Understanding the reasons for low advisor productivity

-This post originally appeared on the Wealthtab blog

Since the 2008 financial crisis, the wealth management industry has faced major changes. Customer behaviour has changed, and there is increased regulatory oversight and compliance pressures. On top of that, digitization has taken the financial industry by storm, altering where customers turn for advice and how they access it.

To be successful in the current business climate, wealth management firms require solutions that support personalized client relationships, strong regulatory compliance, and improved advisor productivity. High advisor productivity should be a key focus area for wealth management firms hoping to compete in the shifting conditions of today and the uncertainty of tomorrow.

In their study “Improving Financial Advisor Productivity through Automation”, Capgemini identifies key challenges for wealth management firms in a post-financial crisis world, and low advisor productivity is one of the most important. According to the study, low advisor productivity results from non-integrated processes and technology tools silos, and is pervasive in the global wealth management industry.

The sales cycle has become longer due to a more engaged and knowledgeable investor, resulting in more time consuming advice and service. A typical financial advisor spends around 67 percent of their time on client facing activities such as contacting and servicing existing clients, new client acquisition, and portfolio management services.

But what’s more alarming is the amount of time spent on administrative work and non-client facing tasks. A substantial portion of their total productive time (29 percent) is spent on operational / administrative activities. Advisors spend 24 percent of this on administrative related activities like back-office operations, investment research and client reporting, and around 5 percent on compliance related activities. Research shows that advisors are spending 25 percent more time on compliance related issues today than they did two years ago.

According to the study, the non-client facing, manual functions where advisors spend most of their productive time are due to:

  • Account opening processes that are product-centric (and not client-centric)
  • Lack of workflow integration with a high level of manual and redundant activities
  • Multiple entry points for client data and change
  • Lack of workflow integration with a high level of manual and redundant activities
  • Multiple entry points

The study comprehensively breaks down how the majority of financial advisors allocated their time in the year following the financial crisis. Of the time spent on client-facing activities (67%), 40% of that time was spent contacting existing clients, 17% of that time was spent on prospecting clients/new client acquisition, and 10% was spent on portfolio management. Of the time spent on operational activities (29%), a full 24% was spent on administrative tasks, and 5% was spent on compliance. The remaining 4% of time was spent on training and development.

By aiming to reduce the amount of time advisors spend on administrative work, advisors can spend more time on outward-facing client relationships and personalized service. Speeding up the workflow and automating some administrative tasks means advisors can spend more of their time on client-facing activities, so pre-existing clients get the attention they deserve, and there’s further opportunity to bring new clients on board.