Launched in 2010, Betterment now has assets under advisory of US$ 7 billion dollars. Jonathan B Stein, Founder and CEO, Betterment commonly known as Jon was in India to speak at the 7th India Investment Conference organised by CFA Society India and CFA Institute in Mumbai.
Here are the key highlights of the session ‘The Future of Financial Advice'.
Be accessible
- Reach out to people who don’t have access to good advice. These people could be in low or middle income group. You can build a scalable business model by targeting this group just as we did in the US market.
- Give your service to each investor no matter how small is the ticket size.
Use intelligence
- Help your client identify goals. This approach help you get long term clients.
- Try to evaluate customer behaviour by analysing their investing habits, asset allocation pattern and response to any impactful event like Brexit and US elections. For instance, a few years back, we found that women are better investor compared to men, simply because the former do not react to news. This will help you serve them better.
- Let your client know how much money they can potentially lose or their tax outgo if they redeem their investments in market corrections. Try to put figures in absolute terms. We have observed that 75% of our clients change their mind once they come to know about this.
Get aligned
- Transparency and technology will result in more advice and less product sales
- Considering the regulatory push across many countries, commission revenue model for advisers is likely to vanish in the coming days.
- Going forward, fiduciary model in which advisers disclose their earnings and work in the best interests of consumers will flourish.
- Advisers should provide holistic solutions to their clients. You should develop expertise on all the financial needs of clients like insurance, loans, tax, retirement, cash management and so on.
Other key highlights
- Both – human and robo will continue to grow. If digital grows at x, human advisers will expand twice or 2x.
- An independent research shows that Robo advisory is likely to grow to US$5 trillion.
- Advisory is not about active vs passive. It is about choosing the best asset class for your clients.
- Asking your client to plan for retirement may not encourage her to invest. Instead, we should try to convince her to pay herself first before spending.
- Globally, financial advisory industry has been going through transformation phase. India is no exception.
