Hybrid Service: Expanding Brokerage Offerings and Value for Self-Directed Investors

Chris PslatosChris Psaltos, Vice President of Product Management at Scivantage, contributes to VantagePoint, with a look at hybrid service models in the wealth management space.

As investor demands continue to rapidly evolve, technology has been placed at the forefront of debates in the wealth management industry. The technological progression has some people predicting a robo-advisor take over; however, many find the appeal for expert advice and counsel to be as strong as ever. As a result, wealth management firms are beginning to expand their offerings to meet these dynamic and changing needs of their mass client base. Today, many firms are embracing the hybrid service model, which combines a self-directed channel (DIY) with advisory services, to provide the ultimate package of value to investors.

The biggest driving force behind the call for a hybrid service model is the increasingly tech-savvy millennial generation. According to the U.S Census Bureau, the U.S. millennial population will expand to 75.3 million in 2015, making them the largest demographic in the nation. Right now, brokerages and institutions are exploring new ways to not only attract but retain this young and important segment of the investing population. Since millennials don’t yet hold the majority of wealth, a pure tech-based platform can meet their current needs from a client experience/satisfaction standpoint. This platform can include high touch technology with a digital strategy centered on reporting and document storage, or a carefully executed social media strategy/video platform. Visualization tools, like mobile and tablet apps, are incredibly appealing to this young demographic, but as this influential group begins to build their investable assets, it is more than likely that they will seek a more hybrid approach to optimize their risk and reward potential.

The hybrid service model is beneficial because it allows wealth managers to offer clients updated tools without having to sacrifice human guidance and expertise. This particular format enables firms to attract millennial investors during the early stages of working life with a self-directed approach, and keep them as they become sophisticated investors in need of customized advice through access to on-demand advisors. This mix of services provides investors with best-in-class customer experience and enhanced digital offerings to achieve differentiation. The development and extension of hybrid services across multiple platforms allows firms to better address the individual investment preferences of investors, and to respond more effectively to those preferences over time

With digital channels and user experience ranking at the top of these tech-savvy investors’ priorities, it is extremely important for firms to offer diverse services. Millennial investors have a wide range of experience, making education and financial advisory a necessity for maintaining a long-term relationship. At the end of the day, the industry views the hybrid service approach as the most opportunistic, as it balances these two offerings and gives millennial investors what they crave – the best of both worlds with on-demand advice and automated services.

For more information on the hybrid service model, download the full Celent report, “The State of Online Brokerage Platforms” and listen to our joint webinar with Celent, “Industry Spotlight: Online Brokerage Market Assessment and Outlook.”

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