Closing the Gap

How Tech-SavvyAdvisors Can RegainInvestor Trust

Page 2 | How Tech-Savvy Advisors Can Regain Investor Trust

Page 3

Accenture Research

A total of 400 US financial advisors (FAs) took part in Accenture’s online survey, conducted in Fall 2012. Theseparticipants included 250 brokerage/wirehouse/bank FAs and 150 who wereindependent or represented a regionalbank or insurance firm. There was a70/30 mix of male and female respondents,with an age cohort breakdown of 26% Millennials, 48% Gen-Xers, and 25% Boomers. Their experience averaged10 years, five with their current firm.

Requirements for participation includedfull-time employment as an FA sellinginvestment products, a minimum of two years’ industry experience in a similar capacity, and a currently activeclient roster.

Private Client Office/Multi-Family Office/Single-Family Office

IndependentBroker/Dealer

Direct

WirehouseA national firm with a

large advisor force

InsuranceBroker/Dealer

RegionalBroker/Dealer

BankBroker/Dealer

Dually Registered Advisor

RIA

Total FAs (n=400)Tech Savvy (n=300)Non-Tech Savvy (n=100)

28% 29%26%

17% 16% 19%

10% 12%6%

10%10% 12%

7%7% 8%

7%7%7%

6%6% 8%

4%3% 7%

10% 11%7%

How Tech-Savvy Advisors Can Regain Investor Trust

Accenture recently released key findings from our research on an emerging US investor population coined Generation D (Gen D), where the D stands for Digital. This heterogeneousgroup—which spans multiple demographics and representsmore than 75 million people with $27 trillion in assets2—isdifferentiated by their broad adoption of technology, particularlyin their deeply ingrained use of digital and social channels inalmost every aspect of their lives.

These digital behaviors will have a growing impact on therelationships these investors have with financial institutionsand advisors—relationships that are currently undermined by a lack of trust in the financial system. This is particularly truefor the Millennials of Gen D, who will become an increasinglykey demographic as their income and assets grow over time.

A tandem Accenture study of financial advisors revealed a Gen D advisor profile that closely corresponds to the investorsegment. In fact, 75% of advisors currently share the samecommand of digital technology as Gen D investors, integratinguse of digital and social channels into their daily lives. Themajority (60%) has daily contact with clients through socialmedia, some likely flouting their firms’ current policies againstthis type of activity. With 54% citing that they found orconverted clients using these channels, it’s clear that the tech-savvy Gen D advisor realizes the importance of digital tools inattracting and retaining clients, and understands that this isincreasingly becoming a key differentiator for success.

Chart 1. Financial Advisor Participants by Business Type or Company Division

Page 4 | How Tech-Savvy Advisors Can Regain Investor Trust

In comparing investor and advisorresponses to our research questions,Accenture identified significant perceptiongaps that clearly need to be addressed bythe financial community.

The erosion of investor trust since therecent financial crisis has led to anincreased need for investors to understandand feel in control of their investmentdecisions. Yet, advisors tend to seriouslyoverestimate investor knowledge, believing42% are extremely knowledgeable aboutinvesting, while only 12% of investorsactually see themselves as extremelyknowledgeable. As a result, what FAs intendas clear and valuable communications

Overall, the research provided a number of revelations regarding the relationships betweenGen D advisors and their clients, which can be summed up in three key learnings.

1. A surprising disconnect exists to investors are often perceived aspromotional—and possibly beyond theirlevel of investment knowledge. Investorsare seeking education, and if advisors don’toffer what they need, they are likely tolook for that information elsewhere,resulting in missed opportunities.

In another significant disconnect betweeninvestors and advisors, FAs tend tomisunderstand their clients’ investmentstyle, assuming their clients want toinvest more aggressively than is oftentheir preference. This is particularly truewith Millennials, who are by far the mostconservative in their attitudes towardinvesting. (See Chart 2.)

FAs also were found to overestimate the strength of their relationships withclients, while underestimating theimportance of the relationship itself. Thismanifests itself differently, however, withthe three generational cohorts withinGen D. The traditional relationship modelstill seems to work well for Gen DBoomers, but Gen X-ers and Millennialstend to be less trusting and perceive theirrelationships with advisors as lesspersonal, more transactional, andprimarily results-driven. (See Chart 3.)

Aggressive

Moderate

Conservative

Total FAs (n=400)Total Gen D Investors (n=1005)

28%

13%

Gap +15%

Gap +2%

34%

51%

Gap -17%

38%

36%

Chart 2. The Gap in Investment Style Perceptions(The approximate percentage of client base categorized as Conservative Investors,Aggressive Investors, or Moderate Investors)

Takes time to know me/client

Personal relationship

If FA moves, client moves too

Clients care ONLY about results

Total FAs (n=400)Total Gen D Investors (n=1005)

67%

42%

63%

38%

49%

31%

40%

19%

Gap -25%

Gap -21%

Gap -25%

Gap -18%

Chart 3. The Gap in Relationship Perceptions(The extent to which each statement describes your current relationship with yourclients/with your FA)

Good news coming out of our research is that the erosion of investor trust canbe addressed through increased—andskillful—use of digital/social tools. Theyoffer FAs unprecedented opportunitiesfor more frequent interactions with theirclients, helping them forge deeper,stronger relationships. They also allowFAs to draw from a broader, richerreferral and acquisition network.

Responding to their clients’ desire for investment education—and theiropenness to using digital tools such as

Page 5

2. Digital/social tools are becoming table stakes virtual meetings, online seminars, andonline communities—FAs can explore theeffectiveness of various digital channelsfor delivering this information in anengaging environment.

Digital tools can be equally important forcreating digital social networks withinfinancial firms,1 providing channels forconnecting FAs with specific expertiseand providing feedback on work-relatedissues. These internal social networks,which are becoming increasinglyprevalent, can also help FAs become

more comfortable with the use of digitaltools for connecting with clients andreferral sources. When asked whetherthey would expect to use an internalsocial network provided by their firm,85% of FAs agreed that if you build it,they will come.

There is a growing perception amongadvisors that digital/social tools will become highly functional table stakes for both external and internalcommunications—and for current andfuture career satisfaction and success.

49%

51%

81%

19%

73% 27%

85%15%

77%23%

83%

17%

73% 26%

54%

46%

47%

53%

True for Me

Social media has led to an increase in client transactions

Social media helps with

client retention

Social media use has led to assets

under management

Not True for Me

True for Me

Not True for Me

True for Me

Not True for Me

Non-Tech Savvy (n=100)Tech Savvy (n=300)Total FAs (n=400)

3. Gen D advisors are seeing results With real results validating their efforts,tech-savvy FAs understand that theyneed to employ digital/social tools tocommunicate effectively with Gen Dinvestors. More than half believe theirclients want, or even demand, digitalinteraction.

Their responses also demonstrate advisorsare having significant success using thesechannels for client acquisition, with 40% indicating they’ve gotten newclients through Facebook, 25% throughLinkedIn, and 21% through Twitter.

While most FAs acknowledged a numberof benefits to using social media channels,the top reasons cited included:

• Getting answers to clients quickly and easily (59%)

• Increasing their touchpoints withreferral sources (58%)

• Keeping up to date on industry news(58%)

Chart 4. Positive Assessment of Social Media

Page 6 | How Tech-Savvy Advisors Can Regain Investor Trust

Social media utilization has also helpedFAs achieve their key professional goals.Among all FAs surveyed, 77% affirm thatit helps with client retention, 74% agreethat it helps them increase assets undermanagement, and 73% say it has led toan overall increase in client interactions.As Chart 4 shows, tech-savvy advisors areeven more positive in their assessmentsof how well these tools are helping.

Page 7

Digital/social use offers a clear advantage

Consistent and effective use of digitaltools and social channels is becomingincreasingly necessary for financialadvisors to remain relevant to Gen Dinvestors who already represent a largeand viable market segment. Millennials,who are now most skeptical toward FAs,will drive this trend as their wealth—and importance—grows.

Financial advisors with digital savvy are successfully using digital tools for attracting, building, and retainingrelationships with Gen D investors. Theyunderstand there are not only client-facing advantages to these tools, but alsobenefits inside their professional spheres.

It is critical, however, that they understandand begin to address the perception gaps that may be undermining theireffectiveness with investors. The use ofdigital tools and social media offers solidopportunities for delivering the financialeducation their clients want and need,and for building stronger, more robustrelationships with multiple touchpoints.

Financial firms need to evolve theirbusinesses to serve the needs andpreferences of Gen D investors, whoseranks will soon dominate the total investorpopulation. Accenture will be releasingdetailed reports in the coming monthswith implications and next steps for:

• Finding, attracting, and retaining Gen D clients

• Evolving the customer experience tomeet their expectations, behaviors, and preferences

• Defining the new role of FAs andidentifying new practices to help themremain relevant in the digital age

About AccentureAccenture is a global managementconsulting, technology services andoutsourcing company, with morethan 246,000 people serving clientsin more than 120 countries.Combining unparalleled experience,comprehensive capabilities across allindustries and business functions,and extensive research on the world’smost successful companies,Accenture collaborates with clients tohelp them become high-performancebusinesses and governments. Thecompany generated net revenues ofUS$25.5 billion for the fiscal yearended Aug. 31, 2011. Its home pageis www.accenture.com.

Copyright © 2013 AccentureAll rights reserved.

Accenture, its logo, and HighPerformance Delivered aretrademarks of Accenture.

Notes1 Population estimates and projections arethe product of publicly available populationestimates from the US Census (2011 data),Pew Research Center data from the PewInternet and American Life Project estimatesof the online population (2011-2012), andthe conditional incidence rates observed inthe quantitative study. US Census data wereused to estimate the size of the populationthat falls within the Millennial, Gen X, andBoomer age ranges. The resulting US populationestimate was multiplied by the midpoint ofthe proportional estimates of online householdsfrom both the US Census and the Pew Researchstudy to arrive at an estimate of the OnlineMillennial, Gen X, and Boomer population.The resulting figure was, in turn, multipliedby the conditional qualifying incidencefigures from Accenture's Gen D Investor survey,which required respondents to participate inor fully control financial decision-making fortheir households (which disproportionatelyaffected Millennials), required incomes of noless than $30k for Millennials and $75k forBoomers and Gen X-ers, and either someform of current investment (including 401k,any stock or bond) without regard for amount,or (for Millennials) a stated intent to begininvesting in the next three years.

Asset projections were the product of medianself-reported total asset levels taken from thesurvey and the population estimates. Medianswere used to mitigate the impact of the very small, but disproportionately wealthyrespondents whose asset levels would haveskewed the projections upwards.

2 Enterprise collaboration (or socialcollaboration) refers to the process ofinfusing social computing technology andprinciples within a firm—for example,providing advisors with internal socialnetworks similar to Facebook within the firm.Companies industry-wide are successfullyusing these networks to improve internalcollaboration and the way employees workwith each other while supporting customers.

About AccentureAccenture is a global management consulting,technology services, and outsourcing company,with 257,000 people serving clients in morethan 120 countries. Combining unparalleledexperience, comprehensive capabilities across all industries and business functions,and extensive research on the world’s most successful companies, Accenturecollaborates with clients to help thembecome high-performance businesses andgovernments. The company generated netrevenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page iswww.accenture.com.

ContactsAlex Pigliucci is the global leader for AccentureWealth and Asset Management Services.alex.pigliucci@accenture.com

Marc McCollum is the North America leadfor Sales & Distribution in Wealth and AssetManagement Services.marc.s.mccollum@accenture.com

Mark Newcomer is a Digital StrategyArchitect focusing on digital marketing and social media for Financial Services.mark.c.newcomer@accenture.com

This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice onyour circumstances. If you require advice or further details on any matters referred to, please contact your Accenturerepresentative. This document makes descriptive reference to trademarks that may be owned by others. The use of suchtrademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent orimply the existence of an association between Accenture and the lawful owners of such trademarks.