mutual funds for emerging market exposures and niche exposures where an active play is better, or where the ETF universe is thin. We do have firms that are very interested in implementing particularly SRI ESG based programs. So not having necessarily ESG SRI products, but having entire allocations or entire programs that are designed ground up for consumers that are concerned about whatever the specific issues are; a lot of energy around that. I think the energy may be a little bit ahead of actual demand, but I still see we get a lot of interest from asset managers and sponsors that want to potentially spin up ESG SRIi oriented digital wealth solutions. I think there is a lot of interest around smart beta and around alternatives, and trying to innovate around what goes into the asset allocation, but less innovation and interest around implementing complex UMA architectures or individual equities, separate accounts.

Implementing Digital Advice is Tricky

Craig: Right. What about, when a firm is bringing in digital advice and implementing it, how should they best integrate it with the rest of their infrastructure?digital advice solutions

Randy: That’s a million dollar question, and it’s got an extremely varied answer. I see a lot of firms that don’t have a big in house platforms, so they outsource to Envestnet or some other TAMP or they componentize it out. So for them, our copilot platform is a full stack, managed account solution that just happens to be digital. So it digitizes everything, but at the end of the day it allows an advisor to profile a client and have access to a broad array of solutions that they can then digitally onboard a client into.

So for them we provide a full stack, everything integrated into whatever their custodian is. On the other end of the spectrum we’ve got partners who have a very robust, fee-based platform. And they’ve either built that themselves, or they’ve outsourced components of it to fill in the blank vendors, Vestmark, Fiserv, Orion, Envestnet, whoever. But, but they don’t have what they would consider to be a robust digital solution, It’s more of a legacy, SMA, UMA solution architecture. And they’re trying to figure out how do they integrate digital into that? And that’s a very complicated set of variables to solve for. It really depends on what the corporate objectives are, but we get involved in those conversations every single day

Invest in Others Foundation

Craig: The Invest in Others charitable foundation is a non-profit that recognizes financial advisors for their exceptional charitable work. This year, over 500 advisors have been nominated for the chance to receive up to $50,000 for their charity. The winners will be announced at the Invest in Others gala that will be held on Thursday, September 26th, 2019 at the Westin Austin Woodford hotel. I was there at the gala last year and I was really blown away when I watched the videos of the top advisors and seeing their impact on their associated charities.

With almost a hundred sponsor firms and close to 700 industry professionals attending, the Invest in Others gala is a fantastic opportunity for your organization to support an exceptional cause, while also taking the opportunity to network with current and prospective clients. For more information on how you or your firm can participate, please go to the Invest in Others website at I’ll also include a link to it in the show notes for all of you, and I encourage you to click on it, read the instructions, and participate if you can. It’s really a wonderful cause.

Integrating Digital into an Existing Platform

Craig: So how does the advisor work with that? Let’s say they’ve got Fiserv as their main platform and they’re bringing SigFig in for digital. How would you integrate, how would you make the advisor experience unified? Are they going back and forth from one screen to another, or are you pulling the custodial files so whatever accounts you open get mirrored back? How does that work?digital advice solutions

Randy: We generally integrate directly into the backend custody and trading platforms of our partner organization. If they have an intermediary portfolio accounting system such as a Fiserv or a Vestmark, but generally we integrate directly into the custodian. Then those systems would independently integrate directly into the custodian, and be used for billing, potentially performance reporting. If there’s a client portal, very often those are going to be powered by those platforms. So usually what we end up doing is creating a new digital wealth platform that sits beside the existing managed accounts platforms and is used by specific advisor types and client types for a digital-first relationship. That’s not necessarily optimal if a firm’s got big scale and an existing managed account solution. The obvious question is, can’t you layer digital over that and just use digital to service accounts and open accounts, and deal with accounts that are in the existing managed accounts platform? And yes, we could do that. We haven’t built any of those types of programs to date, but there’s ongoing dialog. But to date, all of the programs that we built have been full stack, digital wealth programs where SigFig’s delivering an end to end solution integrated into the custodian system, all the way up to the advisor portal and the client customer portal.

Craig: That’s great, it’s nice to have that. When you say full stack, what do you mean by that?

Randy: How we integrate, we are directly integrated into the custodian; we’re directly integrated into the partner’s online client portal for single sign-on and platform access, we’re directly integrated into the partner’s internal advisor portals and dashboard, and then we directly deliver to both the advisor and the retail investor the digital interface via either their retail website or an advisor portal or a tablet form factor or a web app. All of those are things that we support, so we deliver the full thing. We’re not dependent on them having a managed accounts platform that we sit on top of, or them having a CRM that we have to integrate to. We deliver all of those components. And then to the degree that a partner doesn’t want all of those components, they want us to back off of some of that and integrate to existing systems, then we do that. But we have a full stack capability

Being a TAMP

Craig: Is SigFig also a TAMP?

Randy: We don’t lead as a TAMP, we don’t hold ourselves out as a TAMP. But when you look at all the things that we do, yes, we’re a TAMP. What we don’t have that a TAMP typically does is a predefined solution architecture and manager research selection and due diligence that covers that solution architecture. The models that we implement through the various programs we operate are mostly provided by the in-house research advice solutions

We also work with models from leading third-party providers. Many of the active ETF strategists, several of the large ETF issuers have got their own models, so we’ve implemented their model architectures through our digital wealth platform and we’re totally flexible and open architecture, but we don’t have a function within our four walls that is doing research and due diligence and making our own choices around, “Use these models versus these models, these managers versus these managers.” We don’t have a preconfigured product offering we go in with, so we’re missing that TAMP component. But beyond that, we really cover all the core things that a TAMP does.

Craig: Back to some trends. Are you seeing more of a trend with asset managers delivering more technology direct to advisors? And does that constitute digital advice, or is it something else?

Randy: Yes I see that trend, I see tons. I do wonder how long-term effective it will be, and I think a lot of what we’re seeing in that specific market is very defensive in nature. I think active asset managers are realizing that the FA intermediaries and the Home Office intermediaries they’ve historically distributed to, the shelves are getting narrower and narrower. Fee compression is a real thing, competition is brutal, trends are away from active and towards passive. So asset managers are trying whatever they can to regain a growth lever and advantage. So all of them figure, I’ll digitally deliver my product, I’ll deliver technology, I’ll deliver practice management services, and very often I’ll try to figure out is there a way that I can go direct. So we are constantly in active dialogue with a bunch of different asset managers that are trying to replicate the Vanguard success around direct digital distribution. I’ve not seen a lot of what I would call success there, but all of those firms are trying to figure it out.

Craig: Do all asset managers become TAMPs at some point, where they build out a platform?

Randy: I think the opportunity for an asset manager to become a TAMP is really hard. I think the uphill on that is really, really steep, because I don’t think advisors want to necessarily buy a technology solution from an asset manager, or even get a free technology solution from an asset manager. I get why an asset manager would try to do it, and I certainly see firms that have moved in that direction. I just have not seen it be successful yet, and I can see a lot of reasons why it may not be successful.

Craig: Yeah, some of them are just investing. Like look at BlackRock investing in Envestnet.

Randy: Yeah, that deal in particular I think is interesting, and I think the future advisor body of technology has been somewhat subsumed into what’s going on in Atladin, which is obviously a very compelling technology. BlackRock is unique in how they have been able to translate their success in asset management into technology services. I don’t know that most asset managers have the acumen or resources to replicate that kind of a transition.

Craig: Yeah, there’s only a few companies that are that size and have that type of brand recognition, and that type of wallet.

Call Centers & the Rise of Hybrid Advice

Craig: We’re seeing a lot of interest in standing up non-personalized call center advice organizations, which are hybrid call centers where you’ve got advisors like at Personal Capital or Vanguard. Are you seeing that trend, and how is that going to change?

Randy: Yeah, I think this is a huge trend. It’s a trend that the industry doesn’t really talk about or promote that visibly, because we’re still an industry driven by human financial advisor predominantly, and that’s going to stay for awhile. So firms aren’t going to lead with, “Hey we’re investing in call center,” because it sounds mass market-like, and it’s alienating to their financial advisors. So making press about it is not good for that side of the business. But nevertheless, I think it’s a huge strategic shift in the industry. Every firm is investing in their call centers, and as they build up their call center advice organizations, they build expertise, they get higher skilled FA’s that understand how to digitally engage customers and deliver quality advice over the phone, they’re increasing the breadth of services they can deliver that way.

And as that machine gets mature, all of a sudden you get an FA team and the FA is retiring. It used to be that you would try to have a team-lad transition or you would break up that book of business and try to move it to other FA’s, now you have an ability to say, let’s take that book of business and split it in half. And the half that ought to be directly serviced digitally through a call center, that’s where they go. And then the other half that have higher type services, they’re going to go to other FA’s.

So standing up a call center and getting it well developed gives firms strategic options around growth and dealing with FA’s, and dealing with clients that they don’t have otherwise. For me, it’s a super exciting part of the market and we’ve tailored a couple of our solutions to be effectively call center based wealth platforms, and we’ve developed a bunch of call center facing integration technologies. And it’s really interesting to also see how different firms are taking that and how they make it an extension of the traditional full-service advice team, and how they integrate call center services and support with a field advisor. We see a lot of different innovative things happening there, a lot of cool stuff.

Craig: Can you give an example of an innovative, interesting thing happening?

Randy: If I did give you one, it would be very specific to one of our partners and I don’t want people to back into that.

Craig: So are we talking more about like a Merrill Edge type of software, where accounts below a certain value get moved to the call center?

Randy: Yes. But maybe accounts below a certain value get moved to a call center, maybe accounts between some other range of values can either be in the call center or in the field advisor’s book of business, but they should be in the digital solution. And of course if they’re in the digital solution and it’s a common digital solution between the field and the FA, then the firm and the FA have got a lot of flexibility on how and when is that client serviced, whether they’re serviced by the FA in the field or a call center if it’s after hours.

And it could be that it goes either direction. It could be that a client goes into a call center type support model, but say you go through the guidance analytic I was talking about earlier and you identify some opportunities and all of the sudden the client goes from being a half million dollar client to a million and a half client, then maybe you refer that client back out to the field FA.

And the digital platform effectively facilitates all of that; it effectively lubricates the movement of the client from the optimal organization to optimal organization. It also supports evolution of the service offering, the addition of products, the ongoing engagement and identification of those outside assets to bring over. So really, the digital platform becomes the common infrastructure that both the call center and the field organization can collaborate on in delivering advice to a broad set of client profiles.

Digital Beyond Wealth

Craig: What about product service integration beyond wealth?digital advice solutions

Randy: That’s an area where we’re putting a lot of energy. A lot of SigFig’s customers are retail banks. They’re banks that have a retail branch footprint, they’ve got FA’s in those branches in some operating model, licensed in some way. They’ve got a way of serving clients with wealth, they’ve also got retail bankers and all of those branches. So how do you use digital to do better upfront discovery with new clients and existing clients across all products and services that the organization offers. So you might’ve seen the press release we had a few weeks ago on our Atlas product. It’s a tool for doing in-branch client discovery and triaging, and identifying both who is the optimal set of bankers and specialists that that client should meet with based on the discovery information, and also what’s the optimal product offering.

And it spans all products, so checking, saving, mortgage, loans, small business, credit, and investments. So how do you really identify those opportunities and get the best fit with the client while they’re still physically in the branch. And that’s what that product does. And then the banking product discovery components can be lifted out and delivered via the web or tablet by a wealth advisor. So we’ve got some of our organizations where they’ve got a full banking products suite, but they’re full-service wealth advisors aren’t very good at selling checking or savings or credit cards; they have access to the products, they’re just historically wealth advisors. So you can go the other direction. How do you effectively give that advisor a tool that allows them to identify opportunities and cross-sell the broader product shelf that the organization has?

And then the real new frontier, and you see a lot of innovation in this with some of the other robos, is how do you truly integrate at a more fundamental level some of those products? How do you have digital wealth and your savings account either sit in the same count or sit in complimentary accounts, or use the savings as the suite vehicle on the investment account? How do you link a credit card and a debit card to those things and have them all interact well? We’ve got tons of innovation going on with some of our partners, we’ve done some original research around what are consumer interests in some of those areas. So it’s definitely a cool area with a lot of innovation going on.

Retail Banks Connecting with Wealth

Craig: I just wrote an article on my blog today about Envestnet doing that same thing, where they’re building out their insurance exchange, they just announced the lending credit exchange that advisors can now offer loans. I believe they’re going to be using MoneyGuidePro as their main user interface for those, because MoneyGuidePro has some very powerful tools for figuring out what insurance you need, and they should be able to do the same thing for lending. So with MoneyGuidePro as a very powerful interface, how do retail banks connect all of these tools together so it makes it easy for advisors to cross-sell and understand holistically which products are best for their clients?digital advice solutions

Randy: Our Atlas product is engineered specifically to solve that problem, so it’s got an open client discovery questionnaire that we’ve preconfigured, but different partners are configuring it and adding their own questions. Then it’s got a flexible open scoring algorithm on the backend that then maps into the banking product architecture.

So it’s pretty much an open architecture, ask any set of questions, go through any kind of scoring logic to arrive at any kind of product recommendations. We also have a goals-based framework that it can anchor on, so you can effectively go through a light goals framework. Through that process you can map existing assets, either assets on book or assets held away via account aggregation, to the goals to look at goal fulfillment, and ultimately all of that can feed into the algorithm for banking product recommendation. So it’s similar. (See Envestnet is Transforming into The Alibaba of Wealth Management)

We obviously don’t own MoneyGuidePro like Envestnet does. We take an approach of extreme simplification. We really focus on the consumer and consumer engagement, and we do tons of AB testing of all of our interfaces. Whereas other platforms (and I can’t speak at all specifically to the Envestnet platform) maybe try to be exhaustive in their advice. We want to make sure that a consumer will get through the process, that they will understand all of the questions being asked, and that we minimize the amount of time and effort; if we can do it in 10 questions rather than 12, that has huge value. Where the others would say, “Well 12 is okay.” No, the drop-off from 10 to 11 and then 11 to 12 we’ve measured, and we understand that if you can do it in 10, how much better off the consumer and the organization will be. (See The Day Envestnet Became the King of Financial Planning Software)

So we really try to be very deliberate in the construction of all of our digital processes for consumers to really optimize every single interaction. And I think SigFig does that a little better than others; we don’t have the history of wealth management services and the breadth of service that others have, but our consumer experience tends to be top of class around all those things.

Can Big Data Replace Risk Profiling?

Craig: You hit a spot that I think is going to be very interesting moving forward, with asking consumers questions; asking investors questions in order to determine their risk profile or their preferences. And is really the best way to go going forward, when we’ve got big data and we’ve got millions of transactions and millions of interactions? Can we analyze a consumer’s behaviors, their actual actions, that would better determine what their risk profile is or what their preferences are. Like feed it all into an Amazon recommendation engine? (See Can Big Data Make Risk Tolerance Questionnaires Obsolete?)digital advice solutions

Randy: Yeah, absolutely. Earlier I was talking about our guidance engine, and that is the beginnings of that for us. Right now our guidance function is primarily a consumer-oriented analytic, where the consumer links their outside assets, we real time pull in all those holdings, we’ve got our own massive data store and a whole bunch data feeds that then allow us to score that client’s household level portfolio on a whole set of criteria, and effectively point out to them things that they should be concerned about, based on what we know. If you then take that and you pair that with pretty easy to obtain information around how much does the consumer make, how much does the consumer have, how old is the consumer therefore how close are they to retirement, and what’s their net worth?

You’ve got 90% of the data. If you can also then get a little bit around goals, you really can provide a rough out of a financial plan for a consumer, without having to drown them in questions and data entry. And that’s a lot of what we try to do. We’ve got a massive data scientist team in our San Francisco office, and that’s all they do. They’re all about data connectivity and leveraging data to provide automated advice and trying to reduce the number of questions and the amount of data you have to get directly from the consumer for that purpose. (See What Exactly is Riskalyze Building?)

Craig: Sure. Because once you ask a question, depending on how you word it is going to influence the answer.

Randy: That’s right. Just the fact of asking the question. All of the programs that we operate have digital funnels, and some of our funnels have 20 stages. So we measure drop-off, and it’s amazing to see the drop-off. And if you can consolidate stages, if you can eliminate stages, if you can simplify stages, then you increase funnel through. It’s that simple. So that’s a lot of what we do in our data sciences and consumer insights organization, is to focus on optimizing all of the experiences for both delivering quality investment advice, but also doing it in a way that maximizes client throughput to the end of funnel.

Data Sciences

Craig: Can you share any insights that your data sciences and consumer insights team has come up with?

Randy: Off the top of my head, we used to have a two-page funding process: page one, identify your funding source, page two, fill in the details around that source so that we can then execute funding. And then we rebuilt that process to go from two screens and two actions to one. You’re doing the same basic thing, but we just consolidated the steps and we increase throughput by like 30%. Just little things like that, constantly reviewing where are the drop off rates? Where are clients clicking on screens and interacting with the system, and then moving things around and optimizing the process based on what you’re seeing.

We do so much cool AB testing on We do have a direct to consumer robo still; we don’t promote it, you’ll never see a banner ad for it, but it gives us complete end to end control of the consumer digital wealth experience. It allows us to AB test all kinds of stuff, and the insights that come from that we’re then able to take to our large platform partners is really important, and has allowed us to tune some of those platforms to increase throughput, and really add value.

Regulating Digital

Craig: Let me shift gears real quick before we wrap up, to regulation. How do you feel the regulators are going to be responding? Are they going to be coming down harder on digital wealth? Are they going to ignore it? Where do you see the regulatory issues coming into play?digital advice solutions

Randy: I think the vast majority of robo digital offerings are offered as an investment advisory service, a discretionary investment advisory service. So they’re SEC regulated. And the SEC got out the microscope and they did a deep dive on all the robo advisors in the entire industry in 2017. We saw a couple of enforcement actions. But what we really saw was broad acceptance and endorsement. The SEC never approves anything, they only disapprove. So by doing what they did, they implicitly kind of gave the nod to innovation around robo and digital advice. So I think it’s a space where the regulators are likely to be relatively permissive. They’ll always be looking for bad actors and bad acts, they’ll always be looking to make sure that fiduciary standards are being upheld, I would call regulators friends of digital advice. I think they see this as a trend that will increase the consistency, quality, and access to advice.

And that’s a good thing. I’m generally pretty pro-regulatory in the digital advice space. It’ll be interesting to see what ultimately happens around DOL and broader fiduciary adoption, and to the degree that there is a FINRA push to a broad, universal fiduciary standard. Digital stands to win; digital is a way for any organization to deliver fiduciary advice in a much more controlled, regulatory, compliant manner than individual advisors doing what they do and trying to influence that with guard rails and training. So I think digital has a lot to gain by increased enforcement and increased regulatory engagement. I think digital will be the net beneficiary there over time.

Digital Advice Solutions

Craig: And on that note, I think we can wrap things up. I really appreciate your time, Randy, I think this was a really interesting discussion.

Randy: Yeah, thanks. It’s been a lot of fun. I love the podcast and I appreciate you taking the time.

Craig: I’m happy to, I’m glad we got to cover everything we wanted to cover. Thanks so much.



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at